UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1995
Commission file number 0-9146
UNIQUE MOBILITY, INC.
(Exact name of registrant as specified in its charter)
Colorado 84-0579156
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
425 Corporate Circle Golden, Colorado 80401
(Address of principal executive offices) (zip code)
(303) 278-2002
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 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 .
The number of shares outstanding (including shares held by affiliates) of the
registrant's common stock, par value $0.01 per share at September 11, 1995 was
10,586,588.
<PAGE>
PART I - FINANCIAL INFORMATION
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
July 31, October 31,
Assets 1995 1994
(unaudited)
Current assets:
Cash and cash equivalents $1,764,638 1,201,008
Certificate of deposit 319,107 419,107
Accounts receivable 531,049 405,403
Costs and estimated earnings in excess of billings
on uncompleted contracts 439,771 356,083
Inventories (note 3) 409,214 475,151
Prepaid expenses 59,306 64,677
Other current assets 67,433 66,278
Total current assets 3,590,518 2,987,707
Property and equipment, at cost:
Land 335,500 335,500
Building 1,364,500 1,364,500
Molds 102,113 102,113
Transportation equipment 237,145 116,175
Machinery and equipment 1,771,143 1,458,739
3,810,401 3,377,027
Less accumulated depreciation (1,187,422) (942,736)
Net property and equipment 2,622,979 2,434,291
Patent and trademark costs, net of accumulated
amortization of $23,367 and $16,995 at July 31,
1995 and October 31, 1994, respectively 436,899 394,124
Other assets 67,277 87,429
$6,717,673 5,903,551
(Continued)
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
July 31, October 31,
Liabilities and Stockholders' Equity 1995 1994
(unaudited)
Current liabilities:
Accounts payable $ 243,126 216,690
Deposits 49,708 4,687
Accrued employee benefits payable 11,162 10,000
Other accrued liabilities (note 4) 598,615 517,371
Billings in excess of costs and estimated
earnings on uncompleted contracts - 137,247
Note payable 38,078 -
Current portion of long-term debt 78,959 40,100
Total current liabilities 1,019,648 926,095
Long-term debt 834,515 886,996
Total liabilities 1,854,163 1,813,091
Minority interest in consolidated subsidiary 389,725 391,785
Stockholders' equity (notes 5 and 6):
Common stock, $.01 par value, 50,000,000 shares
authorized; 10,358,281 and 9,925,545 shares
issued at July 31, 1995 and October 31, 1994,
respectively 103,583 99,255
Additional paid-in capital 18,242,091 16,790,995
Accumulated deficit (13,776,417)(13,096,103)
4,569,257 3,794,147
Less cost of 31,976 shares of treasury stock 95,472 95,472
Total stockholders' equity 4,473,785 3,698,675
Commitments (note 9)
$ 6,717,673 5,903,551
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited)
<CAPTION>
Quarter Ended July 31, Nine Months Ended July 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenue:
Contract services (note 8) $ 1,464,089 324,399 3,555,682 1,102,621
Product sales 165,730 104,824 634,151 608,753
1,629,819 429,223 4,189,833 1,711,374
Operating costs and expenses:
Cost of sales 1,102,576 349,008 2,778,635 1,458,591
Research and development 140,393 668,463 959,603 1,372,276
General and administrative 274,510 292,723 798,892 940,593
Depreciation and amortization 89,774 70,720 255,016 195,131
1,607,253 1,380,914 4,792,146 3,966,591
Operating income (loss) 22,566 (951,691) (602,313) (2,255,217)
Other income (expense):
Minority interest share of earnings
of consolidated subsidiary (15,613) (16,906) (48,451) (53,014)
Interest, net (13,546) 6,578 (41,126) 25,691
Other 7,821 67 11,576 20,865
Net income (loss) $ 1,228 (961,952) (680,314) (2,261,675)
Net income (loss) per common
share (note 7) $ - (.09) (.07) (.23)
Weighted average number of shares of
common stock outstanding (note 7) 10,013,125 9,879,598 9,955,653 9,712,200
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
Nine Months Ended July 31,
1995 1994
Cash flows from operating activities:
Net loss $ (680,314) (2,261,675)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 255,016 195,131
Minority interest share of earnings of
consolidated subsidiary 48,451 53,014
Noncash compensation expense for common
stock and warrants issued to an
investment banker and directors 12,500 29,800
Share of losses in equity affiliate 2,244 -
Gain on sale of marketable securities (3,534) -
Change in operating assets and liabilities:
Accounts receivable and costs and estimated
earnings in excess of billings on
uncompleted contracts (209,334) 34,059
Inventories 65,937 41,897
Prepaid expenses and other assets 4,573 21,092
Billings in excess of costs and estimated
earnings on uncompleted contracts (137,247) -
Accounts payable and other current liabilities 141,363 (146,501)
Net cash used by operating activities (500,345) (2,033,183)
Cash used by investing activities:
Acquisition of machinery and equipment (433,374) (342,541)
Increase in patent and trademark costs (49,147) (101,403)
Net cash used by investing activities (482,521) (443,944)
Cash flows provided (used) by financing activities:
Proceeds from borrowings 212,337 -
Repayment of debt (187,881) (29,701)
Proceeds from sale of common stock, net 1,437,333 -
Proceeds from sale of investment securities 436,234 -
Purchase of investment securities (319,107) -
Issuance of common stock upon exercise of
employee options 15,565 874,454
Issuance of common stock upon exercise of
underwriter warrants - 46,600
Issuance of common stock upon exercise of Alcan
preemptive right - 200,511
Issuance of common stock to employee stock
purchase plan 2,526 4,848
Cash distribution to minority interest owner (50,511) (45,000)
Net cash provided by financing activities 1,546,496 1,051,712
Increase (decrease) in cash and cash
equivalents 563,630 (1,425,415)
Cash and cash equivalents at beginning of period 1,201,008 3,695,509
Cash and cash equivalents at end of period $1,764,638 2,270,094
Supplemental disclosures to the consolidated statements of cash flows:
Cash paid for interest was $66,971 and $53,264 for the nine months ended July
31, 1995 and 1994, respectively.
See accompanying notes to consolidated financial statements.
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
(1) The accompanying financial statements are unaudited; however, in the
opinion of management, all adjustments which were solely of a normal
recurring nature, necessary to a fair statement of the results for the
interim period, have been made. The results for the interim period are
not necessarily indicative of results to be expected for the fiscal year.
(2) Certain fiscal 1994 amounts have been reclassified for comparative
purposes.
(3) Inventories are stated at the lower of cost or market. Cost is determined
by the first-in, first-out method and consists of materials, direct labor
and production overhead. Inventories consist of the following:
July 31, 1995 October 31, 1994
(unaudited)
Raw materials $220,255 263,526
Work in process 100,824 38,986
Finished products 88,135 172,639
$409,214 475,151
(4) The following table summarizes the composition of the Company's other
accrued liabilities:
July 31, 1995 October 31, 1994
(unaudited)
Accrued subcontractor expense $200,000 150,000
Loss accrual on long-term contracts 64,935 33,186
Accrued legal and accounting fees 149,230 103,254
Accrued consulting, payroll, personal
property and real estate taxes 56,867 147,675
Other accrued liabilities 127,583 83,256
$598,615 517,371
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
(5) The Company granted options to purchase 1,104,000 shares of common stock
pursuant to its Incentive and Non-qualified Stock Option Plan, which
expired by its terms in fiscal 1992. The following table summarizes the
number of shares of common stock subject to issuance upon the exercise of
options outstanding under the plan:
Option Options Outstanding
Grant Date Price July 31, 1995 October 31, 1994
(unaudited)
July 8, 1988 $1.00 57,000 57,000
January 1, 1989 $0.50 39,704 39,704
February 22, 1991 $0.75 124,378 124,378
January 20, 1992 $2.25 233,000 233,000
454,082 454,082
No options were exercised under the Incentive and Non-qualified Stock
Option Plan during the nine months ended July 31, 1995.
The Company has reserved 3,000,000 shares of common stock for key
employees, consultants, and key suppliers under its 1992 Stock Option
Plan. The following table summarizes the number of shares subject to
issuance upon the exercise of options outstanding under the plan:
Option Options Outstanding
Grant Date Price July 31, 1995 October 31, 1994
(unaudited)
July 9, 1992 $3.50 348,516 361,398
January 15, 1993 $8.00 12,000 12,000
February 17, 1993 $6.38 50,000 50,000
October 11, 1993 $6.88 398,966 413,720
November 22, 1993 $6.88 8,000 8,000
December 16, 1993 $8.00 4,000 4,000
March 8, 1994 $7.00 13,333 13,333
April 19, 1994 $6.25 50,000 50,000
June 6, 1994 $8.13 350,000 350,000
June 14, 1994 $6.13 50,000 50,000
August 1, 1994 $5.38 50,000 50,000
October 27, 1994 $5.00 93,000 93,000
November 1, 1994 $5.00 50,000 -
March 20, 1995 $5.00 50,000 -
1,527,815 1,455,451
Incentive options, which vest one year after the date of grant, and
Non-qualified options, which vest immediately, generally have an exercise
price equal to the fair market value of the common stock on the date of
grant and are exercisable over 10 years. The options granted October 11,
1993 and June 6, 1994 vest in annual increments over a three-year period
and require holders to abide by certain Company policies on trading the
Company's securities. The maximum number of shares that may be granted
to any eligible employee during the term of the Plan is 500,000 shares.
Any options which remain unexercised at the end of their exercise period
will expire. Options to acquire 4,447 shares of common stock were
exercised during the nine months ended July 31, 1995 at an average
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
exercise price of $3.50. During the nine months ended July 31, 1995,
options to acquire 23,189 shares of common stock were forfeited at an
average exercise price of $5.65 per share.
The Company has reserved 250,000 shares of common stock for issuance
pursuant to the exercise of options under the Unique Mobility, Inc. Stock
Option Plan for Non-employee Directors. The options vest ratably over a
three year period beginning one year from the date of grant and are
exercisable for 10 years from the grant date. Option prices are equal to
the fair market value of common shares at the date of grant. The
following table summarizes the number of shares subject to issuance upon
the exercise of options outstanding under the plan:
Option Options Outstanding
Grant Date Price July 31, 1995 October 31, 1994
(unaudited)
June 1, 1994 $6.25 32,000 32,000
August 1, 1994 $5.38 16,000 16,000
November 1, 1994 $5.00 13,333 -
April 17, 1995 $5.13 48,000 -
109,333 48,000
No options were exercised under the Stock Option Plan for Non-employee
Directors during the nine months ended July 31, 1995.
(6) The Company has reserved 790,000 shares of common stock for issuance
pursuant to warrant agreements with a venture capital organization. The
warrants are exercisable for a period of five years commencing August 25,
1992 at a price of $2.40 per share or the lower of $2.40 per share or
the market price of the common stock averaged over the 30 trading days
immediately preceding the date of exercise. The warrants allow for a
cashless exercise of the warrants into common shares based on the spread
between the market price of the common stock on the date of exercise and
the $2.40 per share exercise price. No warrants have been exercised to
date.
The Company has reserved 100,000 shares of common stock for issuance
pursuant to warrant agreements with the underwriters of the Company's
1992 public offering. The warrants are exercisable for a period of two
years commencing November 22, 1993 at a price of $6.00 per share. The
warrants contain transfer restrictions and provisions providing for the
adjustment of the exercise price and number and type of securities
issuable upon exercise upon the occurrence of certain events. The
warrants also grant to the holders thereof certain demand and piggyback
registration rights for the shares issuable upon exercise thereof.
No warrants have been exercised to date.
The Company has reserved 300,000 shares of common stock for issuance
pursuant to a warrant agreement with an investment banking company. The
warrants were exercisable for a period of five years commencing January
20, 1994, at a price of $7.63 per share. Further, the warrants were
redeemable on a one-time basis through June 30, 1994, for a like number
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
of warrants, at the then current fair market value of the Company's
common stock. During the second quarter of fiscal 1994, the warrants
were redeemed in accordance with the above provision for a like number
of warrants which are exercisable at a price of $6.00 per share.
The warrants contain transfer restrictions and provisions providing for
the adjustment of the exercise price and the number and type of
securities issuable upon exercise upon the occurrence of certain events.
No warrants have been exercised to date.
The Company has reserved 150,000 shares of common stock for issuance
pursuant to warrant agreements with the placement agent of the Company's
1995 private placement. The warrants are exercisable for a period of
three years expiring July 21, 1998 at a price of $5.75 per share. The
warrants contain transfer restrictions and provisions providing for the
adjustment of the exercise price and number and type of securities
issuable upon exercise upon the occurrence of certain events. No
warrants have been exercised to date.
(7) Loss per common share amounts are based on the weighted average number
of common shares outstanding during the third quarter and first nine
months of each fiscal year presented. Outstanding common stock options
and warrants were not included in the computation because the effect of
such inclusion would be antidilutive. Fully diluted earning per share
are considered equivalent to primary earnings per share.
(8) The Company has historically derived significant revenue from contract
services from a few key customers. For the quarter and nine months
ended July 31, 1995, the Company derived revenue of $1,328,542 and
$3,311,293 representing 91 percent and 93 percent of contract services
revenue from four and five customers, respectively. For the quarter and
nine months ended July 31, 1994, the Company derived revenue of $230,170
and $839,402 representing 71 percent and 76 percent of contract services
revenue from two and five customers, respectively.
(9) The Company has entered into employment agreements with four of its
officers which expire December 31, 1996. The aggregate annual future
compensation under these agreements through the expiration date is
$654,626.
(10) The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (SFAS No. 109) in fiscal 1994. SFAS No. 109
requires the recognition of deferred income taxes for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases. Prior to fiscal 1994, the Company accounted for income taxes
under APB 11. The change in accounting for income taxes had no effect
on the Company's earnings, as a valuation allowance has been established
equal to the net deferred tax asset.
At July 31, 1995, temporary differences that give rise to deferred tax
assets and deferred tax liabilities are principally made up of net
operating loss carry-forwards and research and development credits for
income tax purposes. Deferred tax assets attributable to net operating
loss carry-forwards and other tax credits are offset by a valuation
allowance.
At July 31, 1995, the Company had net operating loss carry-forwards for
income tax purposes aggregating approximately $12,000,000 and research
and development credits for income tax purposes aggregating
approximately $100,000. Net operating loss carry-forwards and research
and development credits are subject to certain rules limiting their
annual usage.
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition
The Company maintained adequate cash balances throughout the third quarter and
first nine months of fiscal 1995 to fund operations. Cash and cash equivalents
rose to $1,764,638 at July 31, 1995, an increase of $563,630 from the balance at
October 31, 1994, and shareholders' equity rose to $4,473,785 at July 31, 1995,
from $3,698,675 at the beginning of the fiscal year. The increase in cash and
cash equivalents was due to a private placement of its common stock. At
July 31, 1995 the Company had sold 427,778 shares of its $0.01 par value common
stock resulting in net proceeds to the Company of $1,437,333. The private
placement was completed during the fourth quarter with total sales of 581,111
shares of the Company's $0.01 par value common stock resulting in aggregate
net proceeds to the Company of $1,952,533.
The Company's business plan provides for the continued investment in the
commercialization of its products including high voltage and
low voltage traction drive systems, the development of the Ethos 3 EV prototype
and various hybrid electric bus activities. Additional capital will be required
to fund the Company's commercialization activities at current and anticipated
levels. See "Liquidity and Capital Resources" below.
Accounts receivable rose to $531,049 at July 31, 1995, from $405,403 at fiscal
1994 year end reflecting higher levels of contract services revenue.
Costs and estimated earnings in excess of billings on uncompleted contracts
increased $83,688 to $439,771 at the end of the fiscal 1995 third quarter due
to increased levels of work performed on sponsored development contracts but
not yet billed to customers under the terms of the development contracts.
Inventories declined to $409,214 at July 31, 1995 from $475,151 at fiscal
1994 year end, reflecting shipments of UQM goods from finished products
inventory and lower levels of raw materials inventory.
Prepaid expenses declined to $59,306 at July 31, 1995 due to the ratable
expensing of insurance premium costs on the Company's commercial insurance
coverages which are prepaid.
Capital expenditures for the quarter and nine months ended July 31, 1995 were
$149,479 and $433,374, respectively, compared to $82,786 and $342,541 for the
comparable periods last year. The increase in capital expenditures is
primarily attributable to leasehold improvements and equipment purchases
associated with an increase in engineering staff.
Patent and trademark costs, net of accumulated amortization rose $42,775 to
$436,899 at July 31, 1995, reflecting ongoing maintenance and prosecution of
the trademark UQM and the Company's pending patent applications.
Other assets declined $20,152 to $67,277 at July 31, 1995, primarily due to the
sale of securities held for investment.
Accounts payable rose to $243,126 at July 31, 1995 from $216,690 at October
31, 1994 due to higher levels of contract service revenue.
Deposits rose to $49,708 at July 31, 1995 reflecting higher levels of deposits
from customers on orders for UQM products.
Other accrued liabilities were $598,615 at July 31, 1995 an increase of
$81,244 from the fiscal 1994 year end level. The increase is attributable to
higher levels of accrued subcontractor, legal and accounting costs and
increased accruals for potential losses on a long-term contract.
Billings in excess of costs and estimated earnings on uncompleted contracts
declined $137,247 reflecting completion of work on a development contract
which was billed to a commercial customer prior to being recognized as revenue
under the percentage of completion accounting method.
Note payable was $38,078 at July 31, 1995 reflecting amounts payable to a
commercial lender on a short-term note utilized to finance the annual premium
cost of the Company's commercial insurance coverages.
Current portion of long-term debt and long-term debt declined $13,622 during
the nine months ended July 31, 1995 reflecting scheduled principal payments and
a principal prepayment on the real estate mortgage by Unique Building Partners
Limited Liability, Co. (UBPL).
Minority interest in consolidated subsidiary declined to $389,725 at July 31,
1995 reflecting cash distributions to the minority interest owner in excess of
earnings allocable to the minority interest owner during the nine months ended
July 31, 1995.
Common stock and additional paid in capital increased $1,455,424 respectively,
reflecting proceeds from the private placement of common stock, the purchase of
common stock upon the exercise of stock options by employees of the Company, and
purchases of common stock by the Company's Employee Stock Purchase Plan.
Results of Operations
The Company's contract services business continued to perform strongly during
the third quarter of fiscal 1995, primarily as a result of the Company's
participation with Ford Motor Company in the first phase of the Hybrid
Propulsion System Development Program sponsored by the U.S. Department of
Energy. Contract services revenue for the quarter rose over four-fold to
$1,464,089 compared to $324,399 for the comparable quarter last year.
Correspondingly, contract services revenue for the nine months ended July 31,
1995, rose over three-fold to $3,555,682 versus $1,102,621 for the same period
last year. Primarily as a result of this growth the Company generated
operating income for the quarter of $1,228 versus an operating loss of $961,952
or $0.09 per common share for the fiscal 1994 third quarter. Operating losses
for the nine months ended July 31, 1995, declined sharply to $680,314 or $0.07
per common share compared to an operating loss of $2,261,675 or $0.23 per common
share for the comparable period last year.
In September 1995, the Company established a new business unit to commercialize
its proprietary line of permanent magnet motors and controls. The motors and
controls unit will operate as a separate division of the company and will be
directed initially toward existing markets for low voltage small vehicle
traction applications. As a result, the Company expects to redirect its
internal research and development expenditures to provide more focus on low
voltage products and less on the Ford/DOE program which requires a 50 percent
cost share match.Through the first phase of the Ford/DOE hybrid program, the
Company's cost share match totaled $1.8 million which covered the modeling of
performance characteristics for a next generation motor-in-the-wheel concept,
a flywheel energy storage system and a gas turbine alternator. In consultation
with Ford, the Company has now limited its participation in the program to
areas of nearer rather than longer term application and to areas where the
Company has a reasonable chance of covering its cost share from third party
sources. Accordingly, the Company has discontinued work on the motor-in-the-
wheel concept and on the gas turbine alternator. The flywheel development
program will constitute the only ongoing work currently under contract for the
Ford/DOE Program.
As a result of these developments the Company has reduced its overall
partcipation in the Ford/DOE Program from an anticipated five year $11.2
million effort under which the Company had a cost sharing obligation of fifty
percent or $5.6 million to a two year $4.4 million effort with a cost sharing
obligation of $2.2 million. At July 31, 1995 the Company had performed
approximately $3.7 million of the work envisioned under the revised program
resulting in unperformed contract services at July 31, 1995 of $.7 million.
Of this, the Company will receive payments from Ford of $.35 million and will
cost share an equal amount. Management expects the near term impact of these
decisions to result in sharply lower levels of contract services revenue and
operating losses for the fourth quarter and beyond. Further, reduction in
workforce from a level of 72 full-time employees in February, 1995 to 40
full-time employees at July 31, 1995 were necessary to implement this
redirection. See "Liquidity and Capital Resources" below.
Sales of UQM products rose to $165,730 and $634,151 for the quarter and nine
months ended July 31, 1995, respectively, versus $104,824 and $608,753 for the
comparable fiscal 1994 periods. The increase is attributable to increased sales
of the Company's products to participants in solar and hybrid vehicle
competitions around the world.
Gross profit margins rose to 32.3 percent and 33.7 percent for the quarter and
nine months ended July 31, 1995 versus 18.7 percent and 14.8 percent for the
comparable prior year periods, respectively. The increase in margins was
attributable to improved absorption of overhead costs across the Company's
then expanding contract base.
Research and development expenditures declined $528,070 to $140,393 and $412,673
to $959,603 for the quarter and nine months ended July 31, 1995, respectively.
The decrease is attributable to improved absorption of overhead costs and
reduced expenditures for subcontractors, consultants and contract workers on the
Ford/DOE Program.
General and administrative costs decreased to $274,510 and $798,892 for the
quarter and nine months ended July 31, 1995, compared to $292,723 and $940,593
for the comparable prior year periods. The decrease is primarily due to higher
levels of consulting, legal and business development costs in fiscal 1994.
Depreciation and amortization expense increased $19,054 and $59,885 during the
quarter and nine months ended July 31, 1995 due to higher levels of depreciable
assets.
Minority interest share of earnings of consolidated subsidiary declined and
interest, net rose during the third quarter and year-to-date period due to
rising interest rates on the mortgage debt held by UBPL.
Liquidity and Capital Resources
The Company's cash balances and liquidity throughout the third quarter of fiscal
1995 were adequate to meet operating needs. At July 31, 1995 cash and
cash equivalents and certificates of deposit amounted to $2,083,745 and working
capital (current assets minus current liabilities) was $2,570,870.
At the beginning of fiscal 1995 management implemented several operational
changes to reduce operating costs, defer product development investments and
conserve cash in substantially all areas of the Company's business. As a result
of these actions, cash used by operations declined to $569,270 or at a rate of
approximately $190,000 per month, on average, for the first quarter of fiscal
1995 and further declined to $94,677 or at a rate of approximately $32,000 per
month, on average for the second quarter of fiscal 1995. These actions resulted
in positive cash flow from operating activities of $163,602 or approximately
$54,000 per month on average, for the third quarter of 1995.
During the third quarter the Company commenced a private placement of its common
stock to four mutual funds in Italy and Sweden under Regulation S. The private
placement was completed during the fourth quarter and resulted in the sale of
581,111 shares of common stock at $3.60 per share. Net proceeds to the Company
after deducting the expenses of the offering amounted to $1,952,533.
In September 1995, the Company formed a new business unit to pursue the
commercialization of low voltage proprietary motors and controls for small
vehicle traction drives. As a result, the Company intends to apply a
substantial portion of its personnel and financial resources toward the
implementation of this activity. The application of these resources is expected
to result in operating losses. The Company intends to finance such operating
losses in part from the proceeds of its recently completed private placement.
Management believes the Company currently possesses sufficient cash to fund its
operations for a period of at least ten months, however, additional capital will
be required to implement the Company's long-term business plan.
The Company hopes to meet future capital requirements through the issuance of
equity or debt securities or a combination of both, although there can be no
assurance that such financing can be arranged. In the event the Company is
unwilling or unable to arrange such financing, management would defer, abandon,
or modify implementation of the Company's strategic plan. For the longer term,
the Company plans to continue to pursue the commercialization of its proprietary
technologies directly, if financing can be obtained or, if financing cannot be
arranged or is deemed to be too costly, indirectly by means of strategic
alliances or licensing arrangements with leading companies in the field.
The Company maintains a working capital facility in the amount of $400,000 with
a commercial bank. The facility is secured by substantially all of the
Company's tangible and intangible assets and bears interest at one percent over
the bank's base rate and requires the maintenance of a deposit in a restricted
cash account with the bank equal to the borrowings in excess of $100,000. At
July 31, 1995, no amounts had been drawn against this facility. The facility
was scheduled to expire on July 31, 1995, but has been provisionally extended
pending renewal of the facility.
The Company has entered into a joint venture agreement with Kwang Yang Motor
Co., Ltd. (KYMCO) and Turn-Luckily Technology, Co., Ltd. (TLT) for the
establishment of a Taiwan based manufacturing company. The parties are in the
process of incorporating the company, to be known as Taiwan UQM Electric Co.,
Ltd. (Taiwan UQM) as a Taiwanese corporation limited by shares. In addition the
parties are in the process of acquiring industrial property for the benefit of
Taiwan UQM with the intention of erecting a light manufacturing facility on the
premises during the next six months. The Company does not currently possess the
financial resources to meet its capital contribution obligations under the Joint
Venture Agreement. In order to facilitate the Company's ability to meet such
obligations, the Company has executed a side agreement with KYMCO pursuant to
which KYMCO will fund the Company's capital contribution obligations to Taiwan
UQM (39 percent of current and future capital calls) arising prior to December
31, 1995. Under the terms of the side agreement the Company has the option to
repay, in whole or in part, the amounts advanced by KYMCO with interest at the
rate of 10 percent per annum at any time prior to May, 1996. Any such advances
by KYMCO will have the effect of temporarily diluting the Company's equity in
the joint venture. The Company does not currently possess the financial
resources to meet the anticipated capital contributions required to maintain
its 39 percent equity in Taiwan UQM. In the event the Company is unable to
secure the additional financing necessary to meet all or a portion of its
capital contribution obligations under the side agreement with KYMCO, its
ownership interest in Taiwan UQM may be permanently diluted. In the event the
Company's ownership position in Taiwan UQM is permanently diluted, Taiwan UQM
would be obligated to obtain a royalty bearing license from the Company in
order to gain manufacturing rights to the Company's proprietary technologies.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Waiver and Option Agreement by and between Unique Mobility, Inc.,
Kwang Yang Motor Co., Ltd. and Turn Luckily Technology Co., Ltd.
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Unique Mobility, Inc.
Registrant
Date: September 14, 1995 By:"Donald A. French"
Donald A. French
Treasurer and Controller
(Principal Financial and
Accounting Officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOL-
IDATED BALANCE SHEETS OF UNIQUE MOBILITY, INC. AND CONSOLIDATED SUBSIDIARIES AS
OF JULY 31, 1995 AND OCTOBER 31, 1994 AND THE CONSOLIDATED STATEMENTS OF OPERA-
TIONS FOR THE QUARTER AND NINE MONTHS ENDED JULY 31, 1995 AND JULY 31, 1994 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 12-MOS
<FISCAL-YEAR-END> OCT-31-1995 OCT-31-1994
<PERIOD-END> JUL-31-1995 OCT-31-1994
<CASH> 2,083,745 1,620,115
<SECURITIES> 0 0
<RECEIVABLES> 531,049 405,403
<ALLOWANCES> 0 0
<INVENTORY> 848,985 831,234
<CURRENT-ASSETS> 3,590,518 2,987,707
<PP&E> 3,810,401 3,377,027
<DEPRECIATION> 1,187,422 942,736
<TOTAL-ASSETS> 6,717,673 5,903,551
<CURRENT-LIABILITIES> 1,019,648 926,095
<BONDS> 834,515 886,996
<COMMON> 103,583 99,255
0 0
0 0
<OTHER-SE> 4,370,202 3,599,420
<TOTAL-LIABILITY-AND-EQUITY> 6,717,673 5,903,551
<SALES> 634,151 708,917
<TOTAL-REVENUES> 4,189,833 2,352,120
<CGS> 510,468 572,820
<TOTAL-COSTS> 4,792,146 5,719,993
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 66,971 72,638
<INCOME-PRETAX> (680,314) (3,395,356)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (680,314) (3,395,356)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (680,314) (3,395,356)
<EPS-PRIMARY> (.07) (.35)
<EPS-DILUTED> (.07) (.35)
</TABLE>
WAIVER AND OPTION AGREEMENTS
THIS WAIVER AND OPTION AGREEMENT (the "Agreement') is entered
into by and between Unique Mobility, Inc., a corporation
organized and existing under the laws of the United States of
America and incorporated in the State of Colorado ("Unique"),
Kwang Yang Motor Co., Ltd., a company limited by shares organized
and existing under the laws of the Republic of China ("KYMCO")
and Turn Luckily Technology Co., Ltd., a company limited by
shares organized and existing under the laws of the Republic of
China ("TLT") on this 12th day of June 1995.
RECITALS
A. WHEREAS, Unique, KYMCO and TLT are parties to a certain Joint
Venture Agreement dated January 29, 1994 (the "Joint Venture
Agreement") providing for the formation, funding and
operation of Taiwan UQM Electric Co., Ltd., a company
limited by shares to be organized under the laws of the
Republic of China ("Taiwan UQM");
B. WHEREAS, pursuant to the Joint Venture Agreement, Unique,
KYMCO and TLT desire that the shareholding in Taiwan UQM
shall be such that Unique holds 39% of the shares, KYMCO
holds 39% of the shares and TLT and its nominees holds 22%
of the shares; and
C. WHEREAS, Unique is incapable of making payments under the
above Joint Venture Agreement in accordance with which it
must purchase 39% of the shares, and KYMCO accepts Unique's
request that it first purchase the shares Unique is
incapable of purchasing;
D. NOW, THEREFORE, in consideration of these recitals and the
mutual covenants and agreements set forth below, Unique,
KYMCO and TLT agree as follows:
AGREEMENT
1. The parties hereto agree that upon incorporation, the
initial paid-in capital of Taiwan UQM shall be twenty-five
million New Taiwan dollars (NT$25,000,000) comprised of:
eighteen million three hundred and thirty thousand New
Taiwan dollars (NT$18,330,000) contributed by KYMCO in
exchange for one million eight hundred and thirty three
thousand (1,833,000) shares of Taiwan UQM, one million one
hundred and seventy thousand New Taiwan dollars
(NT$1,170,000) contributed by Unique in exchange for one
hundred and seventeen thousand (117,000) shares of Taiwan
UQM; and five million five hundred thousand New Taiwan
dollars (NT$5,500,000) contributed by TLT and its nominees
in exchange for five hundred and fifty thousand (550,000)
shares of Taiwan UQM.
<PAGE>
2. The parties hereto agree that all calls for additional
contributions of capital by the shareholders of Taiwan UQM
in exchange for shares over and above the initial paid-in
capital which occur prior to the end of December 1995 will
be paid by KYMCO and TLT with KYMCO subscribing to seventy
eight percent (78%) of each such capital call and TLT
subscribing to twenty-two percent (22%) of each such capital
call and that shares issued pursuant to all such capital calls
shall be issued at par value which is ten New Taiwan dollars
(NT$10) per share.
3. The parties hereto agree that on any two occasions prior to
the completion of the thirteenth month after the
incorporation of Taiwan UQM, to the extent permitted under
the laws of the Republic of China, Unique may tender and
KYMCO shall accept all or any portion of the difference
between the amount of capital contributions by Unique and
thirty-nine percent (39%) of the total paid-in capital of
Taiwan UQM at that time together with interest expense (10%)
annual rate) in exchange for which KYMCO agrees to transfer
and Unique agrees to receive a number of shares in Taiwan
UQM to be determined as follows:
Amount of Money Tendered by Unique (excluding any
interest, securities transaction tax, security
transaction income tax and other relevant fees arising
out of the share transaction which are due under this
Agreement)/par value per share (NT$10).
Unique agrees that any securities transaction tax,
securities transaction income tax and other relevant fees
arising out of this share transfer shall be borne by Unique.
Unique also agrees that it will purchase a minimum of
858,000 shares under the terms of Article 3 of this
Agreement.
For the purposes of calculating interest under this
Agreement, "Interest Bearing Shares" shall mean 39% of each
issuance of shares minus the number of shares of each
issuance already purchased by Unique. Interest shall accrue
under this Agreement on a daily basis at the rate of
Interest Bearing Shares x par value per share (NT$10) x
.000274. Each purchase of shares under this Article 3 shall
be deemed, for the purposes of calculating interest under
this Agreement only, to be a purchase of shares of the
earliest issuance of shares to which Unique has not "Fully
Subscribed." Unique will be deemed to have Fully Subscribed
to an issuance of shares when it is deemed under this
Article 3 to have purchased 39% of said issuance. The
interest due at the time of any purchase of shares by Unique
under this Article 3 shall be the amount of interest which
has accrued and is attributable to the shares then deemed to
be purchased.
<PAGE>
4. Prior to Unique's repurchase from KYMCO in the above Article
(Article 3 of this Agreement) of shares purchased by KYMCO
on Unique's behalf, the three Parties to this Agreement
agree that the nomination of the five directors of Taiwan
UQM shall be changed so that KYMCO nominates three, Unique
one and TLT one. The chairman of the board shall be a
director nominated by KYMCO. When Unique's repurchase of
shares in the above Article (Article 3 of this Agreement)
reaches 39%, the number of directors shall be adjusted in
accordance with the Joint Venture Agreement. If Unique
cannot repurchase all of the shares purchased by KYMCO on
behalf of Unique in accordance with the provisions of
Article 3 of this Agreement thereby causing Unique to hold
39% of the already issued shares, then the number of
directors nominated by the three Parties shall be
reallocated in accordance with each party's actual
shareholding ratio.
5. The parties hereto agree that, prior to the completion of
the thirteenth month after the incorporation of Taiwan UQM:
(1) by the lst day of the thirteenth month after the
incorporation of Taiwan UQM, if Unique has not purchased a
minimum of 858,000 shares under the provisions of Article 3
of this Agreement, then it shall be considered in breach of
the Joint Venture agreement; (2) KYMCO shall not assign,
transfer or otherwise dispose of its shares to third parties
such that it is unable to comply with its obligations under
this Agreement but, if Unique cannot, under the provisions
of Article 3 of this Agreement, repurchase 39% of the
already issued shares within the thirteen months following
incorporation of Taiwan UQM, KYMCO has the right to dispose
of the shares which were not repurchased by Unique and is
not bound by the relevant provisions of the Joint Venture
Agreement; (3) the provisions of Sections 5.1, 5.3, 5.4,
6.2, and 9.1(b) of the Joint Venture Agreement are suspended
to the extent that they conflict with the terms of this
Agreement. The parties hereto further agree that the
provisions of Sections 4.2 and 4.3 of the Joint Venture
Agreement are hereby voided and replaced with the provisions
of Article 1 of this Agreement.
IN WITNESS WHEREOF this Agreement is executed as of the date
first written above.
Unique Mobility, Inc.
"Donald A. French"
By:___________________
Kwang Yang Motor Co., Ltd.
"Kwang Yang Motor Co., Ltd."
By:____________________
Turn Luckily Technology, Co., Ltd.
"Woody Chang"
By:____________________
