As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 8/12/15  Ballard Power Systems Inc.        424B3                  1:3.7M                                   Merrill Corp-MD/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 424B3       Prospectus                                          HTML   2.58M 

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PROTONEX TECHNOLOGY CORPORATION
153 Northboro Road
Southborough, Massachusetts  01772-1034

 

NOTICE OF SPECIAL MEETING
TO BE HELD SEPTEMBER 15, 2015

 

To our Stockholders:

 

NOTICE IS HEREBY GIVEN that a special meeting of stockholders of Protonex Technology Corporation (“Protonex”) will be held at the offices of Protonex, 153 Northboro Road, Southborough, Massachusetts 01772-1034, United States on September 15, 2015, at 10:00 a.m. Eastern Daylight Time for the following purposes:

 

1.              To consider and vote upon the proposal to adopt and approve the Merger Agreement and the Merger set forth in the agreement and plan of merger substantially in the form submitted with this notice (the “Merger Agreement”) by and among Ballard Power Systems Inc., a corporation incorporated under the laws of Canada (“Ballard”), BPC SubCo Inc., a Delaware corporation and wholly-owned subsidiary of Ballard (“Merger Sub”), Protonex and Edward J. Stewart, as stockholder representative, pursuant to which Merger Sub will merge with and into Protonex, with Protonex surviving as a wholly-owned subsidiary of Ballard, and Ballard will issue common shares to the stockholders of Protonex in exchange for all issued and outstanding shares of Protonex common stock, as more fully described in the attached proxy statement/prospectus. A copy of the Merger Agreement is attached as Appendix A to the accompanying proxy statement/prospectus; and

 

2.              To act on such other matters as may be properly brought before the meeting, or any adjournment or postponement thereof.

 

The Protonex board of directors unanimously recommends that you vote “FOR” the proposal to adopt and approve the Merger Agreement and the Merger.

 

The Board of Directors has fixed the close of business on August 11, 2015, as the record date for the meeting. Only stockholders of record at the close of business at this time are entitled to notice of, and to vote at, the meeting or any adjournments, postponements, or continuations of the meeting.

 

	By Order of the Board of Directors
	PAUL OSENAR, President
	August 11, 2015

 

WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY AND RETURN IT AS SOON AS POSSIBLE IN THE ENVELOPE ENCLOSED FOR THAT PURPOSE.  THE GIVING OF SUCH PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING IN PERSON.

 

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ADDITIONAL INFORMATION

 

This proxy statement/prospectus incorporates by reference important business and financial information about Ballard that is not included in, or delivered with, this proxy statement/prospectus. You may request this information, which includes copies of annual, quarterly, and special reports, proxy statements, and other information, from Ballard or Protonex, without charge, excluding all exhibits, unless we have specifically incorporated by reference an exhibit in this proxy statement/prospectus, by requesting them from Ballard or Protonex in writing or by telephone at the following address or telephone number:

 

 

To obtain timely delivery, any request for information should be made no later than September 1, 2015.

 

For a more detailed description of the information incorporated by reference into this proxy statement/prospectus and how you may obtain it, see the sections entitled “Where You Can Find More Information” and “Incorporation of Certain Information by Reference.”

 

ABOUT THIS PROXY STATEMENT/PROSPECTUS

 

This document forms a part of a registration statement on Form F-4 filed by Ballard with the U.S. Securities and Exchange Commission (the “SEC”). This document constitutes a prospectus of Ballard under Section 5 of the U.S. Securities Act of 1933, as amended (the “Securities Act”), with respect to the Ballard common shares to be issued to Protonex stockholders in connection with the proposed Merger.  In addition, this document constitutes a notice of meeting with respect to the Protonex special meeting and a proxy statement of Protonex under Section 14(a) of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

You should rely only on the information contained in this proxy statement/prospectus. No one has been authorized to provide you with information that is different from that contained in this proxy statement/prospectus. This proxy statement/prospectus is dated August 11, 2015. You should not assume that the information contained in this proxy statement/prospectus is accurate as of any date other than that date. Neither Protonex’s mailing of this proxy statement/prospectus to Protonex stockholders nor the issuance by Ballard of common shares in connection with the Merger will create any implication to the contrary.

 

Holders of Protonex common stock who have questions about the special meeting or how to vote or revoke their proxy should contact:

 

Protonex Technology Corporation
153 Northboro Road
Southborough, Massachusetts 01772
United States of America
Attn: Corporate Secretary
Tel.: (508) 490.9960

 

If you are in a jurisdiction where offers to exchange or sell, or solicitations of offers to exchange or purchase, the securities offered by this proxy statement/prospectus or the solicitation of proxies is unlawful, or if you are a person to whom it is unlawful to direct these types of activities, then the offer presented in this proxy statement/prospectus does not extend to you.

 

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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

 

The following are answers to certain questions that you may have regarding the special meeting and the Merger. We urge you to read carefully the remainder of this proxy statement/prospectus because the information in this section may not provide all the information that might be important to you in determining how to vote. Additional important information is also contained in the appendices to, and the documents incorporated by reference in, this proxy statement/prospectus.

 

GENERAL

 

Q:                                  WHY AM I RECEIVING THIS PROXY STATEMENT/PROSPECTUS?

 

A:                                 This document serves as both a proxy statement of Protonex and prospectus of Ballard. As a proxy statement, it is being provided to Protonex’s stockholders in connection with the solicitation of proxies for the Protonex special meeting at which Protonex stockholders will be asked to vote on the proposal set forth in the Notice of Special Meeting of Protonex stockholders.

 

It is a prospectus because Ballard is offering to issue its common shares in exchange for shares of Protonex common stock upon completion of the Merger.

 

THE MERGER

 

Q:                                  WHAT IS THE MERGER?

 

A:                                   On June 29, 2015, Protonex entered into the Merger Agreement with Ballard, Merger Sub, and Edward J. Stewart, as the stockholder representative, pursuant to which Merger Sub will merge with and into Protonex on the terms and subject to the conditions set forth in the Merger Agreement, which transaction we refer to as the Merger, so that Protonex, as the surviving corporation, will become a wholly-owned subsidiary of Ballard.

 

Q:                                  WHY ARE BALLARD AND PROTONEX PROPOSING TO MERGE?

 

A:                                   The boards of directors of Ballard and Protonex are proposing to merge because they believe that the combination strengthens and is in the best interests of both companies and their respective stockholders. Please see “The Merger Proposal—Recommendations of Protonex’s Board of Directors; Protonex’s Reasons for the Transaction” at page 42 for the various factors considered by the Protonex board of directors in unanimously recommending that Protonex stockholders vote “FOR” the proposal to adopt the Merger Agreement and approve the Merger.

 

Q.                                   WHAT WILL HAPPEN IN THE MERGER?

 

A.                                    At the closing of the Merger, Merger Sub will merge with and into Protonex, so that Protonex, as the surviving corporation, will become a wholly-owned subsidiary of Ballard. In exchange for shares of Protonex common stock, the Protonex stockholders will receive Ballard common shares. As a result of the Merger, Ballard will own all of the issued and outstanding securities of Protonex and former Protonex stockholders will not have any direct equity ownership interest in the surviving corporation. See “Merger Agreement” on page 56.

 

Q:                                  AS A PROTONEX STOCKHOLDER, WHAT WILL I RECEIVE IN THE MERGER?

 

A:                                   Each Protonex stockholder will be entitled to receive approximately 0.1562 of a Ballard common share for each share of Protonex common stock currently held upon completion of the Merger. Following the completion of the Merger, it is expected that the former Protonex stockholders will own, by virtue of the exchange of their shares of Protonex common stock for Ballard shares, approximately 7.3% of the total Ballard common shares (based on the number of common shares of each of Protonex and Ballard outstanding as of the date of this proxy statement/prospectus). For more information on the calculation of the exchange ratio, please see “Merger Agreement—Conversion of Securities in the Merger” on page 57.

 

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Q:                                  WHAT IS THE VALUE OF THE MERGER CONSIDERATION?

 

A:                                   The Ballard common shares are traded on the TSX and the NASDAQ under the symbols “BLD” and “BLDP,” respectively. Because Ballard will issue a fixed number of Ballard common shares in exchange for each Protonex common share, the value of the Merger consideration that Protonex stockholders will receive will depend on the price per share of Ballard common shares at the time the Merger is completed. That price will not be known at the time of the special meeting and may be less or more than the current price or the price at the time of the special meeting. Based on the closing sale price of a Ballard common share on the NASDAQ of U.S. $1.33 on the last business day before the date of this proxy statement/prospectus, which may be more or less than the price at the closing of the Merger, and the actual level of Protonex’s net debt and transaction expenses, the consideration per share of Protonex common stock is approximately U.S. $0.2077.

 

Q:                                  WHAT WILL HAPPEN TO MY PROTONEX OPTIONS OR WARRANTS?

 

A:                                   In accordance with the Merger Agreement and Protonex’s 2003 Stock Incentive Plan and 2013 Stock Incentive Plan, holders of options to purchase Protonex common stock must exercise such options by the fifth business day prior to the special meeting of Protonex stockholders, or their options will be cancelled.  In addition, under the Merger Agreement, Protonex has agreed to cause all outstanding warrants to purchase Protonex common stock to be exercised or terminated prior to the effective time of the Merger.  Ballard will not assume any Protonex options, warrants or other derivative securities in connection with the Merger, and you will receive no Merger consideration in exchange for such securities.  Any Protonex options or warrants duly exercised for shares of Protonex common stock prior to the effective time of the Merger will be entitled to the Merger consideration for their shares of common stock held at the effective time.

 

Q:                                  ARE THE COMMON SHARES TO BE RECEIVED BY THE PROTONEX STOCKHOLDERS FREELY TRADEABLE UPON ISSUANCE?

 

A:                                   Yes, all Ballard common shares that each Protonex stockholder receives in the Merger will be listed on the TSX and the NASDAQ and will be freely transferable under Canadian and U.S. securities laws unless a stockholder is deemed an affiliate of Protonex immediately prior to the Merger or an affiliate of Ballard following the Merger for purposes of U.S. securities laws or a control person of Ballard following the Merger for purposes of Canadian securities laws.  This proxy statement/prospectus does not register the resale of Ballard common shares held by affiliates.

 

Furthermore, all of the Protonex stockholders that executed the support agreements (the “Supporting Stockholders”) (as described in “Ancillary Agreements—Support Agreement”) agreed that the Ballard common shares to be received by the Supporting Stockholders in the Merger are all subject to lock-up restrictions, which restrictions will lapse with respect to one-half of such Ballard common shares at the six and 12-month anniversaries of the closing date of the Merger. Each Supporting Stockholder agrees not to offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose of any shares during the lock-up period.

 

Q:                                  WHAT IS THE ESCROW?

 

A:                                   Ballard will deposit approximately 628,732 of the common shares, or approximately 5.6% of the total Merger consideration, to be issued to the Supporting Stockholders in connection with the Merger into an escrow account maintained by U.S. Bank, National Association.  These common shares will be used to cover indemnification claims by the Ballard pursuant to the terms of the Merger Agreement, which shares will be released 12 months after the closing of the Merger, subject to any then-pending claims. See “Ancillary Agreements — Escrow Agreement” starting on page 69.

 

Q:                                  DO PERSONS INVOLVED IN THE MERGER HAVE INTERESTS THAT MAY CONFLICT WITH MINE AS A PROTONEX STOCKHOLDER?

 

A:                                   Yes. These interests include:

 

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·                  change of control bonus payments to be made to certain executive officers of Protonex;

 

·                  the acceleration of vesting of certain options held by certain directors and executive officers of Protonex; and

 

·                  the continued indemnification and directors’ and officers’ insurance coverage of current Protonex directors and officers following the Merger.

 

See “The Merger Proposal — Interests of Certain Protonex Directors, Officers and Affiliates in the Merger” on page 43.

 

Q:                                  ARE THERE ANY CONDITIONS TO THE CLOSING OF THE MERGER?

 

A:                                   Ballard’s and Protonex’s obligations to complete the Merger depend on a number of conditions being met. These include, among others:

 

·                  the approval of the stockholders of Protonex holding a majority of the votes cast at the special meeting;

 

·                  receipt or filing of all waiting period expirations or terminations, consents, clearances, waivers, approvals and authorizations of, any governmental authority or third-party under any applicable antitrust, competition or Merger control laws required to be made or obtained by Protonex, Ballard, Merger Sub or any of their subsidiaries to consummate the Merger shall have been made or obtained;

 

·                  the absence of any judgment, order, or law which prohibits, materially restricts, makes illegal or enjoins the consummation of the Merger;

 

·                  the effectiveness of the registration statement for the Ballard common shares to be issued in the Merger and the approval for listing of such shares on the TSX and the NASDAQ;

 

·                  subject to certain limitations and exceptions, the accuracy of the other party’s representations and warranties and the performance in all material respects of its covenants in the Merger Agreement;

 

·                  the number of dissenting shares held by stockholders of Protonex who have exercised appraisal rights must comprise less than 5% of the issued and outstanding shares of Protonex common stock;

 

·                  the execution of certain ancillary agreements;

 

·                  each party’s receipt of an opinion from outside legal counsel that is reasonably acceptable and dated as of the closing date of the Merger to the effect that, on the basis of the facts, representations and assumptions set forth or referred to in such opinion, the Merger should qualify for U.S. federal income tax purposes as a reorganization within the meaning of Section 368(a) of the U.S. Internal Revenue Code of 1986, as amended (the “Code”);

 

·                  evidence of the adoption and approval by Ballard and Ballard Power Corporation, as the sole stockholder of Merger Sub of the Merger Agreement, the Merger and the other transactions contemplated thereby;

 

·                  executed resolutions of Protonex’s board of directors authorizing the termination of all of Protonex’s unexercised stock options prior to Closing;

 

·                  the execution of employment agreements by certain key employees of Protonex;

 

·                  certain actions with respect to the waiver or approval of “parachute payments”, if applicable; and

 

·                  the absence of any material adverse change with respect to the business and affairs of Protonex (in the case of Ballard).

 

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Where permitted by applicable law and the Merger Agreement, either of Ballard or Protonex could choose to waive a condition to its respective obligation to complete the Merger even when that condition has not been satisfied. See “Merger Agreement—Conditions to the Consummation of the Merger” on page 64.

 

Q:                                  IS PROTONEX OR BALLARD PROHIBITED FROM SOLICITING OTHER OFFERS?

 

A:                                   The Merger Agreement contains detailed provisions that prohibit Protonex and its stockholders, and their respective representatives (including investment bankers, attorneys and accountants) from taking any action to directly or indirectly solicit or engage in discussions or negotiations with any person or group concerning any sale of all or a portion of Protonex’s assets, or of any capital stock of Protonex, or any merger, consolidation, liquidation, dissolution or similar transaction involving Protonex. Protonex has agreed to advise any prospective purchaser or soliciting party, by written notice of the terms of the no solicitation provisions and promptly notify Ballard if any such offer, or any inquiry or contact with any person is made. Protonex has also agreed not to release any third party from, or waive any provision of, any confidentiality or standstill agreement to which Protonex is a party.  Notwithstanding the foregoing, if Protonex has received an alternative transaction proposal on which its board of directors has determined, in good faith, a failure to act would be a breach of the director’s fiduciary duties, then with prior written notice to Ballard, Protonex may enter into a customary confidentiality agreement, share non-public information and engage in discussions with the person making such proposal.

 

Either Ballard or Protonex may be obligated to pay to the other party a termination fee of U.S.$200,000 in certain circumstances if the Merger Agreement is terminated.  If Protonex terminates the agreement to pursue a superior proposal, Protonex will be obligated to pay Ballard a termination fee of U.S.$1,500,000, plus all fees and expenses incurred by Ballard. See “Merger Agreement—No Solicitation” and “Merger Agreement—Termination Amount” beginning on pages 64 and 68, respectively.

 

Q:                                  ARE THERE ANY STOCKHOLDERS ALREADY COMMITTED TO VOTE IN FAVOR OF THE MERGER?

 

A:                                   Yes. Pursuant to support agreements, all of the Supporting Stockholdings, including the directors and officers of Protonex and certain major stockholders, have agreed to vote their shares of Protonex common stock representing approximately      % of the outstanding shares of Protonex as of the record date in favor of the Merger at the special meeting. For a more complete description of the support agreements, see “Ancillary Agreements—Support Agreement” beginning on page 68 of this proxy statement/prospectus. The form of support agreement is also attached to this proxy statement/prospectus as Appendix B.

 

Q:                                  WHAT ARE THE SUPPORT AGREEMENTS?

 

A:                                   In connection with the execution of the Merger Agreement, certain Protonex stockholders, who we refer to as the Supporting Stockholders, entered into support agreements with Ballard, pursuant to which they have agreed, among other things, to vote all of their shares of capital stock of Protonex in favor of the approval of the Merger pursuant to the Merger Agreement and the other transactions contemplated thereby, to vote against any action that would reasonably likely result in a material breach of Protonex under the Merger Agreement, and to vote against any alternative transactions. The support agreements also generally prohibit the Supporting Stockholders from transferring their shares prior to the consummation of the Merger. The support agreements will terminate upon the termination of the Merger Agreement in accordance with its terms. The support agreements provide for the vote of a sufficient number of shares of Protonex to adopt the Merger Agreement and approve the Merger contemplated thereby under Delaware law and Protonex’s organizational documents. For a further description of the support agreements, see the section entitled “Ancillary Agreements—Support Agreement” beginning on page 68.

 

Q:                                  WHAT ARE THE MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO PROTONEX STOCKHOLDERS?

 

The Merger is intended to qualify as a reorganization within the meaning of Section 368(a) of the Code, with no gain or loss recognition to U.S. holders of Protonex common stock (other than a U.S. holder of

 

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Protonex common stock who is a “five-percent transferee shareholder” within the meaning of the rules under Treasury regulations Section 1.367(a)-3(c) and who does not file a gain recognition agreement with the U.S. Internal Revenue Service, or the IRS) for U.S. federal income tax purposes. It is a condition to the closing of the Merger that, at the effective time of the Merger, outside legal counsel will deliver an opinion to Protonex and Ballard to the effect that, for U.S. federal income tax purposes, the Merger should qualify as a reorganization within the meaning of Section 368(a) of the Code. If the conclusions in the tax opinions were to be challenged by the Internal Revenue Service, which we refer to as the “IRS,” and such challenge were to be sustained, a U.S. holder of Protonex common stock would recognize gain (and might not be allowed to recognize loss) in the Merger based on the amount such U.S. holder realizes in the Merger.

 

You should consult your own tax advisor to determine the particular tax consequences to you of the Merger. The foregoing description of U.S. federal income tax consequences of the Merger to stockholders is qualified in its entirety by the longer form discussion under “The Merger Proposal—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 46 and “The Merger Proposal—Ownership and Disposition of Ballard Common Shares” beginning on page 47. Neither Protonex nor Ballard has sought or obtained a ruling from the IRS regarding any of the tax consequences of the Merger. Accordingly, there can be no assurance that the IRS will not challenge such tax treatment of the Merger or that the U.S. courts will uphold such tax treatment in the event of an IRS challenge.

 

Q:                                  WHEN IS THE MERGER EXPECTED TO BE COMPLETED?

 

A:                                   Protonex and Ballard are working towards completing the Merger as quickly as possible and it is currently anticipated that the Merger will be completed by the end of the third quarter of calendar year 2015. However, there can be no assurances that the Merger will be completed at all or, if completed, that it will be completed within such timeframe. The exact timing and likelihood of completion of the Merger cannot be predicted because the Merger is subject to certain conditions, including the receipt of regulatory approvals. Neither Protonex nor Ballard is obligated to complete the Merger unless and until the closing conditions in the Merger Agreement have been satisfied or waived.

 

Q:                                  HOW WILL BALLARD BE MANAGED AFTER THE CLOSING OF THE MERGER?

 

A:                               Ballard’s executive officers and directors are not anticipated to change as a result of the Merger. See “The Merger Proposal — Directors and Management of Ballard Following the Merger” on page 54. Before the closing of the Merger, Ballard or one of its affiliates intends to enter into employment agreements with certain of Protonex’s employees, effective as of the effective time of the Merger. The directors of Protonex will resign as of the effective time of the Merger.

 

Q:                                  WHAT HAPPENS IF THE MERGER IS NOT COMPLETED?

 

A:                                   If the Merger is not completed, Protonex stockholders will not receive any consideration for their shares of Protonex common stock in connection with the Merger. Instead, Protonex will remain an independent company. Under specified circumstances, the terminating party may be required to pay the non-terminating party a fee of $200,000 with respect to the termination of the Merger Agreement; provided that, if Protonex terminates the Merger Agreement to pursue a superior proposal, Protonex will be required to pay Ballard a fee of $1,500,000, plus Ballard’s fees and expenses, as described under the section entitled “Merger Agreement—Termination Amount” beginning on page 68.

 

Q:                              WHAT WILL HAPPEN TO MY SHARE CERTIFICATES AND WHERE SHOULD I SEND MY SHARE CERTIFICATES?

 

A:                               At the effective time of the Merger, unless you properly exercise and perfect your appraisal rights, your shares of Protonex common stock will convert into the right to receive Ballard common shares and you will no longer be a stockholder of Protonex. You will receive written instructions and a letter of transmittal, and you will use these documents to exchange your Protonex share certificates for certificates representing your Ballard common shares. Each person who submits the necessary documentation is entitled to receive the

 

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Merger consideration of approximately 0.1562 Ballard common shares for each share of Protonex common stock. For more information see “Merger Agreement—Exchange of Protonex Stock Certificates for the Merger Consideration” on page 59.

 

Q:                                  SHOULD I SEND IN MY PROTONEX SHARE CERTIFICATES NOW?

 

A:                                   No. You should not send in your Protonex share certificates at this time. The exchange agent to be appointed by Ballard, Computershare Investor Services Inc., will mail you information within three business days following the effective time. Protonex stockholders who hold their shares in certificated form will need to exchange their Protonex share certificates for the Ballard common shares provided for in the Merger Agreement upon completion of the Merger. Ballard will send Protonex stockholders written instructions and a letter of transmittal for exchanging Protonex share certificates at that time. Protonex stockholders who hold their shares in book-entry form, if any, will also receive written instructions for exchanging their shares after the Merger is completed.

 

Q:                                  DO PROTONEX STOCKHOLDERS HAVE APPRAISAL RIGHTS IN CONNECTION WITH THE MERGER?

 

A:                                   Yes. Under Delaware law, holders of Protonex common stock that meet certain requirements will have the right to dissent from the Merger and obtain payment in cash for the fair value of their shares of Protonex common stock, as determined by the Delaware Chancery Court, rather than the Merger consideration. To exercise appraisal rights, Protonex stockholders must strictly follow the procedures prescribed by Delaware law. These procedures are summarized under the section entitled “The Merger Proposal — Appraisal Rights of Holders of Protonex Common Stock” beginning on page 52. In addition, the text of the applicable appraisal rights provisions of Delaware law is included as Appendix C to this proxy statement/prospectus.

 

Q:                                  ARE THERE RISKS ASSOCIATED WITH THE MERGER, BALLARD, PROTONEX OR THE COMBINED COMPANY OF WHICH HOLDERS OF PROTONEX COMMON STOCK SHOULD BE AWARE?

 

A:                                   Yes. You should read the section entitled “Risk Factors” beginning on page 21 and the risk factors set forth in Ballard’s Annual Report on Form 40-F for the year ended December 31, 2014, incorporated by reference herein.

 

THE SPECIAL MEETING

 

Q:                                  WHEN AND WHERE WILL THE SPECIAL MEETING BE HELD?

 

A:                                   The special meeting will be held at the offices of Protonex, 153 Northboro Road, Southborough, Massachusetts 01772-1034, United States on September 15, 2015, at 10:00 a.m. Eastern Daylight Time.

 

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Q:                                  WHAT BUSINESS WILL OCCUR AT THE MEETING?

 

A:                                   Protonex stockholders are voting on a proposal to adopt and approve the Merger Agreement and the Merger and will vote on such other matters as may be properly brought before the special meeting. The approval by the majority of Protonex stockholders of the proposal to approve and adopt the Merger Agreement is required by Delaware law and is a condition to the completion of the Merger.

 

Q:                                  HOW DOES THE PROTONEX BOARD OF DIRECTORS RECOMMEND THAT I VOTE?

 

A:                                   Protonex’s board of directors unanimously recommends that you vote your shares: “FOR” the proposal to adopt and approve the Merger Agreement and the Merger.

 

Q:                                  WHO IS ENTITLED TO VOTE?

 

A:                                   Holders of record of Protonex common stock at the close of business on August 11, 2015 which is the date that the board of directors has fixed as the record date for the special meeting, are entitled to notice of, and to vote at, the Protonex special meeting. As of the record date, there were 64,978,500 outstanding shares of Protonex common stock.

 

Q:                                  WHAT CONSTITUTES A QUORUM?

 

A:                                 The holders of one-third of Protonex’s common stock outstanding and entitled to vote, represented at the special meeting in person or by proxy, shall constitute a quorum for the transaction of business. Abstentions and broker non-votes, if any, will be included in determining the number of shares present at the meeting for the purpose of determining the presence of a quorum.

 

Q:                                  HOW MANY VOTES MAY A HOLDER OF COMMON STOCK CAST?

 

A:                                   Holders of Protonex common stock are entitled to one vote at the special meeting for each share of common stock held that was issued and outstanding as of the record date.

 

Q:                                  WHAT VOTE IS REQUIRED TO APPROVE THE MERGER PROPOSAL?

 

A:                                   The adoption and approval of the Merger Agreement and the Merger requires the affirmative vote of the holders of a majority of the shares of Protonex common stock issued and outstanding on the record date, and entitled to vote at the meeting. If you do not submit a proxy or voting instructions or do not vote in person at the meeting, or if you “ABSTAIN” from voting, the effect will be the same as a vote “AGAINST” the Merger.

 

Q:                                  ARE THERE DIFFERENT VOTING PROCEDURES DEPENDING ON HOW I HOLD MY PROTONEX STOCK?

 

A:                                   Yes. As summarized below, there are some distinctions between Protonex common stock held of record and those owned beneficially.

 

Holder of Record:  If your shares of common stock are registered directly in your name with Protonex or its transfer agent, you are considered, with respect to those shares of common stock, the holder of record, and these proxy materials are being sent directly to you by Protonex. As the holder of record, you have the right to grant your voting proxy directly to Protonex or to vote in person at the special meeting. A proxy card is enclosed for you to use.

 

Beneficial Owner:  If your shares of Protonex common stock are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of securities held in street name, and these proxy materials are being forwarded to you by your broker or nominee who is considered, with respect to those securities, the holder of record. As the beneficial owner, you have the right to direct your broker or nominee on how to vote and you are also invited to attend the special meeting. Your broker or nominee has enclosed a voting instruction card for you to use in directing the broker or nominee regarding how to vote your securities. The voting instruction card provides various alternative voting methods.

 

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Q                                      HOW CAN I VOTE MY STOCK IN PERSON AT THE SPECIAL MEETING?

 

A:                                   Shares of Protonex common stock held directly in your name as the holder of record may be voted in person at the special meeting. If you choose to do so, please bring the enclosed proxy card and proof of identification. Even if you plan to attend the special meeting, we recommend that you also submit your proxy as described below so that your vote will be counted if you later decide not to attend the special meeting. Securities held in street name may be voted in person by you only if you obtain a signed proxy from the record holder giving you the right to vote the securities in person.

 

Q:                                  HOW CAN I VOTE MY PROTONEX STOCK WITHOUT ATTENDING THE SPECIAL MEETING?

 

A:                                   Whether you hold securities directly as the holder of record or beneficially in street name, you may direct your vote without attending the special meeting. You may vote your directly held securities by granting a proxy or, for securities held in street name, by submitting voting instructions to your broker, bank, or nominee following the instructions on the form included with this proxy statement/prospectus by the deadline indicated on that form.

 

Q:                                  HOW DO I VOTE?

 

A:                                   If you are the stockholder of record (that is, the shares are held in your name), you may vote your proxy in one of two ways:

 

By mail:  If you vote by traditional proxy card, mark your selections on the proxy card, date the card, and sign your name exactly as it appears on the card, then mail it in the postage-paid envelope enclosed with the materials. You should mail the proxy card sufficiently in advance to allow delivery prior to the special meeting.

 

In person:  If you are a stockholder of record and attend the meeting, you may deliver your completed proxy card in person. If you are not the stockholder of record (that is, your shares are held in the name of a bank, broker, or other holder of record, which is often referred to as held in “street name”) then you will receive instructions from the holder of record that you must follow to ensure that your shares are voted as you wish. You will not be able to vote those shares at the meeting unless you have received, in advance, a proxy card from the record holder (that is, the bank, broker, or other holder of record).

 

If you complete and properly sign and timely return a proxy card to Protonex, your shares will be voted as you direct.

 

Q:                                  MAY I CHANGE MY VOTE AFTER I HAVE GIVEN IT?

 

A:                                   You may change your proxy instructions and your vote at any time prior to the vote at the special meeting. For shares held directly in your name, you may accomplish this by granting a new proxy bearing a later date, which automatically revokes the earlier proxy, and delivering such new proxy to Protonex’s corporate secretary either by mail or by attending the special meeting and voting in person. Attendance at the special meeting will not cause your previously granted proxy to be revoked unless you specifically request to do so. For securities held beneficially by you, you may accomplish this by submitting new voting instructions to your broker, bank, or nominee by the deadline indicated in the instructions sent to you by your broker, bank, or nominee.

 

Q:                                  WHO BEARS THE COST OF SOLICITING PROXIES?

 

A:                                   Protonex will pay the cost of distributing and soliciting proxies. This proxy solicitation is being made by Protonex on behalf of its board of directors. In addition to solicitation by use of the mail, Protonex’s and Ballard’s directors, officers and employees may also solicit proxies in person or by telephone, electronic mail, facsimile transmission or other means of communication. Protonex will also request brokers and other fiduciaries to forward proxy solicitation material to the beneficial owners of shares of Protonex common stock that the brokers and fiduciaries hold of record.

 

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Q:                                  WHERE CAN I FIND THE VOTING RESULTS OF THE SPECIAL MEETING?

 

A:                                   Protonex may be able to announce preliminary voting results at the special meeting. In addition, Ballard may publish the final voting results in a report on Form 6-K that it furnishes to the SEC.

 

Q:                                  WHO SHOULD I CONTACT IF I HAVE QUESTIONS ABOUT THE SPECIAL MEETING?

 

A:                                   If you have questions about the special meeting, please contact Paul Osenar of Protonex, by telephone at (508) 490-9960 or at 153 Northboro Road, Southborough, MA 01772-1034.

 

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SUMMARY

 

This summary highlights selected information from this proxy statement/prospectus. Because this is a summary, it does not contain all of the information that may be important to you. You should carefully read this entire document and the other documents we refer to in this document before you decide how to vote. These references will give you a more complete description of the Merger Agreement and the Merger and the other matters to be considered at the special meeting of Protonex stockholders.

 

In addition, we incorporate by reference important business and financial information about Ballard into this document. For a description of this information, please see the section entitled “Incorporation of Certain Information by Reference” beginning on page 105. You may obtain the information incorporated by reference into this document without charge by following the instructions in the sections entitled “Additional Information” and “Where You Can Find More Information”.

 

The Companies

 

Ballard Power Systems Inc. (page 84)

 

Ballard is building a clean energy growth company.  It is recognized as a world leader in proton exchange membrane, or PEM, fuel cell development and commercialization.  Ballard’s principal business is the design, development, manufacture, sale and service of fuel cell products for a variety of applications, focusing on its “commercial stage” markets of Telecom Backup Power and Material Handling and on its “development stage” markets of Bus and Distributed Generation, as well as the provision of technology solutions including Engineering Services and the license and sale of its extensive intellectual property portfolio and fundamental knowledge for a variety of fuel cell applications.

 

Ballard was incorporated on November 12, 2008 under the Canada Business Corporations Act, under the name 7076991 Canada Inc.  Ballard changed its name to Ballard Power Systems Inc. on December 31, 2008.  Previously, Ballard Power Systems Inc. was a British Columbia company incorporated on May 30, 1989.  The original predecessor to Ballard was founded in 1979 under the name Ballard Research Inc. to conduct research and development on high-energy lithium batteries.  In the course of investigating environmentally clean energy systems with commercial potential, Ballard began to develop fuel cells and has been developing fuel cell products since 1983.

 

Ballard’s head office is located at 9000 Glenlyon Parkway, Burnaby, British Columbia V5J 5J8, Canada, and its telephone number is (604) 454-0900.  Ballard’s website is www.ballard.com.  Ballard has included its website address in this proxy statement/prospectus only as an inactive textual reference; the contents of this website, and information accessible through this website, are not part of this proxy statement/prospectus.

 

Merger Sub

 

Merger Sub was incorporated in the State of Delaware on June 25, 2015, and is a wholly owned subsidiary of Ballard, formed to facilitate consummation of the Merger.

 

Merger Sub’s contact information is 9000 Glenlyon Parkway, Burnaby, British Columbia V5J 5J8, Canada, and its telephone number is (604) 454-0900.

 

Protonex Technology Corporation (page 84)

 

Protonex, a Delaware corporation incorporated in 2000, is a leading designer and manufacturer of compact, high performance power management and portable fuel cell power generation solutions, with $13.8 mm in total revenues for fiscal year 2014.  With products including fuel cells, portable battery chargers and power managers, the Company sells its products primarily to military and government sectors, but also to commercial and consumer sectors.  Customers include the US Army, US SOCOM and other notable military/government entities, in addition to commercial customers including Lockheed Martin and Raytheon.  In the fuel cell category, it offers products in both Proton Exchange Membrane (PEM) and Solid Oxide (SO) technologies, which can power off-grid applications longer than conventional energy solutions.  Holding a suite of 55 granted and 41 pending patents, the Company’s

 

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products offer a significant improvement over legacy battery technologies, providing a substantial reduction in weight while improving performance, efficiency and functionality.

 

Protonex is headquartered in Southborough, Massachusetts and employs a non-union staff of over 50 development, engineering, manufacturing, sales and marketing, and administrative personnel.  Its principal address and telephone number are 153 Northboro Rd, Southborough MA 01772, (508) 490-9960.

 

The number of stock owners on record totaled 148 as of August 11, 2015.  There is no established public trading market for Protonex’ common stock, however Protonex did list briefly on the London Stock Exchange’s AIM market from 2006-2010.  Protonex does not have a policy of paying regular dividends on its common stock and has never done so.

 

The Merger (page 40)

 

On June 29, 2015, Ballard entered into the Merger Agreement with Merger Sub, Protonex, and Edward J. Stewart, as the stockholder representative, pursuant to which Merger Sub will merge with and into Protonex on the terms and subject to the conditions set forth in the Merger Agreement, so that Protonex, as the surviving corporation, will become a wholly-owned subsidiary of Ballard. The Merger is expected to close in the third calendar quarter of 2015.

 

Reasons for the Merger (page 42)

 

The Protonex board of directors unanimously adopted and approved the Merger Agreement. The Protonex board of directors also unanimously determined that the Merger Agreement is advisable and in the best interests of Protonex and its stockholders and unanimously recommended that Protonex’s stockholders adopt the Merger Agreement and approve the Merger and the other transactions contemplated thereby. In reaching its decision, the Protonex board of directors considered a number of factors that are described in more detail in “Background of the Merger” beginning on page 41.  Individual members of the Protonex board of directors may have given different weight to different reasons.

 

Protonex stockholders should carefully read this proxy statement/prospectus in its entirety for more detailed information concerning the Merger. In addition, Protonex stockholders are directed to the Merger Agreement, which is included as Appendix A to this proxy statement/prospectus.

 

What Protonex Stockholders Will Receive in the Merger (page 44)

 

At the effective time of the Merger, on the terms and subject to the conditions set forth in the Merger Agreement, all of the equity securities of Protonex outstanding immediately prior to the effective time, other than equity securities held by stockholders that exercise appraisal rights under applicable law, will be converted into the right to receive a number of Ballard common shares, equal to U.S. $30,000,000 million less Protonex’s net debt and transaction expenses at the time of closing, divided by U.S. $2.28. Ballard expects to issue, pursuant to the Merger Agreement, up to 11,214,912 common shares (including approximately 628,732 shares to be deposited into escrow). On a per share basis, you will be entitled to receive approximately 0.1562 of a Ballard common share for each share of Protonex common stock you hold as of the effective time of the Merger.

 

The aggregate number Ballard common shares to be issued pursuant to the Merger Agreement will vary depending on a number of factors, including the amount of the estimated net debt of Protonex at closing. The Merger Agreement does not provide for an adjustment in the aggregate number of Ballard common shares to be issued by Ballard to Protonex’s stockholders in the Merger in the event of fluctuations in the market value of Ballard’s common shares up through the closing date. However, the number of shares to be issued by Ballard pursuant to the Merger Agreement is subject to adjustment based on Protonex’s net debt as of the closing date of the Merger. We currently estimate that, if the Merger closes on September 30, 2015, Ballard would issue 11,214,912 shares (including 628,732 shares to be deposited into escrow), which would represent approximately 7.3% of Ballard’s outstanding common shares as of the date of this proxy statement/prospectus (after giving effect to such issuance), assuming Protonex net debt and transaction expenses equal to U.S. $4,430,000. Protonex’s actual results of operations between the date of the financial information included in this proxy statement/prospectus and the closing date may differ from the forecasted results used in this estimate, resulting in differences between the forecast and actual amounts of Protonex’s net debt, including transaction expenses, as of the closing date of the Merger. See “Merger Agreement” located on page 56.

 

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of this proxy statement/prospectus for further information and a discussion relating to the potential amount of shares to be issued by Ballard in the Merger.

 

In accordance with the Merger Agreement and Protonex’s 2003 Stock Incentive Plan and 2013 Stock Incentive Plan, holders of options to purchase Protonex common stock must exercise such options by the fifth business day prior to the special meeting of Protonex stockholders, or their options will be cancelled.  In addition, under the Merger Agreement, Protonex has agreed to cause all outstanding warrants to purchase Protonex common stock to be exercised or terminated prior to the effective time of the Merger.  Ballard will not assume any Protonex options, warrants or other derivative securities in connection with the Merger, and you will receive no Merger consideration in exchange for such securities.  Any Protonex options or warrants duly exercised for shares of Protonex common stock prior to the effective time of the Merger will be entitled to the Merger consideration for their shares of common stock held at the effective time.

 

Principal Agreements

 

Merger Agreement (page 56)

 

The Merger Agreement, which was executed on June 29, 2015, sets forth the terms and conditions of the Merger, including terms for the conversion of securities in the Merger, escrow of certain Merger consideration, representations and warranties, indemnification, covenants of each party, closing conditions and termination provisions.  See “Merger Agreement” on page 56 and Appendix A hereto for further information on the Merger Agreement.

 

Support Agreements (page 68)

 

Concurrently with the execution of the Merger Agreement, certain Protonex stockholders, who collectively hold approximately 56% of the outstanding shares of Protonex common stock as of the date of this proxy statement/prospectus, each have entered into support agreements with Ballard, pursuant to which these Protonex stockholders have agreed, among other things, to vote (or deliver written consents with respect to) all of the shares of Protonex capital stock held by such stockholders in favor of the approval of the Merger and the Merger Agreement and the other transactions contemplated thereby, to vote against any action that would reasonably likely result in a material breach of a representation, warranty, covenant or agreement of Protonex under the Merger Agreement, and to vote against any alternative transactions. Each support agreement also generally prohibits the Protonex stockholders signing it from transferring such stockholder’s shares of Protonex capital stock prior to the consummation of the Merger.

 

In addition, each of the Protonex stockholders that executed a support agreement has agreed that the Ballard common shares to be received by such stockholder in the Merger are subject to lock-up restrictions, which restrictions will lapse with respect to one-half of such Ballard common shares at the six and 12-month anniversaries of the closing date of the Merger. Such stockholder has agreed not to offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose of any Ballard common shares during the lock-up period.

 

Each support agreement will terminate upon the termination of the Merger Agreement in accordance with its terms. Collectively, the support agreements provide for the vote of a sufficient number of shares of Protonex to adopt the Merger Agreement and approve and the Mergers contemplated thereby under Delaware law and Protonex’s organizational documents.

 

Escrow Agreement (page 69)

 

Pursuant to an escrow agreement to be entered into between Ballard, Edward J. Stewart, as stockholder representative, and U.S. Bank, National Association, as escrow agent, Ballard will deposit approximately 628,732 common shares payable to the Supporting Stockholders, or 10% of the total Merger consideration to be paid to the Supporting Stockholders, into an escrow account maintained by U.S. Bank, National Association, as escrow agent. These common shares will be used to cover indemnification claims by Ballard pursuant to the terms of the Merger Agreement, which shares will be released 12 months after the closing of the Merger, subject to any then pending claims.

 

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Risk Factors (page 21)

 

In deciding how to vote Protonex common stock on the matters described in this proxy statement/prospectus, you should carefully consider the risks related to the Merger, Ballard, Protonex and the combined company. The Merger may not achieve the expected benefits because of, among other things, the risks and uncertainties discussed in the sections entitled “Questions and Answers About the Special Meeting and the Merger”, “Risk Factors”, “Cautionary Statement Regarding Forward-Looking Statements” on pages 1, 21 and 32, respectively. Such risks include, among other things, risks relating to the uncertainty that Ballard and Protonex will be able to close the Merger or, if closed, integrate their businesses successfully, uncertainties as to whether the Merger will achieve expected synergies, and uncertainties relating to the performance of the combined company following the Merger.

 

Approval by Holders of Protonex Common Stock (page 35)

 

The adoption and approval of the Merger Agreement and the Merger requires the affirmative vote of the holders of a majority of the shares of Protonex common stock issued and outstanding on the record date and entitled to vote at the meeting.  Collectively, the support agreements provide for the vote of a sufficient number of shares of Protonex to adopt and approve the Merger Agreement and the Merger under applicable Delaware law and Protonex’s organizational documents.

 

Conditions to the Merger (page 64)

 

Ballard and Protonex expect to complete the Merger after all of the conditions to the Merger in the Merger Agreement are satisfied or waived, including after the receipt of approval of the Merger at the special meeting of Protonex stockholders and the receipt of any required regulatory approvals. Ballard and Protonex currently expect to complete the Merger during the third calendar quarter of 2015. However, it is possible that factors outside of either Ballard’s or Protonex’s control could cause the Merger to be completed at a later time or not at all.

 

Each party’s obligation to complete the Merger is subject to the satisfaction or waiver (to the extent waiver is permitted under the Merger Agreement) of various conditions, including conditions relating to the following matters: (i) approval of the Merger by the Protonex stockholders, (ii) not more than 5% of the Protonex stockholders having exercised appraisal rights, (iii) the execution of certain ancillary agreements, (iv) all required consents and approvals necessary to consummate the Merger having been obtained, (v) the effectiveness of the registration statement on Form F-4 (of which this proxy statement/prospectus is a part) for purposes of registering the shares, (vi) no injunction or proceeding by a government entity seeking to restrain or prohibit consummation of the Merger, (vi) no material adverse changes of Protonex, (vii) the other party’s compliance with its covenants and agreements contained in the Merger Agreement (subject to customary materiality qualifiers), (viii) each party’s receipt of an opinion from outside legal counsel that is reasonably acceptable and dated as of the closing date of the Merger to the effect that, on the basis of the facts, representations and assumptions set forth or referred to in such opinion, the Merger will qualify for U.S. federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code; provided, however, that if Protonex’s counsel is unable, unwilling or otherwise fails to deliver such opinion, then Ballard’s counsel may deliver such opinion to Protonex; (ix) the approval for listing of such shares on the TSX and the NASDAQ; (x) subject to certain limitations and exceptions, the accuracy of the other party’s representations and warranties; (xi) evidence of the adoption and approval by Ballard, as the sole stockholder of Merger Sub of the Merger Agreement, the Merger and the other transactions contemplated hereby;  (xii) executed resolutions of Protonex’s board of directors authorizing the termination of all of Protonex’s unexercised stock options; (xiii) the execution of employment agreements by certain key employees of Protonex; and (xiv) if a 280G Vote (as defined in the Merger Agreement) is required (1) Protonex shall have received and delivered to Ballard a parachute payment waiver from each person that is eligible to receive a “parachute payment” and (2) Protonex’s stockholders shall have (A) approved any such “parachute payments” or (B) shall have voted upon and disapproved such “parachute payments,” and, as a consequence, such “parachute payments” shall not be paid.

 

Termination of the Merger Agreement (page 67)

 

The Merger Agreement contains certain provisions giving Ballard and Protonex the right to terminate the Merger Agreement under certain circumstances.  The Merger Agreement may be terminated at any time before the effective time of the Merger:

 

·                                          by mutual written consent of Ballard and Protonex;

 

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·                                          by either party if the closing does not occur by December 31, 2015, with certain conditions;

 

·                                          by Ballard if there is: a material breach of any representation or warranty of Protonex in the Merger Agreement or in the support agreement or any covenant or agreement to be complied with or performed by Protonex, the failure of certain conditions on or prior to December 31, 2015, or the occurrence of any event which results or would result in the failure of a condition to Ballard’s obligations to effect the Merger to be satisfied on or prior to December 31, 2015 or Protonex failed to obtain the stockholder approval of the Merger;

 

·                                          by Protonex if there is a material breach of any representation or warranty of Ballard or Merger Sub in the Merger Agreement or of any covenant or agreement to be complied with or performed by Ballard or Merger Sub, the failure of certain conditions on or prior to December 31 2015, or the occurrence of any event which results or would result in the failure of a condition to Protonex’s obligations to effect the Merger to be satisfied on or prior to December 31, 2015; or

 

·                                          by Protonex, if at any time prior to obtaining the approval of the Protonex stockholders, the Company has received an acquisition proposal that the Protonex board of directors has determined to be a superior proposal (as defined in the Merger Agreement).

 

Termination Fees and Expenses (page 67)

 

If the Merger Agreement is terminated by Protonex pursuant to the fourth bullet in the section entitled “Merger Agreement—Termination of the Merger Agreement” above, then Ballard is required to pay Protonex a termination fee of $200,000, unless, as a result of willful and intentional breach by Ballard or Merger Sub, Protonex notifies Ballard in writing at the time of termination that it will pursue a remedy other than the termination amount.

 

If the Merger Agreement is terminated by Ballard pursuant to the either the second or third last bullet in the section entitled “Merger Agreement—Termination of the Merger Agreement” above, then Protonex is required to pay Ballard a termination fee of $200,000.

 

If the Merger Agreement is terminated by Protonex pursuant to the last bullet in the section entitled “Merger Agreement—Termination of the Merger Agreement” above, then Protonex is required to pay Ballard a termination fee of $1,500,000, plus Ballard’s fees and expenses.

 

Resale of Ballard Common Shares (page 44)

 

All Ballard common shares that each Protonex stockholder receives in the Merger will be listed on the TSX and the NASDAQ and will be freely transferable under Canadian and U.S. securities laws unless a stockholder is deemed an affiliate of Protonex immediately prior to the Merger or an affiliate of Ballard following the Merger for purposes of the U.S. securities laws or a control person of Ballard following the Merger for purposes of Canadian securities laws.

 

Furthermore, all of the Protonex stockholders that executed the support agreements (as described in “Ancillary Agreements—Support Agreement”) agreed that the Ballard common shares to be received by Protonex stockholders in the Merger are all subject to lock-up restrictions, which restrictions will lapse with respect to one-half of such Ballard common shares at the six and 12-month anniversaries of the closing date of the Merger. The stockholder agrees not to offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose of any shares during the lock-up period.

 

Exchange Agent (page 44)

 

Prior to the closing, Ballard will appoint an exchange agent in connection with the Merger to handle the exchange of shares of Protonex common stock for Ballard shares.  Protonex stockholders should not return share certificates now with the enclosed proxy card.

 

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Interests of Certain Persons in the Merger (page 43)

 

Certain directors and executive officers of Protonex have interests in the Merger that may be in addition to or different from those of other Protonex stockholders, including:

 

·                  change of control bonus payments to be made to certain executive officers of Protonex;

 

·                  the acceleration of vesting of certain options held by certain directors and executive officers of Protonex; and

 

·                  the continued indemnification and directors’ and officers’ insurance coverage of current Protonex directors and officers following the Merger.

 

Material U.S. Federal Income Tax Consequences (page 45)

 

The Merger is intended to qualify as a reorganization within the meaning of Section 368(a) of the Code. It is a condition to the closing of the Merger that each party shall have received an opinion from outside legal counsel to the effect that the Merger should qualify as such a reorganization. Assuming the Merger qualifies as a reorganization for U.S. federal income tax purposes, U.S. holders (as defined below under “The Merger Proposal—Material U.S. Federal Income Tax Consequences”) of Protonex common stock will not recognize income, gain or loss on the exchange of their Protonex common stock for Ballard common shares in the Merger (other than a U.S. holder of Protonex common stock who is a “five-percent transferee shareholder” within the meaning of the rules under Treasury regulations Section 1.367(a)-3(c) and who does not file a gain recognition agreement with the IRS).

 

The discussion of U.S. federal income tax considerations set forth herein is for general information only and does not purport to be a complete analysis or listing of all potential tax effects that may apply to a U.S. holder of Protonex common stock. Protonex Stockholders should consult their own tax advisors to determine the particular tax consequences to them of the Merger, including the application and effect of U.S. federal, state, local, foreign and other tax laws.

 

The foregoing summary of U.S. federal income tax consequences of the Merger is qualified in its entirety by the longer form discussion under “The Merger Proposal—Material U.S. Federal Income Tax Consequences” beginning on page 45. Neither Protonex nor Ballard has sought or obtained a ruling from the IRS regarding any of the tax consequences of the Merger. Accordingly, there can be no assurance that the IRS will not challenge this tax treatment of the Merger or that the U.S. courts will uphold this tax treatment in the event of an IRS challenge.

 

Material Canadian Federal Income Tax Consequences (page 50)

 

A holder who acquires Ballard common shares as beneficial owner in connection with the Merger and who, at all relevant times, for the purposes of the Income Tax Act (Canada) (the “Tax Act”), (i) holds such common shares as capital property, deals at arm’s length with Ballard, and is not affiliated with Ballard and (ii) is not, and is not deemed to be, resident in Canada and does not use or hold the Ballard common shares in connection with carrying on a business in Canada  will not be subject to tax under the Tax Act in respect of any capital gain realized by such holder on a disposition of the common shares, unless such shares constitute “taxable Canadian property” (as defined in the Tax Act) of such holder at the time of disposition and such holder is not entitled to relief under an applicable income tax treaty or convention.

 

The foregoing summary of Canadian federal income tax consequences of the Merger is qualified in its entirety by the longer form discussion under “The Merger Proposal—Material Canadian Federal Income Tax Consequences of the Merger” beginning on page 50

 

Anticipated Accounting Treatment of the Merger

 

Ballard’s acquisition of Protonex in the Merger will be accounted for under the acquisition method of accounting in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards

 

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Board (“IFRS”).  From the date of completion of the Merger, our results of operations will include Protonex’s operating results and assets and liabilities.

 

Regulatory Matters (page 54)

 

Protonex and Ballard intend to make all required filings under the Securities Act and the Exchange Act in connection with the Merger. In addition to the SEC filings there are filings required with the TSX and the NASDAQ relating to the listing of the Ballard common shares to be issued in the Merger.  Further, Protonex and Ballard have filed a notification with the Directorate of Defense Trade Controls of the U.S. State Department pursuant to Section 122.4 of the International Traffic in Arms Regulations.

 

The Merger is not subject to pre-merger notification under any U.S. or foreign antitrust laws, but it may be reviewed by the Antitrust Division and the Federal Trade Commission and by foreign antitrust authorities, under U.S. or foreign antitrust laws, respectively. The Merger may also be reviewed by the SEC under the Securities Act and Exchange Act, and by foreign governmental authorities, including Canadian securities regulatory authorities and the TSX.

 

Appraisal Rights (page 52)

 

Under Delaware law, stockholders of Protonex can exercise appraisal rights in connection with the Merger. A stockholder that does not vote in favor of the Merger proposal and complies with all of the other necessary procedural requirements will have the right to dissent from the Merger and to seek appraisal of the fair value of their Protonex common stock, exclusive of any element of value arising from the expectation or accomplishment of the Merger.

 

Unaudited Pro Forma Condensed Combined Financial Information (page 71)

 

For a discussion of the unaudited pro forma condensed combined financial information, see “Selected Historical and Unaudited Pro Forma Condensed Financial Data” on page 17.

 

Comparison of Rights of Stockholders of Ballard and Protonex (page 96)

 

Protonex is incorporated in the State of Delaware and the rights of Protonex stockholders are currently governed by the Delaware General Corporation Law (the “DGCL”) and Protonex’s certificate of incorporation and by-laws. After the completion of the Merger, stockholders of Protonex who receive Ballard’s common shares in the Merger will become stockholders of Ballard and will become subject to Ballard’s articles and the applicable provisions of the CBCA.

 

Enforceability of Civil Liabilities against Foreign Persons

 

Ballard is a corporation governed by the CBCA. The majority of Ballard’s assets are located outside the United States and certain of Ballard’s directors and officers and some of the experts named in this proxy statement/prospectus reside outside the United States. Because some of these persons are located outside the United States, it may not be possible for you to effect service of process within the United States on these persons. Furthermore, it may not be possible for you to enforce against Ballard or them, in the United States, judgments obtained in United States courts, because some of Ballard’s assets and the assets of these persons are located outside the United States.

 

There is doubt as to the enforceability, in original actions in Canadian courts, of liabilities based on the United States federal securities laws or “blue sky” laws of any state within the United States and as to the enforceability in Canadian courts of judgments of U.S. courts obtained in actions based on the civil liability provisions of the United States federal securities laws or any such state securities or blue sky laws. Therefore, it may not be possible to enforce those judgments against Ballard, its directors and officers and some of the experts named in this proxy statement/prospectus, including the appendices hereto.

 

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SELECTED HISTORICAL AND UNAUDITED PRO FORMA CONDENSED FINANCIAL DATA

 

Selected Historical Financial Data of Ballard

 

The following tables summarize Ballard’s financial data. The consolidated statement of profit or loss and other comprehensive income (loss) data for the fiscal years ended December 31, 2014, 2013 and 2012, the consolidated statement of financial position data as of December 31, 2014 and December 31, 2013, which are prepared in accordance with IFRS, are derived from Ballard’s audited annual financial statements and related notes contained in its Annual Report on Form 40-F for the fiscal year ended December 31, 2014, which is incorporated by reference into this proxy statement/prospectus.  The selected financial data of Ballard as of and for the six months ended June 30, 2015 and 2014 are derived from Ballard’s unaudited consolidated financial statements and related notes furnished to the SEC under cover of Form 6-K, which is incorporated by reference in this proxy statement/prospectus.

 

Historical results are not indicative of the results that should be expected in the future. The information set forth below is only a summary and is not necessarily indicative of the results of future operations of Ballard or the combined company, and you should read the following information together with Ballard’s audited consolidated financial statements, the notes related thereto and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Ballard’s Annual Report on Form 40-F for the fiscal year ended December 31, 2014 and Ballard’s unaudited consolidated financial statements, the notes related thereto and the document entitled “Management’s Discussion and Analysis” contained in Ballard’s Form 6-K furnished to the SEC on July 30, 2015, each of which is incorporated by reference into this proxy statement/prospectus. For more information, see the sections titled “Incorporation of Certain Information by Reference” and “Where You Can Find More Information” beginning on pages 105 and 104, respectively.

 

		As of June 30, (1)				As of December 31, (2)
		2015		2014		2014		2013		2012
Consolidated statement of financial position data (IFRS) (Expressed in thousands of U.S. dollars, except share amounts)
Total assets		131,402		151,740		127,949		120,214		127,547
Total liabilities		50,776		49,721		48,715		49,960		69,545
Net assets		80,626		102,019		79,234		70,254		58,002
Capital stock		915,912		914,707		914,786		866,574		845,630
Number of shares outstanding		132,613,596		132,030,742		132,104,116		110,133,901		91,801,477

 

		For the six months  ended June 30, (1)						For the year ended December 31, (2)
		2015			2014			2014			2013			2012
Consolidated statement of profit or loss and other comprehensive income (loss) data (IFRS) (Expressed in thousands of U.S. dollars, except per share amounts)
Operating revenue		20,440			32,463			68,721			61,251			43,690
Gross profit		2,108			8,071			10,246			16,759			7,369
Net (loss) income		(972		)	(8,677		)	(29,428		)	(21,700		)	(43,724		)
Basic and diluted (loss) income per common share		$	(0.00	)	$	(0.07	)	$	(0.22	)	$	(0.20	)	$	(0.48	)

 

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(1) Unaudited.

 

(2) Audited.

 

Selected Historical Financial Data of Protonex

 

The following tables summarize Protonex’s financial data which are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The statements of operations data for the fiscal years ended September 30, 2014, 2013 and 2012 and the statements of financial position as of September 30, 2014 and 2013 are derived from Protonex audited annual financial statements and related notes contained in this proxy statement/prospectus. The statements of operations data for the six months ended March 31, 2015 and March 31, 2014, the statement of cash flows for the six months ended March 31, 2015 and March 31, 2014 and the balance sheet data as of March 31, 2015 are derived from Protonex’s unaudited financial statements and related notes.

 

Historical results are not indicative of the results that should be expected in the future. The information set forth below is only a summary and is not necessarily indicative of the results of future operations of Protonex or the combined company, and you should read the following information together with Protonex’s audited consolidated financial statements, the notes related thereto, Protonex’s unaudited interim consolidated financial statements, the notes related thereto and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Business of Protonex” included elsewhere in this proxy statement/prospectus. For more information, see the section entitled “Where You Can Find More Information” beginning on page 104.

 

		As of March 31, (1)			As of September 30, (2)
		2015			2014			2013			2012
Statement of financial position data (U.S. GAAP) (U.S. $)
Total assets		$	11,501,811		$	13,884,148		$	12,655,377		$	12,775,286
Total liabilities		$	5,245,940		$	6,697,827		$	4,781,027		$	3,608,241
Net assets		$	6,255,871		$	7,186,321		$	7,874,350		$	9,167,045
Stockholders’ equity		$	6,255,871		$	7,186,321		$	7,874,350		$	9,167,045
Number of shares outstanding		64,125,788			64,108,788			63,995,188			63,979,188

 

		For the six months ended  March 31, (1)						For the year ended September 30, (2)
		2015			2014			2014			2013			2012
Statement of operations data (U.S. GAAP) (U.S. $)
Revenue		$	5,712,797		$	6,357,432		$	13,808,625		$	12,979,122		$	10,123,032
Gross profit		$	2,540,254		$	2,631,102		$	5,520,948		$	5,973,985		$	4,856,844
Net (loss) income		$	(1,058,962	)	$	(701,086	)	$	(1,121,320	)	$	(1,748,196	)	$	(2,013,195	)

 

(1) Unaudited.

 

(2) Audited.

 

Selected Unaudited Pro Forma Condensed Financial Data

 

The unaudited pro forma condensed consolidated financial statements of Ballard for the six months ended June 30, 2015 and the year ended December 31, 2014 included in this proxy statement/prospectus have been prepared by Ballard using the business combination rules under IFRS. The unaudited pro forma condensed consolidated statement of financial position of Ballard as at June 30, 2015 assumes that the Merger took place on June 30, 2015, and combines Ballard’s unaudited condensed consolidated statement of financial position at June 30, 2015

 

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with Protonex unaudited consolidated balance sheet at March 31, 2015, with adjustments. The unaudited pro forma condensed consolidated statement of profit or loss and other comprehensive income (loss) of Ballard for the six months ended June 30, 2015 assumes that the Merger took place as of January 1, 2014 and combines the unaudited condensed consolidated statement of profit or loss and other comprehensive income (loss) of Ballard for the six months ended June 30, 2015 and the unaudited consolidated statement of comprehensive income (loss) of Protonex for the six months ended March 31, 2015, with adjustments. The unaudited pro forma condensed consolidated statement of profit or loss and other comprehensive income (loss) of Ballard for the year ended December 31, 2014 assumes that the Merger took place as of January 1, 2014 and combines the audited consolidated statement of profit or loss and other comprehensive income (loss) of Ballard for the year ended December 31, 2014 and the audited consolidated statement of income (loss) of Protonex for the year ended September 30, 2014, with adjustments. In preparing these unaudited pro forma condensed financial statements, Ballard has adjusted Protonex’s financial statements to conform to IFRS and to Ballard’s accounting policies. These adjustments are described in the notes to the unaudited pro forma condensed financial statements of Ballard for the six months ended June 30, 2015 and the year ended December 31, 2014 which should be read in conjunction with the selected unaudited pro forma condensed financial data presented below.

 

The unaudited pro forma condensed financial statements assume that, at the effective time of the Merger, each outstanding share of Protonex common stock will be converted into the right to receive approximately 0.1562 of a Ballard common share. Pro forma book value per share is calculated by dividing total assets (including both tangible and intangible assets) minus total liabilities of Ballard as at June 30, 2015 under IFRS by the total number of Ballard common shares outstanding at such date (including issuance of Ballard shares to Protonex stockholders as of such date).

 

The selected unaudited pro forma condensed financial data is based on estimates and assumptions that are preliminary, presented for illustrative purposes only and is not necessarily indicative of the combined financial position or results of operations of future periods or the results that actually would have been realized had the entities been a single entity during these periods. The assumptions underlying the selected unaudited pro forma condensed financial data described in the notes to the unaudited pro forma condensed financial statements of Ballard for the six months ended June 30, 2015 and should be read in conjunction with the selected unaudited pro forma condensed financial data presented below. The following information should also be read in conjunction with (i) the unaudited condensed consolidated financial statements of Ballard for the six months ended June 30, 2015, including the notes thereto, contained in Ballard’s Form 6-K furnished to the SEC on July 30, 2015, which is incorporated by reference into this proxy statement/prospectus and (ii) the unaudited consolidated financial statements of Protonex, including the notes thereto, which is included elsewhere in this proxy statement/prospectus. See “Unaudited Pro Forma Condensed Combined Financial Information” on page 71 of this proxy statement/prospectus. See also “Cautionary Statement Regarding Forward-Looking Statements” on page 32.

 

		As of
Pro Forma Statement of financial position data (IFRS) (Expressed in thousands of U.S. dollars, except share and per share amounts)		June 30
(Unaudited)		2015
Total assets		$	158,372
Total liabilities		53,476
Net assets		104,896
Capital stock		941,482
Number of shares outstanding		143,828,508

 

Pro Forma Statement of Operations		Six months ended			Year ended
data (IFRS) (Expressed in thousands of U.S. dollars, except share and per share amounts) (Unaudited)		June 30, 2015			December 31, 2014
Operating revenue		$	26,153		82,530
Gross Profit		4,480			15,431
Net profit (loss)		(2,363		)	(31,352		)
Basic and diluted profit (loss) per common share		$	(0.01	)	$	(0.22	)
Shares used in computing basic net profit (loss) per share		143,651,470			138,600,726
Shares used in computing diluted net profit (loss) per share		145,962,247			138,600,726

 

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STOCK PRICE AND DIVIDEND INFORMATION

 

Ballard

 

Stock Price Information

 

The table below sets forth the high and low sales prices per Ballard common share, as reported on the TSX and NASDAQ.

 

		NASDAQ (U.S. $)				TSX (C$)
		High		Low		High		Low
Fiscal Year Ended December 31, 2015
First quarter		3.10		1.41		3.64		1.77
Second quarter		2.51		2.01		3.08		2.42
Third quarter (through August 10)		1.83		1.21		2.32		1.55
Fiscal Year Ended December 31, 2014
First quarter		6.88		1.75		7.63		1.86
Second quarter		4.87		2.89		5.36		3.17
Third quarter		4.38		2.99		4.76		3.31
Fourth quarter		3.14		1.72		3.49		2.00
Fiscal Year Ended December 31, 2013
First quarter		1.41		0.59		1.43		0.60
Second quarter		2.02		0.78		2.08		0.80
Third quarter		2.21		1.46		2.29		1.54
Fourth quarter		1.73		1.27		1.81		1.33

 

On June 29, 2015, the date of execution and announcement of the Merger Agreement, the closing share price of a Ballard common share on the NASDAQ and the TSX was U.S. $2.14 and C$2.63, respectively.

 

The market price of Ballard’s common shares could change significantly. Because the equity consideration to be paid in the Merger will not be adjusted for changes in the market price of Ballard’s common shares through the closing date of the Merger, the value of the consideration that holders of shares of Protonex common stock will receive in the Merger may vary significantly from the market value of Ballard’s common shares that holders of shares of Protonex common stock would have received if the Merger was completed on the date the Merger Agreement was executed and announced, or on the date of the special meeting of Protonex stockholders on this proxy statement/prospectus.

 

Dividend Policies

 

Ballard has not paid any dividends to date on its common shares. Ballard intends to retain its earnings, if any, to finance the growth and development of its business. Accordingly, it does not currently expect to pay any dividends on its common shares in the near future.

 

Following completion of the Merger, the holders of Ballard’s common shares will be entitled to receive any dividends as may be declared by the Ballard board of directors from funds legally available therefor. The dividend policy of the combined company will be determined by its board of directors.

 

Protonex

 

Historical market price information regarding Protonex capital stock is not provided because there is currently no public trading market for Protonex’s common stock.  As of August 11, 2015, the record date for the special meeting, there were 64,978,500 shares of Protonex common stock outstanding, held by 148 holders of record.  No shares of Protonex preferred stock were issued and outstanding as of such date.  Protonex does not have a policy of paying regular dividends on its common stock and has never done so.

 

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RISK FACTORS

 

Protonex’s stockholders should carefully consider the following factors in connection with their vote to adopt the Merger Agreement and their potential receipt of Ballard’s common shares in the Merger. These factors should be considered in conjunction with the other information included, or incorporated by reference in, this proxy statement/prospectus. Additional risks and uncertainties not presently known to Protonex or Ballard, or that are not currently believed to be important to you, also may adversely affect the combined company and its stockholders following the Merger.

 

Risks Related to the Merger

 

Even if the Merger is completed, we may not be able to fully realize all of the projected synergies and anticipated benefits of the Merger.

 

The success of the Merger will depend on, among other things, the ability to realize anticipated revenue and cost savings, enhance the combined company’s global reach and to combine Ballard’s business with Protonex in a manner that potentially creates opportunities through strategic relationships, that does not materially disrupt existing relationships or otherwise result in decreased productivity and that allows Ballard to capitalize on the capabilities of the combined company. If these objectives are not achieved, the anticipated benefits of the Merger may not be realized fully or at all or may take longer to realize than expected.

 

The combined company may not realize projected revenue gains, cost savings and synergies in connection with the Merger on the timetable contemplated, if at all. In addition, the actual integration may result in additional and unforeseen expenses, and the anticipated benefits of the integration plan may not be realized. Actual revenue and cost synergies, if achieved at all, may not be achieved at the levels expected and may take longer than anticipated. If these challenges are not adequately addressed, Ballard and Protonex may be unable to realize the anticipated benefits of the integration of the two companies. An inability to realize the full extent of, or any of, the anticipated benefits of the Merger, as well as any delays encountered in the integration process, could have a material adverse effect on the combined company’s business and results of operations, which may affect the value of the combined company’s common shares.

 

We may not realize the operating and financial benefits we expect from the Merger.

 

The post-acquisition integration of Ballard and Protonex may be complex, time-consuming and expensive, and may disrupt the day-to-day management and operation of our respective businesses. Both Ballard and Protonex have operated and, until the completion of the Merger, will continue to operate independently. It is possible that the integration process could result in the disruption of Ballard’s or Protonex’s ongoing businesses or inconsistencies in standards, controls, procedures or policies that could adversely affect the ability of the combined company to maintain relationships with third parties and employees or to achieve the anticipated benefits of the Merger. After the Merger, the combined company may need to overcome significant challenges in order to realize any benefits or synergies from the Merger. These challenges include the timely, efficient, and successful completion of a number of post-acquisition events, including the following:

 

·                                          integrating the operations and technologies of the companies;

 

·                                          implementing disclosure controls, internal controls and financial reporting systems to comply with applicable securities laws and stock exchange rules;

 

·                                          retaining and assimilating the key personnel of each company;

 

·                                          resolving possible inconsistencies in operating and product standards, internal controls, procedures and policies, business cultures, corporate governance and reporting practices and compensation methodologies between the companies;

 

·                                          retaining existing vendors and customers of the companies and attracting additional customers;

 

·                                          retaining strategic partners of each company and attracting new strategic partners; and

 

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·                                          creating uniform business standards, procedures, policies, and information systems.

 

The execution of these post-acquisition integration events involve considerable risks and may not be successfully implemented, or if implemented, on a timely basis. These risks include the following:

 

·                                          potential disruption of ongoing business operations and distraction of the management of the combined company;

 

·                                          potential strain on financial and managerial controls and reporting systems and procedures of the combined company;

 

·                                          unanticipated expenses and potential delays related to integration of the operations, technology, and other resources of the companies;

 

·                                          potential impairment of relationships with employees, suppliers, and customers as a result of the inclusion and integration of management personnel; and

 

·                                          potential unknown liabilities associated with the Merger and the combined operations.

 

The combined company may not succeed in mitigating these risks or any other problems encountered in connection with the Merger.

 

Failure to complete, or a delay in completing, the Merger could adversely affect Ballard’s and Protonex’s future business and operations.

 

The Merger is subject to the satisfaction, or, in certain circumstances, waiver, of various closing conditions, including obtaining the approval by Protonex’s stockholders and certain other conditions described in the Merger Agreement that are outside the control of Ballard and Protonex that may prevent, delay or otherwise materially adversely affect its completion. Ballard’s and Protonex’s respective obligations to complete the Merger are also subject to the other conditions listed under “Merger Agreement—Conditions to Consummation of the Merger” on page 67. Neither Ballard nor Protonex can assure you whether or when these conditions will be satisfied or waived, or whether the Merger will be successfully completed. Any delay in completing the Merger could cause the combined company not to realize some or all of the synergies and other benefits that Ballard and Protonex expect to achieve if the Merger is successfully completed within its expected time frame.

 

In the event that the Merger is not completed:

 

·                                          Ballard and Protonex would not realize any potential benefits of the Merger, including anticipated revenue and cost synergies;

 

·                                          Ballard’s and Protonex’s management’s attention from day-to-day business may be diverted, Ballard and Protonex may lose key employees, and Ballard’s and Protonex’s relationships with their respective customers and partners may be disrupted as a result of uncertainties with regard to each company’s business and prospects;

 

·                                          the business relationship between Ballard and Protonex may be adversely impacted;

 

·                                          under certain circumstances, Ballard or Protonex may be required to pay the other party a termination fee of U.S. $200,000; provided that if Protonex terminates the Merger Agreement to pursue a superior proposal, then Protonex will be required to pay Ballard U.S. $1,500,000 plus Ballard’s expenses; and

 

·                                          Ballard and Protonex will each incur and must pay significant costs and expenses related to the Merger, such as legal, accounting and advisory fees.

 

Any such events could adversely affect Ballard’s and Protonex’s business and operating results.

 

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Ballard’s and Protonex’s business could suffer due to the announcement, pendency and consummation of the Merger.

 

The announcement, pendency and consummation of the Merger may have a negative impact on Ballard’s, Protonex’s, and the combined company’s ability to sell their respective products and services, attract and retain key management, technical, sales, or other personnel, maintain and attract new customers, and maintain strategic relationships with third parties. For example, Ballard and Protonex, and following consummation of the Merger, the combined company, may experience the deferral, cancellation or a decline in the size or rate of orders for its products or services or a deterioration in customer relationships. If this were to occur, Ballard’s and Protonex’s revenues, and the revenues of the combined company, could decline materially or any anticipated increases in revenue due to potential synergies or otherwise could be lower than expected. Also, speculation regarding the likelihood of the closing of the Merger could increase the volatility of Ballard’s common share price. Any such events could harm Ballard’s and Protonex’s, and following the Merger the combined company’s, operating results and financial condition.

 

The price of Ballard’s common shares may fluctuate, and the purchase price payable in the Merger will not be adjusted for any changes in the price of Ballard’s common shares.

 

The consideration payable in connection with the Merger will be paid through the issuance to the stockholders of Protonex of approximately 11,214,912 of Ballard’s common shares (or approximately 0.1562 Ballard common shares for each share of Protonex common stock owned, based upon 71,803,021 fully diluted shares of Protonex common stock expected to be outstanding as of the date of the special meeting of Protonex stockholders). Under the Merger Agreement, other than as a result of reclassifications, stock splits, stock dividends and similar changes effected by Ballard, the number of Ballard’s common shares to be issued will not be adjusted even if the market price of Ballard’s common shares fluctuates between the date of the Merger Agreement and the closing date of the Merger. The market price of Ballard’s common shares at the closing of the Merger will likely vary from the market price at the date of this proxy statement/prospectus and at the date of the Protonex special meeting of stockholders. Stock price changes may result from a variety of factors that are beyond the control of Ballard or Protonex, including:

 

·                                          market reaction to the announcement and pendency of the Merger and market assessment of the merits and risks of the Merger and the likelihood of the Merger being consummated;

 

·                                          changes in the respective businesses, operations, or prospects of Ballard’s or Protonex’s business;

 

·                                          governmental or litigation developments or regulatory considerations affecting the fuel cell industry or other aspects of Ballard’s or Protonex’s businesses;

 

·                                          general business, market, industry or economic conditions; and

 

·                                          other factors beyond the control of Ballard or Protonex, including those described elsewhere in this “Risk Factors” section or in the documents incorporated by reference herein.

 

Neither party is permitted to “walk away” from the Merger or re-solicit the vote of its stockholders solely because of changes in the market price, and, therefore, the value, of Ballard’s common shares through the closing date of the Merger. Any reduction in Ballard’s stock price would result in Protonex stockholders receiving less value in the Merger. Conversely, any increase in Ballard’s stock price would potentially result in Protonex stockholders receiving greater value in the Merger. The specific dollar value per share of Ballard’s common shares that Protonex’s stockholders would receive upon completion of the Merger will depend on, among other things, the market value of Ballard’s common shares at that time, the number of shares of Protonex common stock then issued and outstanding and other factors discussed in this proxy statement/prospectus. Protonex’s stockholders will not know the exact value of Ballard’s common shares to be issued in the Merger at the time of the Protonex special meeting of stockholders.

 

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If the Merger does not qualify as a “reorganization” within the meaning of Section 368(a) of the Code, the stockholders of Protonex may be required to pay substantial U.S. federal income taxes.

 

It is a condition to the completion of the Merger that Protonex and Ballard each receive an opinion from outside legal counsel that, for U.S. federal income tax purposes, the Merger should qualify as a reorganization within the meaning of Section 368(a) of the Code. The opinions of outside legal counsel will be based on certain assumptions, representations and covenants made by Ballard and Protonex. If any of those representations, covenants and assumptions is inaccurate, the conclusions reached by counsel in such opinions may not apply. Moreover, the opinions of outside tax counsel do not bind the IRS nor do they prevent the IRS from adopting a contrary position. Neither Ballard nor Protonex has requested, or intends to request, a ruling from the IRS, with respect to the tax consequences of the Merger, and there can be no assurance that the companies’ position would be sustained by a court if challenged by the IRS. If the Merger does not qualify as a reorganization within the meaning of Section 368(a) of the Code, Protonex stockholders will recognize gain or loss upon their receipt of Ballard common shares in connection with the Merger. For a more complete discussion of the tax consequences of the Merger, see the section entitled “The Merger Proposal—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 46.

 

The Merger is expected to result in an ownership change for Protonex and may result in an ownership change for Ballard under Section 382 of the Code, substantially limiting the use of the net operating loss, referred to as “NOL,” carryforwards and other tax attributes of Protonex and possibly of Ballard’s U.S. subsidiaries to offset future taxable income of the combined company.

 

In general, under Section 382 of the Code, a corporation that undergoes an “ownership change” within the meaning of Section 382 of the Code is subject to limitations on the utilization of net operating loss carryforwards, which we refer to as NOL carryforwards, generated prior to such ownership change to offset future taxable income. In general, an ownership change occurs if the aggregate stock ownership of certain stockholders increases by more than 50 percentage points over such stockholders’ lowest percentage ownership during the testing period (which is generally three years). If an ownership change occurs, Section 382 imposes an annual limitation on the amount of income against which pre-ownership change NOL carryforwards may be offset. The annual limitation is generally equal to the value of the stock of the corporation immediately prior to the ownership change, multiplied by the adjusted federal tax-exempt rate set by the IRS.

 

The Merger is expected to result in an ownership change for Protonex and may result in an ownership change for Ballard under Section 382 of the Code, potentially limiting the use of the NOL carryforwards of Protonex and Ballard’s U.S. subsidiaries to offset future taxable income of the combined company for both federal and state income tax purposes. Whether the Merger results in an ownership change for Ballard and its U.S. subsidiaries depends on other past and future changes in stock ownership. Moreover, the utilization of the combined company’s NOL carryforwards depends on the timing and amount of taxable income earned in the future, which neither Protonex nor Ballard is able to predict. These tax attributes are subject to expiration at various times in the future to the extent that they have not been applied to offset the taxable income of the combined company. These limitations may affect the timing of when these NOL carryforwards can be used which, in turn, may impact the timing of when cash is used to pay the taxes of the combined company and could limit the benefits of NOL carryforwards for the business, financial condition or results of operations of the combined company.

 

The Merger could cause Ballard or Protonex to lose key personnel, which could materially adversely affect the combined company’s business and require the combined company to incur substantial costs to recruit replacements for lost personnel.

 

As a result of the Merger, Ballard’s current and prospective employees and Protonex’s employees could experience uncertainty about their future roles within the combined company. This uncertainty may adversely affect their ability or willingness to continue with the combined company, and the ability of the combined company to attract and retain key management, sales, marketing, and technical personnel. Any failure to retain and attract key personnel could have a material adverse effect on Ballard’s and Protonex’s current businesses and the business of the combined company after the completion of the Merger.

 

Some of Protonex’s officers and directors have conflicts of interest that may influence them to support or approve the issuance of Ballard common shares in connection with the Merger.

 

Certain officers and directors of Protonex participate in arrangements that provide them with material interests in the Merger that are different from and in addition to those of Protonex’s stockholders, including, among others, the payment of certain change-of-control bonuses to executive officers and the acceleration of vesting of certain options

 

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held by executive officers and directors of Protonex upon a change of control, as well as certain indemnification arrangements for Protonex’s directors and officers. These interests, among others, may influence Protonex’s directors and officers to support or approve the Merger. For a more detailed discussion, see the section entitled “The Merger Proposal — Interests of Certain Protonex Directors, Officers, and Affiliates in the Merger” on page 43.

 

Ballard expects to incur significant costs as a result of the integration of its operations with Protonex.

 

There are inconsistencies in standards, controls, accounting principles, procedures and policies, business cultures, and compensation structures between Ballard and Protonex. The integration of Ballard’s operations and the operations of Protonex and reconciling the inconsistencies in the standards, controls, accounting principles, procedures and policies, business cultures, and compensation structures between Ballard and Protonex may result in additional costs for the combined company. There are no assurances that such inconsistencies can be reconciled seamlessly or at all. The failure to reconcile such inconsistencies may lessen the anticipated benefits of the Merger.

 

We incur a variety of costs as a result of being a public company, and those costs may increase as a result of the Merger.

 

As a Canadian public company and a foreign private issuer registered with the SEC under the Exchange Act, we incur significant legal, accounting, and other expenses. In addition, the Sarbanes-Oxley Act of 2002, as well as rules implemented by the SEC and the NASDAQ Stock Market, frequently require changes in corporate governance policies and practices of public companies. These rules and regulations increase legal and financial compliance costs and make some activities more time-consuming and costly. In addition, we incur additional costs associated with our Canadian and Exchange Act public company reporting requirements.  As a result, implementation of disclosure controls, internal controls, and financial reporting systems complying with the requirements of Canadian and U.S. securities laws and accounting and auditing standards required as a result of our continued status as a reporting company following effectiveness of the Merger may be more difficult and costly than anticipated.

 

Protonex stockholders will own a smaller percentage of Ballard than they currently own in Protonex.

 

After completion of the Merger, Protonex stockholders will own a smaller percentage of Ballard than they currently own in Protonex. Protonex stockholders, in the aggregate, will own approximately 7.3% of Ballard’s outstanding common shares immediately after completion of the Merger (such ownership percentages are based on the number of Protonex and Ballard shares outstanding as of August 11, 2015, and will vary based upon the actual number of Ballard and Protonex shares outstanding as of the effective time of the Merger). Because of this, Protonex stockholders will have less influence over the management and policies of Ballard than they now have over the management and policies of Protonex.

 

You may have difficulty bringing suit and enforcing judgments against Ballard.

 

Because Ballard is organized under the laws of Canada and many of its directors and officers are residents of countries other than the United States, it may be more difficult for U.S. investors to effect service of process or to realize in the United States upon judgments of U.S. courts predicated upon civil liabilities under the Exchange Act. Furthermore, it may be difficult for investors to enforce judgments of U.S. courts based on civil liability provisions of the U.S. federal securities laws or state securities or “blue sky” laws in a foreign court against Ballard or any of its non-U.S. resident officers or directors, or against non-U.S. resident persons named as experts in this proxy statement/prospectus.

 

After the Protonex stockholders have approved the Merger Agreement, Protonex may not terminate the Merger Agreement for any reason, such as a third-party’s proposal to acquire Protonex.

 

After the Protonex stockholders approve the Merger Agreement, Protonex’s options are limited. For example, it may not participate in discussions or negotiations with a person making a competing proposal and may not terminate the Merger Agreement in order to accept another proposal to acquire Protonex.

 

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The common shares to be received by Protonex stockholders as a result of the Merger will have different rights from the shares Protonex common stock.

 

Upon consummation of the Merger, Protonex stockholders, other than those who properly exercise and perfect appraisal rights, will become Ballard stockholders, and their rights as stockholders will be governed by Ballard’s articles and by-laws as well as the CBCA. Certain of the rights associated with Ballard’s common shares are different from, and may be viewed as less favorable than, the rights associated with Protonex’s outstanding common stock. See “Comparison of Rights of Stockholders of Ballard and Protonex” beginning on page 96 of this proxy statement/ prospectus for a discussion of certain different rights associated with Ballard’s common shares.

 

The unaudited pro forma condensed combined financial statements included in this proxy statement/prospectus are preliminary and the actual financial condition and results of operations after the Merger may differ materially.

 

The future results of the combined company may be materially different from those shown in the unaudited pro forma condensed combined financial statements presented in this proxy statement/prospectus, which show only a combination of the historical results of Ballard and Protonex. Ballard expects to incur significant costs associated with the completion of the Merger and combining the operations of the two companies, the exact magnitude of which is not yet known. In addition, these costs may decrease the capital that the combined company could use for revenue-generating investments in the future. Furthermore, potential growth, expected financial results, perceived synergies and anticipated opportunities may not be realized through the completion of the Merger.

 

Risks Related to Ballard’s Business

 

For additional risks related to Ballard’s business (and the business of the combined company after the Merger), see the section entitled “Risk Factors” in Ballard’s Annual Information Form dated February 26, 2015, attached as an exhibit to its Annual Report on Form 40-F for the year ended December 31, 2014 and incorporated by reference herein.

 

Risks Related to Protonex’s Business

 

The current market for off-grid and mobile industry systems is dependent on macroeconomic factors

 

The developing market for off-grid and remote industry systems is expected to continue to grow because of its increasing strategic importance. However, many of our customers and potential customers are dependent on the overall economy, government budgets and state and federal economic programs. Significant changes in these factors can have a positive or negative effect on the market for off-grid and remote power systems products.

 

Defense spending volatility could have an adverse impact on the business of Protonex

 

On the whole defense spending in the USA has been volatile but with potential upsides in the areas of innovation, modernization and increased efficiency. Sequestration could have negative consequences for Protonex, both with respect to timing and volume of development programs with defense partners and with respect to product orders.

 

Defense acquisition process changes could have an adverse impact on the business of Protonex

 

The United States Department of Defense at times modifies its procurement processes, cycles, and regulations. Protonex has been successful in understanding the very complex world of government procurement, but there can be no assurance that the government will not change its processes, regulations, and policies in a manner that will adversely affect Protonex’s ability to sell products and services to the Department of Defense, which in turn would harm Protonex’s business operations.

 

If Protonex does not respond effectively and on a timely basis to rapid technological change, Protonex’s business could suffer.

 

The markets in which Protonex operates are characterized by changing technology and evolving industry standards. There can be no assurance that Protonex’s current and future competitors will not be able to develop products or expertise comparable or superior to those Protonex has developed or to adapt more quickly than Protonex to new technologies, evolving industry standards or customer requirements. Failure or delays in Protonex’s ability to develop products to respond to industry or user trends or developments and the actions of Protonex’s competitors

 

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could have a material adverse effect on Protonex’s business, results of operations and financial condition. Protonex’s ability to anticipate changes in technology, technical standards and product offerings will be a significant factor in the success of Protonex’s current business and expansion into new markets.

 

Protonex’s business could suffer if it does not adequately protect its intellectual property rights

 

As the intellectual property incorporated into its products become more complex, there remains a certain risk of possible patent infringement by Protonex. However, as a result of its unique position as a supplier of fuel cell and power manager systems, Protonex has filed applications for or obtained intellectual property rights (currently 94 patents granted or pending), which puts Protonex in a strong position relative to Protonex’s competitors. However, is it entirely possible that Protonex may incur legal expenses to defend these patents. Due to Protonex’s orientation as a provider of energy supply solutions, there is a risk that integration solutions are covered by intellectual property rights that have already been granted to others. Protonex works continuously with experienced patent attorneys to ensure that it is operating in full compliance with the law by staying abreast of patents that may be relevant to Protonex.

 

Protonex may not be able to enforce or protect Protonex’s intellectual property rights, which may harm Protonex’s ability to compete and harm Protonex’s business.

 

Protonex’s future success will depend, in part, on Protonex’s ability to protect Protonex’s proprietary methodologies and other valuable intellectual property.

 

Protonex’s ability to enforce Protonex’s intellectual property rights is subject to general litigation risks, as well as uncertainty as to the enforceability of Protonex’s intellectual property rights in various countries. To the extent that Protonex seeks to enforce Protonex’s rights, Protonex could be subject to claims that an intellectual property right is invalid, otherwise not enforceable, or is licensed to the party against whom Protonex is pursuing a claim. In addition, Protonex’s assertion of intellectual property rights may result in the other party seeking to assert alleged intellectual property rights or assert other claims against Protonex, which could harm Protonex’s business. If Protonex is not successful in defending such claims in litigation, Protonex may not be able to sell or license a particular service or product due to an injunction, or Protonex may have to pay damages that could, in turn, harm Protonex’s results of operations. Protonex has granted the U.S. government rights to some intellectual property in conjunction with government funded research and development, and the government may assert those rights. In addition, governments may adopt regulations, or courts may render decisions, requiring compulsory licensing of intellectual property to others, or governments may require that products meet specified standards that serve to favor local companies. Protonex’s inability to enforce Protonex’s intellectual property rights under these circumstances may harm Protonex’s competitive position and Protonex’s business.

 

Protonex’s services or solutions could infringe upon the intellectual property rights of others and Protonex may be subject to claims of infringement of third-party intellectual property rights.

 

Protonex cannot be sure that Protonex’s products do not infringe on the intellectual property rights of others. Third parties may assert against Protonex or Protonex’s customers claims alleging infringement of patent, copyright, trademark, or other intellectual property rights to technologies or services that are important to Protonex’s business. Infringement claims could harm Protonex’s reputation, cost Protonex money and prevent Protonex from offering some products or solutions. In Protonex’s contracts, Protonex generally agrees to indemnify Protonex’s clients for certain expenses or liabilities resulting from potential infringement of the intellectual property rights of third parties. In some instances, the amount of Protonex’s liability under these indemnities could be substantial. Any claims that Protonex’s products, services or processes infringe the intellectual property rights of others, regardless of the merit or resolution of such claims, may result in significant costs in defending and resolving such claims, and may divert the efforts and attention of Protonex’s management and technical personnel from Protonex’s business. In addition, as a result of such intellectual property infringement claims, Protonex could be required or otherwise decide that it is appropriate to:

 

·                  pay third-party infringement claims;

·                  discontinue using, licensing, or selling particular products subject to infringement claims;

·                  discontinue using the technology or processes subject to infringement claims;

 

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·                  develop other technology not subject to infringement claims, which could be costly or may not be possible; and/or

·                  license technology from the third party claiming infringement, which license may not be available on commercially reasonable terms.

 

The occurrence of any of the foregoing could result in unexpected expenses or require Protonex to recognize an impairment of Protonex’s assets, which would reduce the value of Protonex’s assets and increase expenses. In addition, if Protonex alters or discontinues Protonex’s offering of affected products, Protonex’s revenue could be affected. If a claim of infringement were successful against Protonex or Protonex’s clients, an injunction might be ordered against Protonex’s client or Protonex’s own services or operations, causing further damages.

 

Protonex expects that the risk of infringement claims against Protonex will increase if Protonex’s competitors are able to obtain patents or other intellectual property rights for software products and methods, technological solutions, and processes. Protonex may be subject to intellectual property infringement claims from certain individuals or companies who have acquired patent portfolios for the primary purpose of asserting such claims against other companies. The risk of infringement claims against Protonex may also increase as Protonex continues to develop Protonex’s intellectual property and sell additional products. Any infringement claim or litigation against Protonex could have a material adverse effect on Protonex’s business, results of operations and financial condition.

 

Protonex may fail to adequately protect Protonex’s proprietary technology, which would allow competitors or others to take advantage of Protonex’s research and development efforts.

 

Protonex relies upon trade secrets, proprietary know-how, and continuing technological innovation to develop new products and to remain competitive. If Protonex’s competitors learn of Protonex’s proprietary technology or processes, they may use this information to produce products that are equivalent or superior to Protonex’s products, which could materially adversely affect Protonex’s business, operations and financial position. Protonex’s employees and consultants may breach their obligations not to reveal Protonex’s confidential information, and any remedies available to Protonex may be insufficient to compensate Protonex’s damages. Even in the absence of such breaches, Protonex’s trade secrets and proprietary know-how may otherwise become known to Protonex’s competitors, or be independently discovered by Protonex’s competitors, which could adversely affect Protonex’s competitive position.

 

Protonex relies on third parties for the manufacture of certain product components.

 

Protonex purchases the components and equipment it needs to manufacture its fuel cell and power management systems from various manufacturers and does not produce them itself. The supplier industry for Protonex components is, however, only partially prepared for the specific requirements of the developing mass market for fuel cells and power managers. To avoid overdependence on certain suppliers, Protonex is working to diversify its suppliers and is entering into intensive cooperative projects to that end. Arrangements have been made with suitable second suppliers for some components. Supply chain risks are being reduced through professional quality management and supplier management. Nevertheless, insufficient availability of all components procured from suppliers poses a risk in the event that these components cannot be made available on time, at the planned cost, or in the required quality. There is also the risk of the loss of a supplier. Another risk is having claims asserted against Protonex if Protonex is unable to make all deliveries under master agreements, based on inability to procure components within the planned time or cost.

 

Financial and Liquidity Risks

 

Protonex’s strategic orientation requires continued expenditures, which must be financed to ensure future business success, particularly in the areas of product development and tapping additional market segments and new regions. Thanks to Protonex’s customer structure (high percentage of industrial customers, military customers), there were no significant payment defaults in 2014 not addressed through write-downs. However, as Protonex expands sales to commercial customers and foreign governments, payment defaults could increase.

 

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Regulatory risks

 

The business in which Protonex operates is often regulated. That is because it produces, distributes, and markets complex technical products, distributes them in markets with demanding safety requirements (such as military organizations), and is subject to highly complex, sometimes non-uniform regulatory background conditions in various markets and countries.

 

Protonex depends on a small number of large customers and the loss of one or more major customers could have a material adverse effect on Protonex’s business, financial condition and results of operations.

 

For the fiscal year ended September 30, 2014, Protonex’s top five customers, in aggregate, generated approximately 79% of Protonex’s revenue with no one customer representing greater than 37%. Protonex expects that Protonex’s top five customers will continue to account for a significant portion of Protonex’s revenue for the foreseeable future. For fiscal year 2014, one large customer constituted approximately 37% of total revenues. For fiscal year 2015 YTD, two large customers constituted approximately 40% and 12% of total revenues, respectively. It is possible that any of Protonex’s large customers could decide to terminate their relationships with Protonex. The loss of one or more of Protonex’s top five customers, or a substantial decrease in demand by any of those customers for Protonex’s products, could have a material adverse effect on Protonex’s business, and result in a decline in financial condition. Additionally, Protonex’s large customers have substantial negotiating leverage, which may require that Protonex agree to terms and conditions that result in increased cost of sales, decreased revenues and lower average selling prices and gross margins, all of which could harm Protonex’s operating results.

 

If Protonex’s products or systems experience data security breaches or there is unauthorized access to or release of Protonex’s customers’ data, Protonex may lose current or future customers and Protonex’s reputation and business may be harmed and may incur liabilities to repair or replace Protonex’s systems or in connection with litigation or regulatory enforcement actions that may result from such breaches.

 

If Protonex’s security measures are breached as a result of a third-party action, employee error or otherwise, and as a result customers’ information becomes available to unauthorized parties, Protonex could incur liability, Protonex may lose revenues and Protonex’s reputation would be damaged. This could lead to the loss of current and potential customers. If Protonex experiences any breaches of Protonex’s network security due to unauthorized access, sabotage, or human error, Protonex may be required to expend significant capital and other resources to remedy, protect against or alleviate these and related problems. Protonex also may not be able to remedy these problems in a timely manner, or at all. Even the perception that the customer information is not satisfactorily protected or does not meet regulatory requirements or that Protonex’s systems are unsecure or unstable could inhibit sales of Protonex’s products, and could limit adoption of Protonex’s products. The property and business interruption insurance Protonex carries may not provide coverage adequate to compensate Protonex fully for losses that may occur or litigation that may be instituted against Protonex in these circumstances. Protonex could be required to make significant expenditures to repair Protonex’s systems in the event that they are damaged or destroyed, or if the delivery of Protonex’s services to Protonex’s customers is disrupted, and Protonex’s business and results of operations could be harmed.

 

Protonex faces intense and growing competition. If Protonex is unable to compete successfully, Protonex’s business will be seriously harmed through loss of customers or increased negative pricing pressure.

 

The market for Protonex’s products is extremely competitive. Protonex’s competitors vary in size and in the variety of products.

 

Some of Protonex’s current and potential direct competitors have longer operating histories, significantly greater financial, technical, marketing and other resources than Protonex does, greater brand recognition and, Protonex believes, a larger base of customers. In addition, competitors may operate more successfully or form alliances to acquire significant market share. These direct competitors may be able to adapt more quickly to new or emerging technologies and changes in customer requirements. They may also be able to devote more resources to the promotion, sale and development of their products than Protonex and there can be no assurance that Protonex’s current and future competitors will not be able to develop products comparable or superior to those offered by Protonex at more competitive prices. As a result, in the future, Protonex may suffer from an inability to offer

 

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competitive products or be subject to negative pricing pressure that would adversely affect Protonex’s ability to generate revenue and adversely affect Protonex’s operating results.

 

Protonex’s business will be adversely affected if Protonex cannot successfully retain key members of Protonex’s management team or retain, hire, train and manage other key employees, particularly in the engineering, sales and customer service areas.

 

Protonex’s continued success is largely dependent on the personal efforts and abilities of Protonex’s executive officers and senior management, including Protonex’s President and Chief Executive Officer and Protonex’s executive management team. Protonex’s success also depends on Protonex’s continued ability to attract, retain, and motivate key employees throughout Protonex’s business. In particular, Protonex is substantially dependent on Protonex’s skilled technical employees and Protonex’s sales and customer service employees. Competition for skilled technical, sales and customer service professionals is intense and Protonex’s competitors often attempt to solicit Protonex’s key employees and may be able to offer them employment benefits and opportunities that Protonex cannot. There can be no assurance that Protonex will be able to continue to attract, integrate or retain highly qualified personnel in the future. In addition, Protonex’s ability to achieve significant growth in revenue will depend, in large part, on Protonex’s success in effectively training sufficient numbers of technical, sales and customer service personnel. New employees require significant training before they achieve full productivity. Protonex’s recent and planned hires may not be as productive as anticipated, and Protonex may be unable to hire sufficient numbers of qualified individuals. If Protonex is not successful in retaining Protonex’s existing employees, or hiring, training and integrating new employees, or if Protonex’s current or future employees perform poorly, growth in the sales of Protonex’s services may not materialize and Protonex’s business will suffer.

 

Protonex’s sales cycle is lengthy and variable, depends upon many factors outside Protonex’s control, and could cause Protonex to expend significant time and resources prior to earning associated revenues.

 

The typical sales cycle for Protonex’s products and services is lengthy and unpredictable, requires evaluation by a significant number of employees in Protonex’s customers’ organizations, and often involves a significant operational decision by Protonex’s customers. Protonex’s sales efforts involve educating Protonex’s customers about the use and benefits of Protonex’s products, including the technical capabilities of Protonex’s products and the potential cost savings achievable by organizations deploying Protonex’s products. Customers typically undertake a significant evaluation process, which frequently involves not only Protonex’s products, but also those of Protonex’s competitors and can result in a lengthy sales cycle. Moreover, a purchase decision by a potential customer typically requires the approval of several senior military and / or civilian decision makers. Protonex’s sales cycle for new customers is typically one to two years and can extend even longer in some cases. Protonex spends substantial time, effort and money in Protonex’s sales efforts without any assurance that Protonex’s efforts will produce any sales. In addition, Protonex sometimes commits to include specific functions in Protonex’s base product offering at the request of a customer or group of customers and are unable to recognize product revenues until the specific functions have been added to Protonex’s products. Providing this additional functionality may be time consuming and may involve factors that are outside of Protonex’s control. The lengthy and variable sales cycle may also have a negative impact on the timing of Protonex’s revenues, causing Protonex’s revenues and results of operations to vary significantly from period to period.

 

Failure to meet customer expectations on the implementation of Protonex’s products could result in negative publicity and reduced sales, both of which would significantly harm Protonex’s business, results of operations, financial condition and growth prospects.

 

Protonex provides its customers with upfront estimates regarding the duration, budget and costs associated with development efforts. Failing to meet these upfront estimates and the expectations of Protonex’s customers for Protonex’s development efforts could result in a loss of customers and negative publicity regarding Protonex and Protonex’s products and services, which could adversely affect Protonex’s ability to attract new customers and sell additional products and services to existing customers. Such failure could result from Protonex’s product and/or development capabilities. The consequences could include customer’s refusal to pay the products or service. In addition, cost overruns on development projects increase Protonex’s costs and adversely affecting Protonex’s business results and financial condition.

 

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If Protonex is unable to develop, introduce and market new and enhanced versions of Protonex’s products, Protonex  may be put at a competitive disadvantage.

 

Protonex’s success depends on Protonex’s continued ability to develop, introduce and market new and enhanced versions of Protonex’s products to meet evolving customer requirements. However, Protonex cannot guarantee that this process can be maintained. If Protonex fails to develop new products or enhancements to Protonex’s existing products, Protonex’s business could be adversely affected, especially if Protonex’s competitors are able to introduce products with enhanced functionality. Protonex plans to continue Protonex’s investment in product development in future periods. It is critical to Protonex’s success for Protonex to anticipate changes in technology, industry standards and customer requirements and to successfully introduce new, enhanced and competitive products to meet Protonex’s customers’ and prospective customers’ needs on a timely basis. However, there can be no assurance that revenues will be sufficient to support the future product development that is required for Protonex to be competitive. Although Protonex may be able to release new products in addition to enhancements to existing products, Protonex cannot guarantee that Protonex’s new or upgraded products will be accepted by the market, will not be delayed or canceled, will not contain errors or “bugs” that could affect the performance of the products or cause damage to users’ equipment, or will not be rendered obsolete by the introduction of new products or technological developments by others. If Protonex fails to develop products that are competitive in technology and price or that fail to meet customer needs, Protonex’s market share will decline and Protonex’s business and results of operations could be harmed.

 

Litigation could result in substantial costs to Protonex and Protonex’s insurance may not cover these costs.

 

There is a risk that Protonex’s products may not perform up to expectations. While Protonex attempts to contractually limit Protonex’s liability for damages arising from the use of Protonex’s products, there can be no assurance that they will be enforceable in all circumstances or in all jurisdictions. Furthermore, litigation, regardless of contractual limitations, could result in substantial cost to Protonex’s divert management’s attention and resources from Protonex’s operations and result in negative publicity that Protonex’s ongoing marketing efforts and therefore Protonex’s ability to maintain and grow Protonex’s customer base. Although Protonex has general liability insurance in place, there is no assurance that this insurance will cover these claims or that these claims will not exceed the insurance limit under the company’s current policies.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

This proxy statement/prospectus and the documents incorporated by reference herein contain certain “forward-looking information” and “forward-looking statements” as defined under applicable Canadian and U.S. securities laws (collectively, “forward-looking statements”). All statements, other than statements of historical fact, are forward-looking statements. When used in this proxy statement/prospectus, the words “estimate,” “project,” “believe,” “anticipate,” “intend,” “expect,” “plan,” “predict,” “may,” “should,” “will,” “could” or the negatives of these words or other variations thereof and comparable terminology are intended to identify forward-looking statements. Also, as examples, forward-looking statements may include statements concerning future results from operations, financial position, economic conditions, product releases, revenue and product synergies, cost savings, product or competitive enhancements and any other statement that may be construed as a prediction of future performance or events, including the unaudited pro forma consolidated financial data included herein, perceived benefits from the business combination to the combined company, or that the acquisition will result in increased revenue, cost savings and better competitive position, or that Ballard will successfully integrate Protonex’s business and technology. These forward-looking statements involve certain known and unknown risks and uncertainties. Factors that could cause actual results to differ materially from those contemplated by the forward-looking statements include, but are not limited to, the following factors:

 

·                                          the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement;

 

·                                          the inability to complete the Merger within the expected time period or at all, including due to the failure to obtain stockholder approval, or the failure to satisfy other conditions to completion of the Merger;

 

·                                          risks related to disruption of management’s attention from the ongoing business operations due to the Merger; the effect of the announcement of the Merger on the Ballard’s or Protonex’s relationships with their respective customers, lenders, operating results and businesses generally;

 

·                                          material adverse changes in Ballard’s or Protonex’s operations or financial results prior to closing;

 

·                                          the ability to expand the combined company’s global reach and accelerate growth;

 

·                                          failure to realize anticipated operational efficiencies, revenue (including projected revenue) and cost synergies and resulting revenue growth if the Merger is consummated;

 

·                                          the ability to achieve internal strategic forecasts;

 

·                                          inability to refinance the assumed Protonex debt subsequent to the closing or to refinance the debt on favorable terms;

 

·                                          unforeseen challenges related to relationships with operators, publishers and advertisers and expanding and maintaining those relationships;

 

·                                          the ability to execute upon, and realize any benefits from, potential value creation opportunities through strategic relationships in the future or at all, including the ability to leverage advertising opportunities effectively and increase revenue streams for carriers; and

 

·                                          the potential for unforeseen or underestimated cash requirements necessary to enable the Merger synergies to be realized.

 

See also the section entitled “Risk Factors” in this proxy statement/prospectus and the documents incorporated by reference herein. These risks and uncertainties are not exhaustive. Other sections of this proxy statement/prospectus describe additional factors that could adversely impact the combined company’s business and financial performance. Moreover, the combined company will operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible to predict all risks and uncertainties, nor can we assess the impact that these factors will have on the combined company’s business or the extent to which any factor,

 

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or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.

 

Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, believed, estimated or expected.  We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.  Although we have attempted to identify important factors that could cause actual results to differ materially from forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated, described or intended.  We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect changes in assumptions or the occurrence of anticipated or unanticipated events, except as required by law. Except for our ongoing obligation to disclose material information under U.S. federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events, or to report the occurrence of unanticipated events.

 

We expressly qualify in their entirety all forward-looking statements attributable to Ballard, Protonex or the combined company, or any person acting on their behalf, by the foregoing cautionary statements.

 

EXCHANGE RATE INFORMATION

 

The following table shows, for the periods indicated, information concerning the exchange rate between the Canadian dollar and the U.S. dollar. The data provided in the following table are expressed in U.S. dollars per Canadian dollar and are based on the noon exchange rates published by the Bank of Canada for the Canadian dollar. This information is provided solely for your information, and Ballard and Protonex do not represent that Canadian dollars could be converted into U.S. dollars at these rates or at any other rate.

 

On June 26, 2015, the last trading day before the Merger Agreement was announced, the noon exchange rate between the U.S. dollar and the Canadian dollar expressed in U.S. dollars per Canadian dollar as reported by the Bank of Canada was 0.8091. On the date of this proxy statement/prospectus, the noon exchange rate between the U.S. dollar and the Canadian dollar expressed in U.S. dollars per Canadian dollar as reported by the Bank of Canada was 0.7606.

 

		Period-End Rate(1)		Average  Rate(2)		High		Low
Recent Monthly Data
August 2015 (through August 10)		0.7659		0.7618		0.7659		0.7586
July 2015		0.7665		0.7773		0.7958		0.7657
June 2015		0.8017		0.8087		0.8191		0.7968
May 2015		0.8022		0.8207		0.8368		0.8010
April 2015		0.8252		0.8110		0.8365		0.7929
March 2015		0.7885		0.7924		0.8039		0.7811
February 2015		0.7995		0.8000		0.8063		0.7915
Annual Data (Year ended December 31)
2015 (through August 10)		0.7659		0.8030		0.8527		0.7586
2014		0.8620		0.9054		0.9422		0.8589
2013		0.9402		0.9710		1.0164		0.9348
2012		1.0051		1.0004		1.0299		0.9599
2011		0.9833		1.0111		1.0583		0.9430

 

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