<PAGE>   1


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-QSB



(Mark One)

[X]  Quarterly report under Section 13 or 15(d) of the Securities Exchange
     Act of 1934

                    FOR THE QUARTER ENDED: SEPTEMBER 30, 1997

[ ]  Transition report under Section 13 or 15(d) of the Exchange Act

                 FOR THE TRANSITION PERIOD FROM ______ TO ______

                         Commission file number: 0-28556

                           ---------------------------

                         BOREALIS TECHNOLOGY CORPORATION
        (Exact name of small business issuer as specified in its charter)

                    Delaware                               88-0238203
        (State or other jurisdiction of                 (I.R.S. Employer
         incorporation or organization)              Identification Number)

                             4070 Silver Sage Drive
                              Carson City, NV 89701
                    (Address of principal executive offices)

                                 (702) 888-3200
                           (Issuer's telephone number)


Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes   X     No 
                                                              -----      -----

State the number of shares outstanding of each of the issuer's classes of
equity, as of the latest practicable date:

                   CLASS                                  OUTSTANDING AT
Common Stock - par value $.001 ("Common Stock")    September 30, 1997: 4,826,644


Transitional Small Business Disclosure Format (check one): Yes      ; No   X  .
                                                               -----     -----


<PAGE>   2



                         BOREALIS TECHNOLOGY CORPORATION



                                      INDEX



<TABLE>
<CAPTION>
                                                                        Page No.
<S>                                                                         <C>
          PART I.  FINANCIAL INFORMATION

Item 1    Financial Statements:

             Condensed Balance Sheets
             September 30, 1997 (unaudited) and December 31, 1996            3

             Condensed Statements of Operations (unaudited)
             three and nine months ended September 30, 1997 and 1996         4

             Condensed Statements of Cash Flows (unaudited)
             nine months ended September 30, 1997 and 1996                   5

             Notes to Condensed Financial Statements (unaudited)             6

Item 2    Management's Discussion and Analysis of Financial
          Condition and Results of Operations                                7

          Risk Factors                                                      10

          PART II.  OTHER INFORMATION

Item 6    Exhibits and Reports on Form 8-K                                  13
</TABLE>





                                                                          Page 2
<PAGE>   3



PART 1 - FINANCIAL INFORMATION

ITEM 1.          FINANCIAL STATEMENTS

                              BOREALIS TECHNOLOGY CORPORATION
                                 CONDENSED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                September 30,        December 31,
                                                                    1997                1996
                                                                    ----                ----
<S>                                                             <C>                 <C>
ASSETS                                                           (unaudited)
   Current assets:
     Cash and cash equivalents                                  $  2,892,389        $  3,921,506 
     Accounts receivable                                             222,308               2,000 
     Short term certificate of deposit                               650,000                  -- 
     Other current assets                                            259,314             136,073 
                                                                ------------        ------------
           Total current assets                                    4,024,011           4,059,579 

   Property and equipment, net                                       873,604             856,653 

   Long-term investment                                                   --             650,000 

   Other assets                                                       48,049              40,850 
                                                                ------------        ------------

               Total assets                                     $  4,945,664        $  5,607,082 
                                                                ============        ============

LIABILITIES AND STOCKHOLDERS' EQUITY
   Current liabilities:
     Line of credit                                             $    250,000        $         -- 
     Accounts payable                                                169,397             258,377 
     Accrued employee compensation and benefits                      406,975             298,492 
     Promissory note                                                 650,000                  -- 
     Other current liabilities                                       645,552             320,739 
                                                                ------------        ------------
           Total current liabilities                               2,121,924             877,608 

   Long-term obligations                                              31,715             738,800 
                                                                ------------        ------------

               Total liabilities                                   2,153,639           1,616,408 
                                                                ------------        ------------

   Stockholders' equity:
     Preferred stock, $.001 par value:
       Authorized shares - 5,000,000
       Issued and outstanding - none
     Common stock, $.001 par value:
       Authorized shares - 10,000,000
       Issued and outstanding shares - 4,826,644 and
       3,184,506 at September 30, 1997 and
       December 31, 1996, respectively                                 4,827               3,185 
     Additional paid-in capital                                   15,518,263          10,777,241 
     Notes receivable from stockholders                              (93,124)                 -- 
     Accumulated deficit                                         (12,637,941)         (6,789,752) 
                                                                ------------        ------------
               Total stockholders' equity                          2,792,025           3,990,674 
                                                                ------------        ------------

               Total liabilities and stockholders' equity       $  4,945,664        $  5,607,082 
                                                                ============        ============
</TABLE>

            See accompanying notes to condensed financial statements.



                                                                          Page 3
<PAGE>   4



                         BOREALIS TECHNOLOGY CORPORATION
                       CONDENSED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                              Three Months Ended Sept 30,      Nine Months Ended Sept 30,
                                              ---------------------------      --------------------------
                                                  1997          1996              1997           1996
                                                  ----          ----              ----           ----
 <S>                                           <C>           <C>               <C>            <C>
 Total revenues                                $   520,927        28,621       $   728,281    $   151,681 

 Cost of revenues                                    1,061        12,951            37,329         58,573 
                                               -----------   -----------       -----------    -----------

 Gross profit                                      519,866        15,670           690,952         93,108 

 Operating expenses:
     Sales and marketing                           974,667       801,386         3,350,743      1,667,410 
     Research and development                      578,510       591,529         1,754,822      1,327,580 
     General and administrative                    462,482       579,354         1,455,451      1,069,963 
                                               -----------   -----------       -----------    -----------
             Total operating expenses            2,015,659     1,972,269         6,561,016      4,064,953 
                                               -----------   -----------       -----------    -----------

 Loss from operations                           (1,495,793)   (1,956,599)       (5,870,064)    (3,971,845) 

 Interest income (expense), net                      7,256        45,726            21,875         (9,738) 
                                               -----------   -----------       -----------    -----------

 Net loss                                      $(1,488,537)  $(1,910,873)      $(5,848,189)   $(3,981,583) 
                                               ===========   ===========       ===========    =========== 

 Net loss per common share                     $     (0.34)  $     (0.61)      $     (1.64)   $     (2.55)
                                               ===========   ===========       ===========    ===========

 Weighted average common shares outstanding      4,346,577     3,130,725         3,576,211      1,560,567 
                                               ===========   ===========       ===========    ===========
</TABLE>



            See accompanying notes to condensed financial statements.







                                                                          Page 4
<PAGE>   5



                         BOREALIS TECHNOLOGY CORPORATION
                       CONDENSED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                               Nine Months Ended September 30,
                                                               -------------------------------
                                                                   1997               1996
                                                                   ----               ----
<S>                                                            <C>                <C>
OPERATING ACTIVITIES
Net loss                                                       $(5,848,189)       $(3,981,583)
Adjustments to reconcile net loss to net cash used
   in operating activities:
       Depreciation and amortization                               255,914             93,383 
       Noncash charges (credits), net                               69,756                 -- 
       Changes in operating assets and liabilities:
         Accounts receivable                                      (220,308)            36,188 
         Other assets, net                                        (130,440)          (188,550)
         Accounts payable                                          (88,980)            41,136 
         Other liabilities, net                                    376,211              7,101 
                                                               -----------        -----------

Net cash used in operating activities                           (5,586,036)        (3,992,325) 

INVESTING ACTIVITIES
Investment in certificate of deposit                                    --           (650,000) 
Purchases of property and equipment                               (272,865)          (253,030) 
Proceeds from disposal of property and equipment                       250                 -- 
Loan to stockholder                                                (18,125)                -- 
                                                               -----------        -----------

Net cash used in investing activities                             (290,740)          (903,030) 

FINANCING ACTIVITIES
Proceeds from exercise of common stock options                       1,672                 -- 
Proceeds from issuance of notes payable to stockholders                 --            750,000 
Repayment of notes payable to stockholders                              --           (971,311) 
Borrowings under line of credit                                    250,000            650,000
Issuance of promissory note                                        250,000                 -- 
Repayment of promissory note                                      (250,000)                -- 
Proceeds from sale of common stock, net                          4,595,987          9,589,657 
Proceeds from issuance of convertible promissory notes                  --            675,570 
                                                               -----------        -----------

Net cash provided by financing activities                        4,847,659         10,693,916 
                                                               -----------        -----------

Net increase (decrease) in cash and cash equivalents            (1,029,117)         5,798,561 

Cash and cash equivalents at beginning of period                 3,921,506            158,840 
                                                               -----------        -----------

Cash and cash equivalents at end of period                     $ 2,892,389        $ 5,957,401 
                                                               ===========        ===========
</TABLE>


            See accompanying notes to condensed financial statements.



                                                                          Page 5
<PAGE>   6



                         BOREALIS TECHNOLOGY CORPORATION
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1997
                                   (UNAUDITED)



NOTE A - BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine-month periods ended
September 30, 1997 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1997. For further information, refer to
the 1996 financial statements and footnotes thereto included in the Company's
10-KSB and the Company's registration statement on form SB-2 declared effective
by the Securities and Exchange Commission on July 21, 1997.

NOTE B - FINANCING

On July 25, 1997, the Company successfully completed a follow-on public
offering. The Company issued 1,400,000 shares of its Common Stock with proceeds
net of offering expenses and underwriter's discounts of approximately $4.0
million. On August 8, 1997, the Company issued 210,000 shares of Common Stock
pursuant to the exercise of an over-allotment option granted by the Company to
the underwriter of its follow-on public offering, with proceeds net of offering
expenses and underwriter's discounts of approximately $0.6 million.

NOTE C - LOSS PER COMMON SHARE

Loss per share was computed by dividing the net loss by the weighted average
number of shares of common stock outstanding. Common stock equivalents from
stock options and warrants are excluded from the computation because their
effect is anti-dilutive. The weighted average number of shares of common stock
and common stock equivalents has been computed in accordance with Securities and
Exchange Commission's Staff Accounting Bulletin No. 83, pursuant to which "cheap
stock," as defined, is considered outstanding even if the effect is
anti-dilutive. Fully diluted earnings per share are considered equal to primary
earnings per share in all periods presented.

In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share, which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share. Under the new requirements for calculating
primary earnings per share, the dilutive effect of stock options will be
excluded. A restatement of prior periods will not be necessary as common
equivalent shares from common stock options and warrants have been excluded from
the computation of net loss per share as their effect is anti-dilutive. The
impact of Statement 128 on the calculation of fully diluted earnings per share
for these quarters is not expected to be material.

NOTE D - BORROWINGS

At September 30, 1997, the Company has a promissory note payable to a bank for
$650,000. The note matures on January 11, 1998 and bears interest of 7.55% per
annum. The note is collateralized by the $650,000 certificate of deposit and
places certain business and borrowing restrictions on the Company.

In July, 1997 the Company borrowed $250,000 pursuant to a bank credit line
subject to certain restrictive covenants. These borrowings accrue interest at
10.25% per annum and are due and payable on July 14, 1998.

NOTE E - USE OF ESTIMATES

The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles which require the Company's management
to make estimates and assumptions that affect the amounts reported therein.
Actual results could vary from such estimates.

                                                                          Page 6
<PAGE>   7



ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

        The following contains forward-looking statements regarding future
events and the future financial performance of Borealis Technology Corporation
("Borealis" or the "Company") that involve risks and uncertainties. These
statements include, but are not limited to, statements related to the market
acceptance of Arsenal and the adequacy of the Company's cash reserves. The
Company's actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including those set
forth herein under "Risk Factors" and elsewhere in this report.

        The Company has experienced significant operating losses for the three
month and nine month periods ended September 30, 1997. In the quarter ended June
30, 1997, the Company completed development of its new sales force automation
product, Arsenal. To date, the Company has shipped Arsenal to 4 customers and
has received follow-on orders from 2 of its initial customers.

        In mid 1995, the Company ceased sales and marketing of its entire
product line and shifted its focus to the development of Arsenal and the
establishment of a third party integrator channel. The Company's revenues in
periods prior to the quarter ended June 30, 1997 have been generated almost
entirely from the sale of consulting services and products which the Company no
longer sells and are not meaningful in predicting future performance. Due to the
shift to the development and sale of Arsenal, the Company will derive
substantially all of its revenues from licensing Arsenal and maintenance
contracts for Arsenal.

        The Company's future operating results will depend on many factors,
including demand for Arsenal, which was only recently introduced in the second
quarter of 1997, the level of product and price competition, the ability of the
Company to develop and market new products and to control costs, the ability of
the Company to expand its direct sales force and indirect distribution channels
and the ability of the Company to attract and retain key personnel. In
particular, the ability of the Company to achieve revenue growth in the future
will depend on its success in adding a substantial number of direct sales
personnel and in attracting third party integrators in 1997 and future periods.
Competition for such personnel is intense, and there can be no assurance that
the Company can retain its existing sales personnel or that it can attract,
assimilate or retain additional highly qualified sales personnel in the future.
Further, the Company believes, based on interactions with its customers and
potential customers, that the purchase of its products is relatively
discretionary and generally involves a significant commitment of capital. As a
result, in the event of any downturn in any potential customer's business or the
economy in general, purchases of the Company's products may be deferred or
canceled, which could have a material adverse effect on the Company's business,
results of operations and financial condition.

        The Company has generally recognized product license revenue not subject
to significant future obligations following execution of a licensing agreement
and delivery of the software and when collection is deemed probable. Service
revenues are recognized as services are performed while maintenance revenues are
recognized ratably over the term of the support period.

REVENUES:

        Revenues have historically consisted of revenue from the licensing and
sale of products, revenue from service and maintenance agreements and revenue
from consulting and training services. Revenues increased from $28,621 for the
three months ended September 30, 1996 to $520,927 for the comparable period
ended September 30, 1997. Revenues increased from $151,681 to $728,281 between
the nine months ending September 30, 1996 and 1997, respectively. Both of these
increases are the result of the introduction and initial sales of the Company's
new sales force automation product, Arsenal. There can be no assurance that the
Company's revenues will continue to increase or fail to decrease, and any
further increases in the Company's revenues will be dependent upon, among other
things, market acceptance of Arsenal and the Company's ability to attract,
retain and assimilate additional sales personnel.



                                                                          Page 7
<PAGE>   8

COST OF REVENUES:

        Cost of revenues represents primarily amounts incurred pursuant to
royalty obligations and maintenance agreements on certain technology and the
wages of technical services personnel. The cost of revenues decreased from
$12,951 to $1,061 between the three months ended September 30, 1996 and 1997.
Between the nine months ended September 30, 1996 and 1997, the cost of revenues
decreased from $58,573 to $37,329. The Company anticipates that the absolute
dollar spending for cost of revenues will increase in the foreseeable future as
the Company expands its technical services organization to support customer
needs. However, since the Company only recently introduced Arsenal, the Company
believes that the ratio of cost of revenues to revenues are not meaningful in
the periods presented or indicative of future ratios.

OPERATING EXPENSES:

        Total operating expenses are comprised of sales and marketing, research
and development, and general and administrative expenses. Sales and marketing
expenses increased from $801,386 to $974,667 between the three months ended
September 30, 1996 and 1997 and increased from $1,667,410 to $3,350,743 between
the nine month periods ended September 30, 1996 and 1997. Both of these
increases were the result of increased staffing as well as costs associated
with the Company's attendance at trade shows, print advertising and public
relations. Research and development expenses decreased from $591,529 to
$578,510 between the three months ended September 30, 1996 and 1997 and
increased from $1,327,580 to $1,754,822 between the nine month periods ended
September 30, 1996 and 1997. The decrease in research and development expenses
between the three months ended September 30, 1996 and 1997 is a result of a
decrease in costs expended to   purchase certain technology. The increase in
research and development expenses between the nine months ended September 30,
1996 and 1997 is due to an increase in staffing and expenditures related to the
development of Arsenal. General and administrative expenses decreased from
$579,354 to $462,482 between the three months ended September 30, 1996 and 1997
and increased from $1,069,963 to $1,455,451 between the nine month periods
ended September 30, 1996 and 1997. The decrease in general and administrative
expenses between the three months ended September 30, 1996 and 1997 is
primarily due to a decrease in staffing between the third quarters of 1996 and
1997. The increase in general and administrative expenses between the nine
months ended September 30, 1996 and 1997 is due to an increase in staffing
between the first two quarters of 1996 and 1997. The Company anticipates that
total operating expenses will continue to increase for the foreseeable future
as the Company: (i) expands its sales and marketing function in order to
facilitate the market acceptance and sale of Arsenal and (ii) adds additional
software engineers to fund the development of enhancements to Arsenal and
develop new products.

        Based on the Company's research and development process, costs incurred
between the establishment of technical feasibility and general release have not
been material and therefore have not been capitalized in accordance with
Statement of Financial Accounting Standards No. 86. All research and development
costs are expensed as incurred.

NET LOSS:

        As a result of the factors discussed above, the net loss for the three
months ended September 30, 1997 decreased from a loss of $1,910,873 for the
three months ended September 30, 1996 to a loss of $1,488,537 for the three
months ended September 30, 1997. Between the nine months ended September 30,
1996 and 1997, the net loss increased from $3,981,583 to a loss of $5,848,189,
again, as a result of the factors discussed above.

LIQUIDITY AND CAPITAL RESOURCES

        In July 1997, the Company completed a follow-on public offering (the
"Offering") of 1,400,000 shares of Common Stock. In August 1997, the Company
completed the public sale of an additional 210,000 shares of Common Stock
pursuant to the exercise of an over-allotment option granted by the Company to
the underwriter of the Company's Offering. As a result of these offerings, the
Company recorded proceeds of approximately $4.6 million, net of related
underwriting discounts and offering expenses. The Company has invested the
proceeds from these offerings in investment grade, interest-bearing securities,
and has not invested in any derivative securities or other financial instruments
that involve a high level of risk.

        The Company's cash and short-term investments totaled $2,892,389 at
September 30, 1997, representing 58% of total assets. The Company used $2.1
million of cash to fund operations for the third quarter of 1997. Net cash used
in operating activities was primarily for the development, sales and marketing
costs associated with Arsenal. The Company's principal investing activities
consisted of expenditures for computers and computer related equipment. The
Company's principal financing activities consisted of the Offering, the issuance
in July 1997 of a $250,000 short-term



                                                                          Page 8
<PAGE>   9

promissory note, which was paid off during the third quarter, and borrowings
under a newly established $250,000 line of credit.

        The $250,000 promissory note issued in July 1997 bore interest of 10%
per annum and was due on demand seven days following the closing of the
Offering. In connection with the promissory note, the Company issued a warrant
to purchase up to 50,000 shares of the Company's Common Stock. The warrant
expires five years from its execution date. In addition, in July 1997, the
Company borrowed $250,000 pursuant to a bank credit line subject to certain
restrictive covenants. These borrowings accrue interest at 10.25% per annum and
are due and payable on July 14, 1998. 

        The Company recently hired a new Senior Vice President of World Wide
Sales and Services, Dave Bouchard, and a new Vice President of Business
Development, Michael D'Eath. As part of Mr. Bouchard's compensation, he will be
entitled to receive a $250,000 loan, payable on his start date. Such loan will
be forgiven over three years, assuming continued employment with the Company.
Additionally, Mr. Bouchard will be entitled to receive a $425,000 loan in
January 1998, if and when the Company secures at least $3 million in additional
equity financing. Such loan will be forgiven over three years, assuming
continued employment with the Company. If the Company is not able to secure at
least $3 million in additional equity financing, Mr. Bouchard's loan for
$250,000 will be immediately forgiven and charged to expense. As part of Mr.
D'Eath's compensation, he will be entitled to receive an $80,000 bonus after 45
days of employment, but no later than January 5, 1998.

        The Company's future capital requirements will depend upon many factors,
including the amount of revenues generated from operations, the cost of the
Company's sales and marketing activities and the progress of the Company's
research and development activities, none of which can be predicted with
certainty. The Company anticipates that the existing capital resources and cash
generated from operations, if any, will be sufficient to meet the Company's cash
requirements for at least the next 4 months at its anticipated level of
operations, which includes increases in expenses, particularly sales and
marketing expenses, and costs of revenues. However, the Company plans to seek
additional funding during the next 4 months and will likely seek additional
funding after such time. There can be no assurance that any additional financing
will be available on acceptable terms, or at all, when required by the Company.
Moreover, if additional financing is not available, the Company could be
required to reduce or suspend its operations, seek an acquisition partner or
sell securities on terms that may be highly dilutive or otherwise
disadvantageous to investors. The Company has in the past, and may continue to
experience, operational difficulties and delays in its product development due
to working capital constraints. Any such difficulties or delays could have a
material adverse effect on the Company's business, financial condition and
results of operations.



                                                                          Page 9
<PAGE>   10


RISK FACTORS

Going Concern Assumption; Future Capital Needs Uncertain; No Assurance of Future
Financing

        The company's independent auditors' report on the Company's financial
statements at December 31, 1996 and for the years ended December 31, 1995 and
1996 contains an explanatory paragraph indicating that the Company had recurring
operating losses that raise substantial doubt about its ability to continue as a
going concern. In addition, the Company had an accumulated deficit of
$12,637,941 at September 30, 1997. The Company may require substantial
additional funds in the future and there can be no assurance that any
independent auditor's report on the Company's future financial statements will
not include a similar explanatory paragraph if the Company is unable to raise
sufficient funds or generate sufficient cash from operations to cover the cost
of its operations. The existence of the explanatory paragraph may materially
adversely affect the Company's relationship with prospective customers, third
party integrators and suppliers, and therefore could have a material adverse
effect on the Company's business financial condition and results of operations.

        The Company's future capital requirements will depend upon many factors,
including the amount of revenues generated from operations, the cost of the
Company's sales and marketing activities and the progress of the Company's
research and development activities, none of which can be predicted with
certainty. The Company anticipates that existing capital resources and cash
generated from operations, if any, will be sufficient to meet the Company's cash
requirements for at least the next 4 months at its anticipated level of
operations, which includes increases in expenses, particularly sales and
marketing expenses, and costs of revenues. However, the Company may seek
additional funding during the next 4 months and will likely seek additional
funding after such time. There can be no assurance that any additional financing
will be available on acceptable terms, or at all, when required by the Company.
Moreover, if additional financing is not available, the Company could be
required to reduce or suspend its operations, seek an acquisition partner or
sell securities on terms that may be highly dilutive or otherwise
disadvantageous to investors. The Company has in the past, and may continue to
experience, operational difficulties and delays in its product development due
to working capital constraints. Any such difficulties or delays could have a
material adverse effect on the Company's business, financial condition and
results of operations.

Complete Dependence on Recent Product Introduction

        The Company commenced sales of Arsenal, currently the Company's only
product, in April 1997. As a result, the Company will derive substantially all
of its revenues from the sale of Arsenal licenses and maintenance contracts for
Arsenal. Consequently, the Company will depend entirely on the successful
roll-out and commercial acceptance of Arsenal. Unless and until Arsenal receives
significant market acceptance, the Company will not have a source of revenue
sufficient enough to cover operating expenses. There can be no assurance that
Arsenal will achieve significant market acceptance. The Company's ability to
effectuate the roll-out of Arsenal will be substantially dependent on the hiring
and training of additional personnel and there can be no assurance that the
Company will be able to successfully hire and train such personnel. Although the
Company has begun to establish distribution channels for Arsenal, commercial
acceptance of Arsenal will require the Company to successfully establish
additional sales and distribution channels, of which there can be no assurance.
Any such failure will have a material adverse effect on the Company's business,
financial condition and results of operations. Failure of Arsenal to achieve
significant market acceptance and for the Company to achieve profitability will
have a material adverse effect on the Company's business, financial condition
and results of operations.

Recent Hires of Key Executives; Need to Fill Key Executive Position; Dependence
on Limited Number of Key Personnel

        The Company's future success substantially depends on the efforts of
certain of its officers and key technical and other employees, many of whom have
only recently joined the Company. In particular, the Company's President and
Chief Executive Officer has been with the Company only since July 1997 and the
Company's Senior Vice President of World Wide Sales and Services, Dave Bouchard,
and its Vice President of Business Development, Michael D'Eath, will be joining
the Company in November 1997. Additionally, the Company is currently seeking to
hire a Vice President of Marketing. The Company's future success will require it
to recruit additional key personnel, including additional sales and marketing
personnel. The Company has not entered into employment agreements nor does it
have key man life insurance. The Company believes that its future success
depends on its ability to attract, retain and motivate highly



                                                                         Page 10
<PAGE>   11

skilled employees, who are in great demand. There can be no assurance that the
Company will be successful in doing so.

Dependence on Systems Integrators and Third Party Consultants

        Sales automation software products that address the needs of medium- to
large-size businesses are typically highly complex and require significant
customization that often results in an extensive implementation process. The
Company's strategy for implementing Arsenal is dependent on the utilization of
third-party integrators to install, customize and service the product.
Consequently, third-party integrators are required to undergo a substantial
amount of training to be able to apply the Company's products to the varied
needs of the Company's current and prospective customers. There can be no
assurance that the Company's training will be sufficient or that such
integrators will be able to provide the level or quality of service required to
meet the needs of the Company's current and prospective customers. The Company
will likely be dependent on third-party integrators to complete certain
post-delivery obligations prior to the Company's recognition of revenue. Any
failure of such integrators to complete such obligations could prevent the
Company from recognizing revenue and the failure to so recognize revenue could
have a material adverse effect on the Company's business, financial condition
and results of operations. If the Company is unable to maintain effective,
long-term relationships with these integrators, or if such integrators fail to
meet the needs of the Company's current and prospective customers in a timely
fashion, or at all, such failure would result in a loss of, or delay in, market
acceptance or sales and could result in increased product support costs and an
injury to the Company's reputation, which would have a material adverse effect
on the Company's business, financial condition and results of operations.

        In addition, the Company uses its third-party integrators as a source
for sales leads and, to some extent as part of its sales and distribution
channels. To the Company's knowledge, such use of third-party integrators by
other companies has been limited and there can be no assurance that such
third-party integrators will contribute meaningfully to the Company's sales
efforts.

        The Company has not and does not plan to enter into or maintain
exclusive relationships with third-party integrators and, consequently, such
integrators may have existing relationships with, or may undertake new
relationships with, the Company's direct competitors. There can be no assurance
that such integrators will promote Arsenal effectively, or at all. The failure
of the Company to provide sufficient incentive for such integrators will
materially and adversely affect the Company's sales of Arsenal which will have a
material adverse effect on the Company's business, financial condition and
results of operations.

Recent Losses; Quarterly Fluctuations in Performance

        The Company has experienced significant operating losses in each of
fiscal 1994, 1995, 1996 and for the three months and nine months ended September
30, 1997 and expects to incur significant operating losses for the foreseeable
future. In mid 1995, the Company ceased sales and marketing of its entire
product line and shifted its focus to the development of Arsenal and the
establishment of a third-party integrator channel. As a result, the Company will
derive substantially all of its revenues from the sale of Arsenal licenses and
maintenance contracts for Arsenal. There can be no assurance that the Company
will ever achieve profitability.

        The Company has experienced significant fluctuations in its quarterly
operating results, and it anticipates that such fluctuations will continue and
could intensify in the future. In addition, the price of the Company's Common
Stock has fluctuated significantly since the Company's initial public offering
and is expected to continue to do so. Fluctuations in operating results may
contribute to volatility in the price of the Company's Common Stock. Operating
results may fluctuate as a result of many factors, including volume and timing
of orders received, the extent to which the Company is required to establish and
support a third-party integrator channel or hire additional sales personnel to
supplement such channel, announcements by the Company and its competitors, the
timing of commercial introduction of enhancements or



                                                                         Page 11
<PAGE>   12

competitive products, the impact of price competition on the Company's average
selling prices, and the level of research and development required to complete
any future product enhancements. Almost all of these factors are beyond the
Company's control. In addition, due to the short product life cycles that
characterize the sales automation software market, the Company's failure to
introduce any Arsenal enhancements in a timely manner will have a material
adverse effect on the Company's business, financial condition and results of
operations.

        The Company's operating and other expenses are relatively fixed in the
short term. As a result, variations in the timing of revenues will cause
significant variations in quarterly operating results. Notwithstanding the
difficulty in forecasting future sales, the Company generally must undertake its
development, sales and marketing activities and other commitments months in
advance. Accordingly, any shortfall in revenues in a given quarter may
materially adversely affect the Company's business, financial condition and
results of operations due to the inability to adjust expenses during the quarter
to match the level of revenues for the quarter. Once commitments for such
expenditures are undertaken, the Company may be unable to reduce them quickly if
revenue is less than expected. In addition, the Company's sales expectations are
based entirely on its internal estimates of future demand. Due to these and
other factors, the Company believes that quarter-to-quarter comparisons of its
results of operations are not necessarily meaningful and should not be relied
upon as indications of future performance.

Rapid Technological Change; Risk of Product Delays or Defects

        The sales automation software market is characterized by ongoing
technological developments, frequent new product announcements and
introductions, evolving industry standards and changing customer requirements.
The introduction of products embodying new technologies and the emergence of new
industry standards and practices can render existing products obsolete and
unmarketable. The Company's future success depends in large part upon its
ability to obtain market acceptance of Arsenal, develop enhancements to Arsenal
to address the changing requirements of its customers, educate third-party
integrators regarding Arsenal and anticipate or respond to technological
advances, competitive products and emerging industry standards and practices in
a timely, cost-effective manner. There can be no assurance that the Company will
be successful in marketing and supporting Arsenal or enhancements to Arsenal, if
any, or will not experience difficulties that could delay or prevent the
successful marketing and support of these products, or that Arsenal or any such
product enhancements will adequately meet the requirements of the marketplace
and achieve any significant degree of commercial acceptance. The Company has in
the past experienced delays in product development, including significant delays
in the development of Arsenal. Delays in enhancements to Arsenal, if any, may
result in customer dissatisfaction and delay or loss of product and maintenance
revenue. In addition, there can be no assurance that Arsenal or other future
products will meet the requirements of the marketplace or will conform to
industry standards and requirements.

        Software products such as Arsenal often contain errors or "bugs" that
can adversely affect the performance of the product or damage a user's data. As
a result, such software defects can have a materially adverse effect on the
financial condition and operating results of the Company. There can be no
assurance that, despite testing by the Company and by potential customers,
errors will not be found in Arsenal, resulting in a loss of, or delay in, market
acceptance and sales, diversion of development resources, injury to the
Company's reputation, or increased service and warranty costs, any of which
could have a material adverse effect on the Company's business, financial
condition and results of operations.



                                                                         Page 12
<PAGE>   13



PART II - OTHER INFORMATION


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

        (a)    Exhibits

<TABLE>
<CAPTION>
                Exhibit
                Number       Description
                ------       -----------
               <S>           <C>
               2.1(1)        Agreement and Plan of Merger between Borealis Corporation, a Nevada
                             corporation, and Borealis Technology Corporation, a Delaware corporation,
                             dated June 7, 1996.
               3.1(1)        Registrant's Certificate of Incorporation, as currently in effect.
               3.2(1)        Registrant's Bylaws, as currently in effect.
               10.1(1)       Real Property Lease between Registrant and Incline
                             Investors Group, dated June 15, 1995.
               10.2(1)       Real Property Sublease between Registrant and
                             U.S. Bank of Nevada, dated November 7, 1995.
               10.3(1)       1994 Stock Plan.
               10.4(1)       1996 Stock Plan.
               10.5(1)       1996 Director Option Plan.
               10.6(3)       1997 Employee Stock Purchase Plan.
               10.7(1)       Form of Indemnification Agreement.
               10.8(1)       Asset License and Purchase Agreement between the Registrant and
                             Sales Technologies, Inc., dated April 15, 1994.
               10.9(1)       Form of Warrant for 2,000 shares granted to Peter Pitsker on June 11, 1996.
               10.10(1)      Form of Warrant for 7,000 shares granted to Jerry Brooks on June 11, 1996.
               10.11(1)      Form of Warrant granted to H.J. Meyers & Co., Inc. in connection with the
                             Registrant's initial public offering.
               10.12(4)      Form of Warrant granted to H.J. Meyers & Co., Inc. in connection with the
                             Registrant's 1997 public offering.
               10.13(1)      Lease between the Registrant and DBB Holdings, Inc., dated June 11, 1996.
               10.14(2)      Promissory Note between the Registrant and US Bank, dated
                             July 11, 1996.
               10.15(4)      Solution Provider Agreement between the Company and
                             American Technology Corporation, dated October 4, 1996.
               10.16(4)      Promissory Note issued to Oxbow LLC.
               10.16(4)      Warrant to Purchase Shares of Common Stock issued to Oxbow LLC.
               10.17(4)      Rights Agreement with Oxbow LLC.
               10.18         Silicon Valley Bank Business Loan Agreement
               27.1          Financial Data Schedule
</TABLE>

        -------------------------



                                                                         Page 13
<PAGE>   14

        (1)  Incorporated by reference to exhibits filed with Registrant's
             Registration Statement on Form SB-2 which became effective on June
             20, 1996.

        (2)  Incorporated by reference to exhibits filed with Registrant's
             Quarterly Report on Form 10-QSB filed August 13, 1996.

        (3)  Incorporated by reference to annex filed with Registrant's Definite
             Proxy Statement on Schedule 14A filed April 11, 1997.

        (4)  Incorporated by reference to exhibits filed with Registrant's
             Registration Statement on Form SB-2 which became effective on
             July 21, 1997.

(b)  Reports on Form 8-K.

     A report on Form 8-K was filed by the Registrant on September 16, 1997. 
     The unaudited balance sheet as of July 31, 1997 was filed as part of the 
     report.



                                                                         Page 14
<PAGE>   15



                                    SIGNATURE



        In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                            BOREALIS TECHNOLOGY CORPORATION
                                            Registrant



                                            BY:    /s/ Elizabeth J. Gaspar
                                                   -----------------------
                                                   Elizabeth J. Gaspar
                                                   Executive Vice President
                                                   Chief Financial Officer


Date:  November 14, 1997








                                                                         Page 15
<PAGE>   16



                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
 Exhibit
 Number       Description
 ------       -----------
<S>           <C>
2.1(1)        Agreement and Plan of Merger between Borealis Corporation, a Nevada
              corporation, and Borealis Technology Corporation, a Delaware corporation,
              dated June 7, 1996.
3.1(1)        Registrant's Certificate of Incorporation, as currently in effect.
3.2(1)        Registrant's Bylaws, as currently in effect.
10.1(1)       Real Property Lease between Registrant and Incline
              Investors Group, dated June 15, 1995.
10.2(1)       Real Property Sublease between Registrant and
              U.S. Bank of Nevada, dated November 7, 1995.
10.3(1)       1994 Stock Plan.
10.4(1)       1996 Stock Plan.
10.5(1)       1996 Director Option Plan.
10.6(3)       1997 Employee Stock Purchase Plan.
10.7(1)       Form of Indemnification Agreement.
10.8(1)       Asset License and Purchase Agreement between the Registrant and
              Sales Technologies, Inc., dated April 15, 1994.
10.9(1)       Form of Warrant for 2,000 shares granted to Peter Pitsker on June 11, 1996.
10.10(1)      Form of Warrant for 7,000 shares granted to Jerry Brooks on June 11, 1996.
10.11(1)      Form of Warrant granted to H.J. Meyers & Co., Inc. in connection with the
              Registrant's initial public offering.
10.12(4)      Form of Warrant granted to H.J. Meyers & Co., Inc. in connection with the
              Registrant's 1997 public offering.
10.13(1)      Lease between the Registrant and DBB Holdings, Inc., dated June 11, 1996.
10.14(2)      Promissory Note between the Registrant and US Bank, dated
              July 11, 1996.
10.15(4)      Solution Provider Agreement between the Company and
              American Technology Corporation, dated October 4, 1996.
10.16(4)      Promissory Note issued to issued to Oxbow LLC.
10.16(4)      Warrant to Purchase Shares of Common Stock issued to Oxbow LLC.
10.17(4)      Rights Agreement with Oxbow LLC.
10.18         Silicon Valley Bank Business Loan Agreement
27.1          Financial Data Schedule
</TABLE>

-------------------------


<PAGE>   17

(1)  Incorporated by reference to exhibits filed with Registrant's Registration
     Statement on Form SB-2 which became effective on June 20, 1996.

(2)  Incorporated by reference to exhibits filed with Registrant's Quarterly
     Report on Form 10filed August 13, 1996.

(3)  Incorporated by reference to annex filed with Registrant's Definite Proxy
     Statement on Schedule 14A filed April 11, 1997.

(4)  Incorporated by reference to exhibits filed with Registrant's Registration
     Statement on Form SB-2 which became effective on July 21, 1997.