UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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 June 7, 1996 was
11,081,128.
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PART I - FINANCIAL INFORMATION
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
April 30, October 31,
1996 1995
---------- ----------
(unaudited)
Assets:
- - -------
Current assets:
Cash and cash equivalents $ 1,844,905 1,796,392
Certificates of deposit 319,107 319,107
Accounts receivable 383,878 337,849
Costs and estimated earnings in excess of
billings on uncompleted contracts 123,852 262,414
Inventories (note 3) 420,247 404,701
Prepaid expenses 100,304 35,397
Other current assets 83,193 70,203
--------- ---------
Total current assets 3,275,486 3,226,063
--------- ---------
Property and equipment, at cost:
Land 335,500 335,500
Building 1,364,500 1,364,500
Molds 102,113 102,113
Transportation equipment 251,175 251,175
Machinery and equipment 1,781,249 1,763,818
--------- ---------
3,834,537 3,817,106
Less accumulated depreciation (1,431,580) (1,275,530)
--------- ---------
Net property and equipment 2,402,957 2,541,576
--------- ---------
Investment in Taiwan joint venture 1,411,394 1,432,735
Patent and trademark costs, net of accumulated
amortization of $33,002 and $25,491 498,536 450,394
Other assets 10,193 27,831
--------- ---------
$ 7,598,566 7,678,599
(Continued)
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UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
April 30, October 31,
Liabilities and Stockholders' Equity 1996 1995
- - ------------------------------------ ---------- ---------
(unaudited)
Current liabilities:
Accounts payable $ 321,078 83,859
Other current liabilities (note 4) 414,837 464,186
Note payable to Taiwan joint venture
participant 1,403,493 1,403,493
Current portion of long-term debt 78,227 81,525
---------- ----------
Total current liabilities 2,217,635 2,033,063
Long-term debt, less current portion 770,607 807,003
---------- ----------
Total liabilities 2,988,242 2,840,066
Minority interest in consolidated subsidiary 389,729 389,065
Stockholders' equity (note 5):
Common stock, $.01 par value, 50,000,000 shares
authorized; 10,944,828 and 10,571,953 shares
issued 109,448 105,720
Additional paid-in capital 20,285,348 18,887,886
Accumulated deficit (16,046,349) (14,426,536)
4,348,447 4,567,070
Less cost of 39,341 and 37,341 shares of
treasury stock 127,852 117,602
---------- ----------
Total stockholders' equity 4,220,595 4,449,468
---------- ----------
Commitment (note 8)
$ 7,598,566 7,678,599
See accompanying notes to consolidated financial statements.
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UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Quarter ended April 30, Six Months Ended April 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenue:
Contract services (note 7) $ 329,985 1,248,963 518,664 2,091,593
Product sales 163,260 282,832 278,893 468,421
--------- --------- --------- ---------
493,245 1,531,795 797,557 2,560,014
--------- --------- --------- ---------
Operating costs and expenses:
Costs of revenue 419,096 838,215 763,261 1,676,059
Research and development 460,144 448,968 747,091 819,210
General and administrative 326,907 270,999 645,686 511,702
Depreciation and amortization 90,482 86,174 183,368 165,242
Royalty 2,414 7,592 3,831 12,680
--------- --------- --------- ---------
1,299,043 1,651,948 2,343,237 3,184,893
--------- --------- --------- ---------
Operating loss (805,798) (120,153) (1,545,680) (624,879)
Other income (expense):
Minority interest share of earnings of
consolidated subsidiary (17,189) (16,235) (34,336) (32,838)
Interest income 28,427 4,586 54,130 15,252
Interest expense (54,293) (22,756) (109,867) (42,832)
Equity in loss of Taiwan joint venture (12,456) (2,748) (21,341) (5,618)
Other 36,866 7,624 37,281 9,373
--------- --------- --------- ---------
Net loss $ (824,443) (149,682) (1,619,813) (681,542)
========= ========= ========= =========
Net loss per common share (note 6) $ (.08) (.02) (.15) (.07)
=== === === ===
Weighted average number of shares of common
stock outstanding (note 6) 10,891,490 9,927,361 10,749,078 9,926,440
========== ========= ========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
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UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
Quarter Ended April 30,
1996 1995
Cash flows from operating activities:
Net loss $ (1,619,813) (681,542)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 183,368 165,242
Minority interest share of earnings of
consolidated subsidiary, net of cash
distributions 664 (836)
Noncash compensation expense for common stock
issued for services 29,492 12,500
Equity in loss of Taiwan joint venture 21,341 2,046
Gain on sale of assets (37,274) (3,534)
Change in operating assets and liabilities:
Accounts receivable and costs and estimated
earnings in excess of billings on
uncompleted contracts 92,533 (474,704)
Inventories (15,546) 66,144
Prepaid expenses and other current assets (77,897) (79,563)
Billings in excess of costs and estimated
earnings on uncompleted contracts - 114,993
Accounts payable and other current
liabilities 187,870 181,277
Other - 356
--------- ---------
Net cash used by operating activities (1,235,262) (697,621)
Cash used by investing activities:
Acquisition of property and equipment (37,283) (283,895)
Increase in patent and trademark costs (55,653) (20,039)
Proceeds from sale of other assets 51,563 17,110
Proceeds from sale of property and equipment 3,394 -
--------- --------
Net cash used by investing activities $ (37,979) (286,824)
--------- ---------
(Continued)
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UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
Quarter Ended April 30,
1996 1995
Cash flows provided (used) by financing activities:
Proceeds from borrowings - 112,337
Repayment of debt (39,694) (130,688)
Proceeds from sale of common stock, net 1,307,619 -
Issuance of common stock upon exercise of
employee options 36,984 10,942
Issuance of common stock under employee stock
purchase plan 16,845 2,400
--------- ---------
Net cash provided (used) by financing
activities 1,321,754 (5,009)
--------- ---------
Increase (decrease) in cash and cash
equivalents 48,513 (989,454)
Cash and cash equivalents at beginning of period 1,796,392 1,620,115
--------- ---------
Cash and cash equivalents at end of period $ 1,844,905 630,661
========= =========
Supplemental disclosures to the consolidated statements of cash flows:
Cash paid for interest was $40,873 and $42,833 for the six months ended April
30, 1996 and 1995, respectively.
In the second quarter of fiscal 1995, the Company financed its additional
investment in the Taiwan joint venture through the issuance of a note payable in
the amount of $1,403,493.
In accordance with the provisions of the Company's stock option plans, the
Company accepts as payment of the exercise price, shares of the Company's common
stock held by the option holder prior to the date of the option exercise. The
shares received are recorded at cost as treasury stock. During the six months
ended April 30, 1996, the Company issued 13,666 shares of common stock with an
exercise price of $10,250 for which the Company received 2,000 shares of common
stock.
See accompanying notes to Consolidated Financial Statements.
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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 1995 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:
April 30, 1996 October 31, 1995
(unaudited)
Raw materials $ 274,441 247,225
Work in process 72,960 31,525
Finished products 72,846 125,951
------- -------
$ 420,247 404,701
======= =======
(4) The following table summarizes the composition of the Company's other
current liabilities:
April 30, 1996 October 31, 1995
(unaudited)
Accrued subcontractor expense $ - 174,781
Accrued interest 161,658 93,698
Accrued legal and accounting fees 30,457 48,611
Accrued payroll, consulting,
personal property and real
estate taxes 37,316 44,882
Unearned revenue 79,095 22,096
Other 106,311 80,118
------- -------
$ 414,837 464,186
======= =======
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UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
(5) The Company has reserved 4,104,000 shares of common stock for key
employees, consultants, and key suppliers under its Incentive and
Non-Qualified Option plans. Options became exercisable as determined at
the date of grant by the Board of Directors and expire within ten years
from the date of grant. The maximum number of shares that may be granted
to any eligible employee during the term of the Plan is 500,000 shares.
The options require holders to abide by certain Company policies on the
trading of the Company's common stock.
The following table summarizes activity under the plans:
Shares Under Per Share
Option Exercise Price
Outstanding at October 31
1994 1,914,533 $ .50 - 8.13
Granted 100,000 5.00
Exercised (64,786) .50 - 3.50
Forfeited (97,515) 3.50 - 6.88
---------
Outstanding at October 31,
1995 1,852,232 .50 - 8.13
Granted 540,000 4.13 - 4.75
Exercised (50,572) .50 - 3.50
Forfeited (302,725) 3.50 - 8.13
---------
Outstanding at April 30, 1996 2,038,935 .50 - 8.13
=========
Exercisable at April 30, 1996 1,153,640
In February 1994, the Company's Board of Directors ratified a Stock Option
Plan for Non-Employee Directors pursuant to which Directors may elect to
receive options in lieu of cash compensation for their services as
directors. The Company has reserved 250,000 shares of common stock for
issuance pursuant to the exercise of options under the Plan. The options
vest ratably over a three-year period beginning one year from the date of
grant and are exercisable for ten 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 activity under the plan:
Shares Under Per Share
Option Exercise Price
Outstanding at October 31, 1994 48,000 $ 5.38 - 6.25
Granted 61,333 5.00 - 5.13
-------
Outstanding at October 31, 1995 109,333 5.00 - 6.25
Granted 32,000 4.38
-------
Outstanding at April 30, 1996 141,333 4.38 - 6.25
=======
Exercisable at April 30, 1996 36,444
-8-
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
In connection with the original issuance of certain subordinated
convertible term notes to Advent and Techno, the Company granted Advent
and Techno warrants to acquire 790,000 shares of the Company's common
stock at 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 expire August 1997, and 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
exercise price. All of these warrants remain outstanding at April 30,
1996.
The Company has reserved 300,000 shares of common stock for issuance
pursuant to a warrant agreement with an investment banking company. The
warrants are exercisable at a price of $6.00 per share and expire in
January 1999. The warrants contain transfer restrictions and provisions
for the adjustment of the exercise price and the number and type of
securities issuable upon exercise based on the occurrence of certain
events. All of these warrants remain outstanding at April 30, 1996.
In connection with the 1995 common stock issuance, the placement agent was
issued warrants expiring July 1998, to acquire 150,000 shares of the
Company's common stock at $5.75 per share. All of these warrants remain
outstanding at April 30, 1996.
In connection with the 1996 common stock issuance, the placement agent was
issued warrants expiring February 1999, to acquire 50,000 shares of the
Company's common stock at $4.75 per share. All of these warrants remain
outstanding at April 30, 1996.
(6) Loss per common share amounts are based on the weighted average number of
common shares outstanding during the second quarter and first half 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.
(7) The Company has historically derived significant revenue from contract
services from a few key customers. For the quarter and six months ended
April 30, 1996, the Company derived revenue of $284,738 and $410,028
representing 86 percent and 79 percent of contract services revenue from
three customers, respectively. For the quarter and six months ended April
30, 1995, the Company derived revenue of $1,113,914 and $1,978,251
representing 89 percent and 95 percent of contract services revenue from
four and five customers, respectively.
(8) The Company has entered into employment agreements with three of its
officers which expire December 31, 1996. The aggregate annual future
compensation under these agreements from April 30, 1996, through the
expiration date is $268,505.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Except for historical information, the discussion in this report contains
forwardlooking statements that involve risks and uncertainties. The Company
wishes to caution readers that the Company's actual results could differ
materially from those discussed in this report. The Company has filed a
Registration Statement on Form S-3 with the Securities and Exchange Commission
which contains additional information concerning important factors that could
cause the Company's actual results to differ materially from the discussion in
this report.
Financial Condition
During the second quarter the Company continued to invest in manufacturing
engineering activities directed toward the commercialization of its proprietary
products in existing and developing markets for low voltage (24v to 48v)
applications. Principal among these activities are the development of
manufacturing processes for high efficiency motors for application in Invacare
Corporation's family of motorized wheelchair products; production engineering of
the electric motor scooter power system for Kwang Yang Motor Co., Ltd.(KYMCO);
development of a 10HP low voltage traction system for application in small
vehicle markets; and the development of a vehicle transaxle in collaboration
with Funk Manufacturing Co., a subsidiary of Deere and Company, which the
company intends to offer for over- the- road vehicle applications together with
its 53kW Caliber EV high efficiency traction motor and microprocessor based
controller. As a result of these activities, which were primarily internally
funded, research and development expense rose 60 percent to $460,144 during the
second quarter from the first quarter expenditure level of $286,947.
The foregoing preproduction investments, which are charged to expense as
incurred, resulted in higher levels of operating losses for the quarter. Net
loss for the second quarter was $824,443 or $0.08 per share compared to a net
loss of $795,370 or $0.07 per share for the first quarter and a net loss of
$149,682 or $0.02 per share for the second quarter of fiscal 1995. Operations
for the first half of fiscal 1996 resulted in a net loss of $1,619,813 or $0.15
per share compared to a net loss of $681,542 or $0.07 per share for the
comparable prior year period.
Operations for the quarter and six months ended April 30, 1996 were financed
through the sale of 181,000 shares of common stock pursuant to Regulation S to
overseas mutual funds during the second quarter and from existing cash
resources. Net proceeds from the offering amounted to $807,619.
The Company intends to continue to invest similar amounts of cash during the
second half of fiscal 1996 toward the commercialization of its proprietary
technology, including the launch of expanded manufacturing operations at its
Golden, Colorado facility. The Company, however, does not currently possess the
financial resources to fully fund these activities. See "Liquidity and Capital
Resources" below.
Cash balances at April 30, 1996 rose $48,513 to $2,164,012 from the fiscal 1995
year end level of $2,115,499 primarily due to the private placement sale of the
Company's common stock during the first half of fiscal 1996.
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<PAGE>
Accounts receivable rose $46,029 to $383,878 at April 30, 1996, and costs and
estimated earnings in excess of billings on uncompleted contracts declined
$138,562 from the fiscal 1995 year end level due to progress billings under
certain development contracts during the period.
Inventories rose $15,546 during the first half of fiscal 1996, reflecting higher
levels of raw material and work in process inventories which were offset, in
part, by lower levels of finished goods inventory.
Prepaid expenses rose to $100,304 at the end of the first half compared to
$35,397 at the beginning of the fiscal year due to the prepayment of annual
premiums on the Company's insurance coverages which are amortized ratably over
the fiscal year.
The Company invested $37,283 for the acquisition of machinery and equipment and
$55,653 for the prosecution of patent and trademark applications covering its
proprietary technologies during the first half of fiscal 1996. Management
expects that the level of capital expenditures for machinery and equipment will
rise substantially during the second half of fiscal 1996 coincident with the
Company's plan to establish an expanded manufacturing capability at its Golden,
Colorado facility.
Accounts payable rose to $321,078 at April 30, 1996, from $83,859 at October 31,
1995, reflecting higher levels of purchased parts for raw material and work in
process inventories.
Other current liabilities declined $49,349 to $414,837 at the end of the fiscal
1996 first half, primarily due to the payment of subcontractor costs during the
period which was partially offset by increases in accrued interest on the note
payable to KYMCO financing the Company's investment in Taiwan UQM Electric Co.,
Ltd., and higher levels of deposits from customers for the purchase of UQM
products.
Long-term debt declined $36,396 during the six months ended April 30, 1996, to
$770,607 due to scheduled principal payments on the Company's mortgage debt for
its Golden, Colorado facility and scheduled collections on a lease contract held
by UQM Leasing, Inc.
Common stock and additional paid-in capital increased to $109,448 and
$20,285,348 at the end of the fiscal 1996 first half, respectively, compared to
$105,720 and $18,887,886 at the end of fiscal 1995, respectively. The increase
is attributable to the sale of common stock to Invacare Corporation in the first
quarter; the sale of common stock to overseas institutional investors in an
offering under Regulation S; and the purchase of common stock upon the exercise
of stock options by the Company's employees and consultants.
Results of Operations
Operations for the second quarter of fiscal 1996 resulted in a net loss of
$824,443 or $0.08 per share on total revenue of $493,245 compared to a net loss
of $149,682 or $0.02 per share on total revenue of $1,531,795 for the comparable
prior year quarter. Operations for the first half of fiscal 1996 resulted in a
net loss of $1,619,813 or $0.15 per share on total revenue of $797,557 compared
to a net loss of $681,542 or $0.07 per share on total revenue of $2,560,014 for
the first half of fiscal 1995.
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<PAGE>
Contract services revenue for the second quarter and first half of fiscal 1996
declined $918,978 or 74 percent and $1,572,929 or 75 percent, respectively. The
decrease is attributable to a reduction in the scope of the Company's contract
with the U.S. Department of Energy (DOE) and Ford Motor Company and the
reassignment of the Company's personnel to internally-funded product launch
activities during the first half of fiscal 1996.
Product sales for the second quarter and first half of fiscal 1996 declined
$119,572 or 42 percent and $189,528 or 40 percent, respectively, reflecting
lower sales levels of high voltage drive systems.
Gross profit margins declined to 15 percent for the second quarter and 4 percent
for the first half of fiscal 1996 from 45 percent and 35 percent for the
comparable prior year periods reflecting cost sharing on certain sponsored
development contracts and higher material costs on purchased parts used in the
Company's products. Gross profit margins for the first half of fiscal 1996 were
additionally impacted by the write down of certain raw material component costs
to current market values during the fiscal 1996 first quarter.
Research and development expenditures rose to $460,144 during the second quarter
and $747,091 for the first half of fiscal 1996 compared to $448,968 and $819,210
during the comparable prior year periods, respectively. The fiscal 1996
expenditures were primarily attributable to internally funded engineering
activities associated with the launch of products for Invacare Corporation and
KYMCO and vehicle integration activities for the Ethos 3 EV demonstration
vehicle. Substantially all of the research and development expenditures during
the second quarter and first half of the prior fiscal year were attributable to
cost sharing investments under the contract with the DOE and Ford Motor Company.
General and administrative costs rose to $326,907 for the second quarter versus
$270,999 for the comparable prior year quarter and to $645,686 for the first
half versus $511,702 for the comparable prior year period. The increase is
primarily attributable to an arbitration award compensating a consultant for
unauthorized work performed on the Ford/DOE program for which the company was
unable to seek reimbursement under the contract. Higher levels of business
development activities and the initiation of an investor communications program,
also contributed to the increase.
Depreciation and amortization expense increased to $90,482 and $183,368 for the
quarter and six months ended April 30, 1996, compared to $86,174 and $165,242
for the comparable prior year periods, reflecting generally higher levels of
depreciable assets and amortizable patents and trademark expenditures in fiscal
1996.
Interest income for the second quarter and first half of fiscal 1996 rose from
the comparable fiscal 1995 levels due to higher balances of cash available for
investment during the fiscal 1996 period.
Interest expense rose $31,537 and $67,035 for the quarter and six months ended
April 30, 1996, compared to the prior year, reflecting interest accrual on the
Company's note payable to its Taiwan joint venture partner.
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<PAGE>
Liquidity and Capital Resources
The Company's cash balances and liquidity were adequate to meet operating
requirements throughout the first half of fiscal 1996.
During the first quarter of fiscal 1996 the Company sold to Invacare Corporation
129,032 shares of the Company's common stock at a price of $3.88 per share. Net
proceeds to the Company were $500,000. Contingent upon the achievement of
certain conditions, Invacare has agreed to make an additional investment in the
Company through the purchase of common stock at the then prevailing market
price. The additional investment, if completed, will be in the approximate
amount of 50 percent of the mutually agreed capital costs for the manufacture of
products to be sold to Invacare. The proceeds from the additional investment by
Invacare will be restricted to such mutually agreed costs. The Company believes
that the second investment by Invacare will be completed during the third
quarter at which time the Company intends to dedicate approximately $1 million
of its existing cash resources to meet its obligations with respect to the
Invacare product launch.
During the second quarter of fiscal 1996 the Company completed the sale of
181,000 shares of its common stock with two institutional funds in Italy in an
offering under Regulation S of the Securities and Exchange Act. The common stock
was sold at the market price on the date of purchase acceptance and averaged
$4.69 per common share. Net proceeds to the Company after deducting the expenses
of the offering was $807,619.
During fiscal 1995, the Company, KYMCO and Turn-Luckily Technology Co., Ltd.
(TLT) entered into a Waiver and Option Agreement whereby KYMCO agreed to fund
Unique's capital call obligations pursuant to the Joint Venture Agreement giving
Unique the right to purchase a 39 percent equity in Taiwan UQM Electric Co.,
Ltd. (Taiwan UQM). Pursuant to the Agreement, KYMCO contributed $1,403,493 to
Taiwan UQM and acquired ownership of the shares of Taiwan UQM issued in exchange
therefore. Further, the Agreement granted Unique the option to repurchase these
shares from KYMCO at any time prior to May 31, 1996, for $1,403,493 plus
interest at 10 percent per annum. The purchase of the shares by KYMCO has been
accounted for as a financing arrangement. Accordingly, for financial reporting
purposes the Company has recorded an investment in joint venture equal to 39
percent of the current net assets of Taiwan UQM and a note payable to Taiwan
joint venture participant equal to the amount payable to KYMCO under the Waiver
and Option Agreement excluding accrued interest thereon. On May 6, 1996, the
Company, KYMCO and TLT completed an amendment to the Waiver and Option
Agreement. Under the amendment, the Company's option to repurchase the shares
was extended from May 31, 1996, to October 21, 1996, and certain provisions
relating to the minimum number of shares subject to repurchase by the Company
were eliminated. The Company does not currently possess the financial resources
to meet its obligation under the amended Waiver and Option Agreement, although
the Company intends to secure capital to meet this obligation should such
capital be available on terms acceptable to the Company. In the event the
Company is unable to secure the capital necessary to meet its existing
obligation under the amended Waiver and Option Agreement, the Company may seek
an additional extension of time to preserve its ownership interest in Taiwan
UQM. However, there can be no assurance that such an extension can be obtained,
or if obtained that the Company will then possess the financial resources to
maintain its ownership interest in Taiwan UQM at 39 percent. Should the Company
not meet its obligation under the Joint Venture Agreement and the amended Waiver
and Option Agreement, Taiwan UQM would nevertheless be obligated to obtain a
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<PAGE>
royalty bearing license from the Company in order to gain manufacturing rights
to the Company's proprietary technologies.
The Company may require additional capital beyond that discussed above to
complete its 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 business plan. The Company plans to continue to pursue the
commercialization of its proprietary technologies directly, if financing can be
obtained, or indirectly by means of strategic alliances or licensing
arrangements with leading companies in the field, or a combination of both.
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<PAGE>
PART II - OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of the Shareholders of Unique Mobility, Inc. was held on
March 20, 1996. The following is a summary of the matters submitted to a vote of
security holders and the results of the voting thereon:
Proposal 1: Election of Directors
Withhold
For Authority
Ray A. Geddes 8,150,422 125,263
Michel A. Bell 8,095,242 180,443
Frank Hodsoll 8,151,422 124,263
William G. Rankin 8,200,968 74,717
H. J. Young 8,176,409 99,276
J. B. Richey 8,203,422 72,263
Proposal 2: Proposal to ratify the appointment of KPMG Peat Marwick LLP as
the Independent Auditors of the Company.
For Against Abstain
8,213,718 44,226 17,741
Total votable shares: 10,678,831
Total shares represented in person and by proxy: 8,275,685
Percentage of votable shares voted: 77.5%
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Cooperation Agreement between Unique Mobility, Inc. and Northrop
Grumman Corporation.
10.2 Amendment to the Waiver and Option Agreement between Unique
Mobility, Inc., Kwang Yang Motor Co., Ltd. and Turn-Luckily
Technology Co., Ltd.
10.3 Amendment to the Stock Purchase Agreement by and among Unique
Mobility, Inc. and Invacare Corporation.
27 Financial Data Schedule
(b) Reports on Form 8-K
Cooperation Agreement with Northrop Grumman Corporation dated March 19,
1996.
-15-
<PAGE>
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: June 12, 1996 By:/s/ Donald A. French
Donald A. French
Treasurer and Controller
(Principal Financial and
Accounting Officer)
COOPERATION AGREEMENT
AGREEMENT dated March, 1996, between the parties, Unique Mobility, Inc.,
("UMI") a corporation organized and incorporated under the laws of the State of
Colorado and Northrop Grumman Corporation ("Northrop Grumman"), a corporation
organized and incorporated under the laws of the State of Delaware.
WHEREAS, UMI has developed Brushless DC (PM) motor and power electronics
technology and other know-how relating to vehicle propulsion systems used or
useful in electric and hybrid electric vehicles; and
WHEREAS, Northrop Grumman has developed induction motor and power
electronics technology and other know-how relating to vehicle propulsion systems
and has focused on achieving volume production of induction motor drive
technology; and
NOW, THEREFORE, in consideration of the foregoing, and in express reliance
on the mutual promises and covenants contained herein, the Parties hereby agree
to use best efforts as follows:
Section 1 - Marketing. The parties agree to join each other in defining
opportunities for their respective vehicle propulsion systems in Electric and
Hybrid Vehicle markets and for meeting the Northrop Grumman customer needs in
the lower power ranges.
Section 2 - Production Readiness. The parties agree to initiate with limited
available funding a development program for the transition to production of the
UMI Brushless DC technology.
The parties also agree to pursue and apply additional funding to accelerate the
transition to production. Both parties recognize that a firm production order
may be required to complete production readiness.
Section 3 - Production. In the event UMI and Northrop Grumman decide that any
Product is ready for production, then the parties will negotiate, in good faith,
a definitive agreement covering the nature and structure of the business
arrangement, as well as the details of such production program which shall
include a description of the work to be done, the budget therefor including the
respective financial commitments of the parties and the time schedule.
Section 4 - Participation of the Parties. Northrop Grumman agrees to lead the
transition to production effort that will make the Products ready for
production. The parties agree to provide each other with all relevant
information concerning design, configuration, interface definition and physical
requirements of the Products. Both parties agree to participate in proposal
preparation for any project to pursue the funding for making the Products
production ready. If such funding becomes available, the parties will allocate
the proceeds between them on such basis as may be agreed at the time the funding
proposal is prepared.
<PAGE>
Section S - Technology Ownership.
A. Each party shall own exclusively all technical information, technical data,
design documentation, hardware and all intellectual property rights generated by
it, whether prior to, in parallel with, or pursuant to this project.
B. All technical information, technical data, design documentation and technical
know how disclosed by either Northrop Grumman or UMI during the course of this
Agreement shall be held in confidence in accordance with the terms of the
Proprietary Information Exchange Agreement (PIEA) attached (Attachment A). The
parties agree that the PIEA shall remain in effect for the term of this
Agreement and the protection responsibility for the proprietary information will
continue for five years after the term of this Agreement.
C. All items of hardware transferred between Northrop Grumman and UMI will
remain the property of provider and will be furnished pursuant to bailment terms
attached (Attachment B).
Section 6 - Notices. Wherever under this Agreement one party is required or
permitted to give notice to the others, such notice will be deemed given when
delivered in hand, when telecopied or faxed and receipt confirmed, when sent by
Federal Express or similar overnight courier service, or when mailed by United
States mail, registered or certified mail, return receipt requested, postage
prepaid, and sent to the following points of contact:
In the case of UMI: Unique Mobility. Inc.
425 Corporate Circle
Golden. Colorado 80401
Attn: Ray A. Geddes
In the case of Northrop: Northrop Grumman Corporation
P.O. Box 17320 MS B420
Baltimore, MD 21203
Attn: Ted Lesster MSB400
Section 7 - Entire Agreement. The terms and conditions herein constitute the
entire agreement and understanding of the parties and shall supersede all
communications, negotiations, arrangements and agreements, either oral or
written, with respect to the subject matter hereof. No amendments to or
modifications of this Agreement shall be effective unless reduced to writing and
executed by the Parties hereto. The failure of any party to enforce any term
hereof shall not be deemed a waiver of any rights contained herein.
Section 8 - Limitation of Liability. Notwithstanding any language in this
Agreement to the contrary, none of the parties shall be liable to the other of
the parties for any incidental,
<PAGE>
consequential, indirect or special damages whatsoever, including without
limitation loss of use or lost profits, arising out of or associated with the
performance of this Agreement.
Section 9 - Term and Termination. The Term of this agreement is three years from
the date of the last to sign below. The parties may terminate this Agreement by
providing the other parties with thirty day prior written notice of its intent
to terminate provided in accordance with Section 6 above.
Section 10 - Governing Law. This Agreement shall be governed and interpreted in
accordance with the laws of the State of Colorado.
Section 11- Definitions. The following definitions shall apply to this
Agreement:
A. Technical Information shall mean any technical information, data, drawings,
plans, specifications, processes, software and know how relating to the
Brushless DC Motors and Power Electronics.
B. Intellectual Property Rights. Intellectual Property Rights means any of the
legally enforceable rights, world-wide, under statute or common law, or pursuant
to nondisclosure obligations between the Parties for property for inventive
subject matter, original works of authorship, and includes (without limitation)
patents, copyrights, trade secrets, trademarks, and mask works.
C. Products. Products shall mean Brushless DC motors, Brushless DC alternators
and related electronic products to control motor speed and torque for
application to electrically propelled on-road vehicles having four or more
wheels.
NORTHROP GRUMMAN CORPORATION UNIQUE MOBILITY, INC.
By: /s/ J. J. Chambers By: /s/ /R. A. Geddes
Typed Name: J. J. Chambers Typed Name: R. A. Geddes
Title: Contracts Title: Chairman
Date: March 19,1996 Date: March 19.1996
<PAGE>
ATTACHMENT A
PROPRIETARY INFORMATION EXCHANGE AGREEMENT
This Agreement is entered into by and between Northrop Grumman Corporation, a
corporation organized and existing under the laws of Delaware, by and through
its Systems and Technology Division, having offices at Baltimore, Maryland
(hereinafter referred to as "Northrop") and Unique Mobility, Inc., a corporation
organized and existing under the laws of Colorado, having offices at Golden
(hereinafter referred to as "Unique").
Subject of Northrop information: Business plans and technical information
pertaining to Northrop Electric Propulsion System including the electric motor,
controller, power converter and battery products.
Subject of Unique information: Business plans and technical information
pertaining to Unique Mobility products and technology concerning electric
motors, controllers, power converters and related devices.
Purpose of exchange: Discuss the possibility of a strategic partnership between
Northrop and Unique.
The parties hereto desire to exchange the information described above, and
considered by them to be proprietary, for the above-stated purpose. The party
furnishing the proprietary information will be referred to as the "Disclosing
Party" and the party receiving the proprietary information will be referred to
as the "Receiving Party". In order to provide for the protection of such
proprietary information from unauthorized use and disclosure, the parties hereby
agree that the disclosure of such information between them shall be subject to
the following terms and conditions:
1. Only that information disclosed in written form and identified by a marking
thereon as proprietary, or oral information which is identified as proprietary
at the time of disclosure and confirmed in writing within ten (10) days of its
disclosure, shall be considered proprietary and subject to this Agreement.
2. The exclusive points of contact with respect to the delivery and control of
proprietary information disclosed hereunder are designated by the parties as
follows:
Unique: Mr. Ray A. Geddes
Unique Mobilitv. Inc.
425 Corporate Circle
Golden. Colorado 80401
Northrop: Mr. L.E. Lesster
Northrop Grumman Corporation
P.O. Box 17320. MS B400
Baltimore. MD 21203
Either party may change its point of contact by written notice to the other.
3. Information identified and disclosed as provided in this Agreement shall be
held by the Receiving Party in confidence for a period of 5 year(s) from the
date of receipt. During such period, such information shall be used only for the
purpose stated above and shall not be disclosed to any third party. Neither
party shall be liable for disclosure pursuant to judicial action or government
regulation or requirement, provided that the originating party is given prompt
notice of such government or judicial action and is afforded an opportunity to
<PAGE>
respond prior to disclosure by the Receiving Party.
4. The parties shall have no obligation under this Agreement to hold information
in confidence which, although identified and disclosed as stated herein, has
been or is:
(a) developed by the Receiving Party independently and without the benefit
of information disclosed hereunder by the Disclosing Party;
(b) lawfully obtained by the Receiving Party from a third party without
restriction;
(c) publicly available without breach of this Agreement;
(d) disclosed without restriction by the Disclosing Party to a third party,
including the United States Government; or
(e) known to the Receiving Party prior to its receipt from the Disclosing
Party.
5. Each party shall use not less than the degree of care used to prevent
disclosure of its own proprietary information to prevent disclosure of
information received in accordance with this Agreement. In no event, however,
shall less than a reasonable standard of care be used.
6. All information received and identified in accordance with this Agreement
shall remain the property of the Disclosing Party and shall be returned upon
request. Nothing contained herein shall be construed as a right or license,
express or implied, under any patent copyright, or application therefor, of
either party by or to the other party.
7. Any U. S. Government classified information disclosed by one party to the
other shall be handled in accordance with the Department of Defense Industrial
Security Manual for Safeguarding Classified Information (DoD 5220.22-M) or the
National Industrial Security Program Operating Manual (NISPOM), their
supplements, and other applicable U. S. Government security regulations.
8. The Receiving Party represents and warrants that no technical data delivered
to it by the Disclosing Party shall be exported from the United States without
first complying with all requirements of the International Traffic in Arms
Regulations and the Export Administration Act, including the requirement for
obtaining any export license, if applicable. The Receiving Party shall first
obtain the written consent of the Disclosing Party prior to submitting any
request for authority to export any such technical data.
9. The terms and conditions herein constitute the entire agreement and
understanding of the parties and shall supersede all communications,
negotiations, arrangements and agreements, either oral or written, with respect
to the subject matter hereof. No amendments to or modifications of this
Agreement shall be effective unless reduced to writing and executed by the
Parties hereto. The failure of either party to enforce any term hereof shall not
be deemed a waiver of any rights contained herein.
10. The effective date of this Agreement shall be the date of the last signature
below. This Agreement shall expire one (1) year from the effective date hereof
unless extended in writing by the parties hereto. The obligations of the parties
contained in paragraph 3 above shall continue in effect notwithstanding the
expiration of this Agreement.
11. This Agreement shall be governed and interpreted in accordance with the laws
of the State of Maryland except its rules in regard to choice of laws.
<PAGE>
NORTHROP GRUMMAN CORPORATION UNIQUE MOBILITY, INC.
BY: /s/J. J. Chambers BY: /s/Ray A. Geddes
TYPED NAME: J.J. Chambers TYPED NAME: Ray A. Geddes
TITLE: Contracts TITLE: Chairman
DATE: March 30. 1996 DATE: March 30. 1996
AGREEMENT NO.:
<PAGE>
ATTACHMENT B
BAILMENT AGREEMENT
1. The Bailor will loan the Bailee , (herein called the "bailed property"
defined as property delivered or transferred without permanent transfer of
ownership) in support of the Project.
2. The bailed property is to be loaned to the Bailee by Bailor for a period of
five (5) years beginning on the date the bailed property is shipped to the
Bailee, address to be furnished to Northrop Grumman for shipment, and terminate
on the date the bailed property is received by the Bailor. The bailed property
is to be returned F.O.B. Baltimore, Maryland unless otherwise agreed by the
Parties.
3. These terms may be extended by mutual agreement of the parties hereto
4. Bailee will not use the bailed property for any purpose other than to
integrate and test in support of the Project.
5. Bailee will assign appropriately qualified personnel for the operation,
handling and maintenance of the bailed property.
6. THE BAILOR DISCLAIMS ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND ALL
WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE. In no event shall the Bailor be
liable in contract or tort (including negligence), strict liability or otherwise
for any indirect or incidental losses or other consequential, exemplary or
special damages. The maximum liability of the Bailor under this Agreement is
limited to $ .
7. Information of a proprietary nature concerning the bailed property will be
safeguarded by Bailee against disclosure thereof according to the terms of
Attachment A, Proprietary Information Exchange Agreement. In addition, Bailee
agrees not to reverse engineer the bailed property.
8. The Bailee assumes the risk of, and shall be responsible for, any loss or
damage to the bailed property provided under this Agreement while in Bailee's
possession or control, including during the transportation periods. Bailee
agrees to indemnify the Bailor for its costs or losses resulting from the
Bailee's use or possession of the bailed property. Bailee shall return the
bailed property in as good a condition as when received, except for reasonable
wear and tear thereof for the utilization of such bailed property in accordance
with the terms of this Agreement.
9. Neither the bailment term, nor any interest herein nor claim arising
hereunder shall be transferred by Bailee to any party or parties.
10. The laws of the State of Maryland, U.S.A. shall govern the terms of this
Agreement, except for its rules regarding choice of laws.
May 6, 1996
Kwang Yang Motor Co., Ltd.
35 Wan Hsign St. Sanmin Dist
Kaohsiung Taiwan, Republic of China
Turn-Luckily Technology Co., Inc.
5F, No. 93, Hsin Sheng S. Rd.
1st Section Taipei
Taiwan, Republic of China
Gentlemen:
This letter is to document the discussions between Unique Mobility, Inc.
(Unique), Kwang Yang Motor Co., Ltd. (KYMCO) and Turn Luckily Technology Co.,
Ltd. (TLT) regarding the amendment of the Waiver and Option Agreement amongst
the parties dated June 12, 1995.
Unique, KYMCO and TLT agree to amend the Waiver and Option Agreement as follows:
Paragraph 3 is hereby deleted in its entirety and replaced by the following
paragraph 3:
3. The parties further agree that on any two occasions prior to October 21,
1996, to the extent permitted under the laws of the Republic of China,
Unique may tender and KYMCO shall accept all or any portion of NT$37,830,000
(NT$39,000,000 - NT$1,170,000) together with interest expense (10% annual
rate) in exchange for which KYMCO agrees to transfer and Unique agrees to
receive a number of shares in Taiwan UQM to be determined as follows:
Amount of Money Tendered by Unique (excluding any interest, securities
transaction tax, security transaction income tax and other relevant fees
arising out of the share transaction which are due under this Agreement)
divided by the par value per share (NT$ 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.
For the purposes of calculating interest under this Agreement, "Interest Bearing
Shares" shall mean shares purchased from KYMCO by Unique pursuant to this
Agreement. 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,
<PAGE>
Kwang Yang Motor Co., Ltd.
Turn-Luckily Technology, Co., Ltd.
Page 2
May 6, 1996
to be a purchase of shares of the earliest purchase of shares by KYMCO, on
Unique's behalf for 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 all capital calls through December 31,
1995. 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.
Paragraph 5 is hereby deleted in its entirety and replaced by the following
paragraph 5:
5. The parties hereto agree that, prior to October 21, 1996: (1) if Unique
has not purchased 39 percent of the already issued 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 percent of the already issued shares prior to October 21,
1996, 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.
If the foregoing amendment is consistent with your understanding of our
agreement, please so acknowledge by signing where indicated below.
Very truly yours,
UNIQUE MOBILITY, INC. AGREED AND ACCEPTED:
/s/ Donald A. French
Donald A. French /s/ Kwang Yang Motor Co., Ltd.
Treasurer Kwang Yang Motor Co., Ltd.
cc: R. Geddes
/s/ Turn-Luckily Technology Co., Ltd.
Turn-Luckily Technology Co., Ltd.
March 6, 1996
Mr. Thomas R. Miklich
Chief Financial Officer
Invacare Corporation
899 Cleveland Street
Elyria, OH 44036-2125
Dear Tom:
Pursuant to our discussions, the Stock Purchase Agreement by and among Unique
Mobility, Inc. and Invacare Corporation dated December 7, 1995, is hereby
amended effective on the date of the agreement as follows:
Paragraph 5.1 entitled "Use of Proceeds" is amended to read as follows:
"Commencing on the Second Investment Date Unique shall use commercially
reasonable efforts to apply the proceeds of the purchase of the Additional
Shares to production, tooling, capital equipment and product launch for the
manufacture of products to be sold to Invacare pursuant to the Supply
Agreement."
If this letter accurately describes our agreement relative to the amendment of
the Stock Purchase Plan Agreement, please so indicate by executing this letter
below and returning it to me.
Very truly yours, Agreed and accepted:
UNIQUE MOBILITY, INC. INVACARE CORPORATION
/s/ Donald A. French /s/ Thomas R. Miklich
Treasurer Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS OF UNIQUE MOBILITY, INC. AND CONSOLIDATED
SUBSIDIARIES AS OF APRIL 30, 1996, AND THE CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> APR-30-1996
<CASH> 2,164,012
<SECURITIES> 0
<RECEIVABLES> 383,878
<ALLOWANCES> 0
<INVENTORY> 544,099
<CURRENT-ASSETS> 3,275,486
<PP&E> 3,834,537
<DEPRECIATION> 1,431,580
<TOTAL-ASSETS> 7,598,566
<CURRENT-LIABILITIES> 2,217,635
<BONDS> 770,607
<COMMON> 20,394,796
0
0
<OTHER-SE> (16,174,201)
<TOTAL-LIABILITY-AND-EQUITY> 7,598,566
<SALES> 278,893
<TOTAL-REVENUES> 797,557
<CGS> 763,261
<TOTAL-COSTS> 2,343,237
<OTHER-EXPENSES> (35,734)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 109,867
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,619,813)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,619,813)
<EPS-PRIMARY> (.15)
<EPS-DILUTED> (.15)
</TABLE>
