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
[ ] Transition Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 1997
Commission file number 1-10869
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 November 10, 1997 was
14,141,562.
PART I - FINANCIAL INFORMATION
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, March 31,
Assets 1997 1997
(unaudited)
Current assets:
Cash and cash equivalents $ 3,505,215 5,713,557
Accounts receivable (note 9) 252,597 389,314
Costs and estimated earnings in excess of
billings on uncompleted contracts (note 3) 810,391 191,885
Inventories (note 4) 353,347 425,391
Prepaid expenses 121,505 115,260
Other current assets 34,513 17,675
Total current assets 5,077,568 6,853,082
Property and equipment, at cost:
Land 335,500 335,500
Building 1,438,090 1,438,090
Molds 102,113 102,113
Transportation equipment 235,575 258,675
Machinery and equipment 2,160,610 1,963,146
4,271,888 4,097,524
Less accumulated depreciation (1,934,226) (1,764,288)
Net property and equipment 2,337,662 2,333,236
Investment in Taiwan joint venture (note 5) 2,548,308 2,677,730
Other investments (note 5) 1,000,000 -
Patent and trademark costs, net of accumulated
amortization of $53,216 and $45,551 608,386 502,297
Other assets 1,714 4,354
$ 11,573,638 12,370,699
(Continued)
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
September 30, March 31,
Liabilities and Stockholders' Equity 1997 1997
(unaudited)
Current liabilities:
Accounts payable $ 222,950 169,403
Note payable to Taiwan joint venture - 1,345,285
Other current liabilities (note 6) 285,611 459,223
Current portion of long-term debt 47,322 45,180
Billings in excess of costs and estimated earnings
on uncompleted contracts (note 3) 34,751 659,807
Total current liabilities 590,634 2,678,898
Long-term debt, less current portion 702,112 726,218
Total liabilities 1,292,746 3,405,116
Minority interest in consolidated subsidiary 390,229 390,784
Stockholders' equity (note 7):
Common stock, $.01 par value, 50,000,000 shares
authorized; 14,011,152 and 13,042,964 shares issued 140,111 130,430
Additional paid-in capital 29,332,809 27,094,170
Accumulated deficit (19,386,812) (18,532,364)
Notes receivable from officers (63,665) (83,646)
Cumulative translation adjustment (131,780) (33,791)
Total stockholders' equity 9,890,663 8,574,799
Commitments (note 10)
$ 11,573,638 12,370,699
See accompanying notes to consolidated financial statements.
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Quarter Ended September 30,Six Months Ended September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenue:
Contract services (note 9) $ 673,759 539,193 1,703,370 983,474
Product sales 118,870 184,081 346,421 375,387
792,629 723,274 2,049,791 1,358,861
Operating costs and expenses:
Cost of contract services 708,279 353,762 1,578,270 672,588
Cost of product sales 98,356 138,683 266,138 313,381
Research and development 167,899 484,366 256,737 880,488
General and administrative 371,551 265,850 688,311 531,654
Depreciation and amortization 52,869 55,096 104,593 108,048
Royalty (2,231) 3,470 3,805 9,028
1,396,723 1,301,227 2,897,854 2,515,187
Operating loss (604,094) (577,953) (848,063) (1,156,326)
Other income (expense):
Interest income 46,296 26,856 97,969 52,826
Interest expense (17,735) (55,489) (41,814) (110,101)
Equity in loss of Taiwan joint venture (note 5) (16,905) (13,643) (31,433) (23,282)
Minority interest share of earnings of
consolidated subsidiary (16,671) (17,878) (33,119) (35,079)
Other 10 4,006 2,012 4,363
(5,005) (56,148) (6,385) (111,273)
Net loss $ (609,099) (634,101) (854,448) (1,267,599)
Net loss per common share $ (.04) (.05) (.06) (.11)
Weighted average number of shares of common
stock outstanding (note 8) 13,701,823 11,246,061 13,393,582 11,155,189
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
Six Months Ended September 30,
1997 1996
Cash flows used by operating activities:
Net loss $ (854,448) (1,267,599)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation and amortization 180,243 189,892
Minority interest share of earnings of
consolidated subsidiary 33,119 35,079
Noncash compensation expense for common stock
issued for services 38,520 21,925
Equity in loss of Taiwan joint venture 31,433 23,282
Loss (Gain) on sale of property and equipment 23,100 (350)
Change in operating assets and liabilities:
Accounts receivable and costs and estimated
earnings in excess of billings on
uncompleted contracts (481,789) (62,660)
Inventories 72,044 (8,283)
Prepaid expenses and other current assets (23,083) 31,728
Accounts payable and other current liabilities(120,065) 147,889
Billings in excess of costs and estimated
earnings on uncompleted contracts (625,056) (73,952)
Net cash used by operating activities (1,725,982) (963,049)
Cash provided by (used by) investing activities:
Acquisition of property and equipment (197,464) (149,287)
Increase in patent and trademark costs (113,754) (42,499)
Investment in Taiwan joint venture (1,345,285) -
Proceeds from sale of assets - 350
Proceeds from sale of certificates of deposit
and other investments - 319,107
Net cash provided by (used by)
investing activities $(1,656,503) 127,671
(Continued)
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
(unaudited)
Six Months Ended September 30,
1997 1996
Cash provided by (used by) financing activities:
Repayment of debt $ (21,964) (46,302)
Repayment of notes receivable from officers 574 -
Proceeds from sale of common stock, net - 2,609,152
Issuance of common stock upon exercise of
employee and non-employee options 749,913 106,976
Issuance of common stock under employee stock
purchase plan 19,294 14,338
Issuance of common stock upon exercise of
underwriter warrants 460,000 -
Distributions paid to holders of minority interest (33,674) (33,673)
Net cash provided by financing
activities 1,174,143 2,650,491
Increase (decrease) in cash and cash equivalents (2,208,342) 1,815,113
Cash and cash equivalents at beginning of period 5,713,557 2,001,028
Cash and cash equivalents at end of period $ 3,505,215 3,816,141
Interest paid in cash during the period $ 74,939 41,753
Non-cash investing and financing transactions:
During the six months ended September 30, 1997 and 1996 the Company recorded
unrealized foreign currency losses related to its investment in Taiwan UQM in
the amount of $97,989 and $5,257, respectively.
In June, July and August, 1997, warrant holders exercised warrants to acquire
790,000 shares of common stock on a cashless exchange basis resulting in the
issuance of 556,276 shares of common stock based upon a fair market value of
the common stock on the dates of exchange of $6.50, $6.75, $7.13 and $7.25 per
share. See also note 7 to the Consolidated Financial Statements.
In June, 1997 the Company exchanged 200,000 shares of its common stock for
400,000 shares of EV Global Motors Company. The aggregate value of the shares
on the date of exchange was $1,000,000.
(Continued)
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
(unaudited)
In accordance with the provisions of the Company's stock option plans, the
Company accepts as payment of the exercise price mature shares of the Company's
common stock held by the option holder for a period of six months prior to the
date of the option exercise. The Company may, and has, accepted promissory notes
from officers of the Company in satisfaction of the exercise price of options
exercised. These notes receivable are recorded as a reduction of shareholder's
equity in the Consolidated Financial Statements. In addition, the Company, may
and has, accepted mature shares from officers. During the six months ended
September 30, 1997, the Company accepted 2,654 shares of common stock with an
aggregate value of $19,407 as payment against amounts due under promissory notes
from officers. The shares received thereunder were canceled pursuant to Colorado
law.
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 prior year amounts have been reclassified to conform to the
current period financial statement presentation.
(3) The estimated period to complete contracts in process ranged from one to
nine months at September 30, 1997, and from one to fifteen months at
March 31, 1997. The Company expects to collect substantially all related
accounts receivable and costs and estimated earnings in excess of
billings on uncompleted contracts within one year. Contracts in process
consist of the following:
September 30, 1997 March 31, 1997
(unaudited)
Costs incurred on uncompleted
contracts $ 2,412,568 3,158,704
Estimated earnings 463,570 490,407
2,876,138 3,649,111
Less billings to date (2,100,498) (4,117,033)
$ 775,640 (467,922)
Included in the accompanying
balance sheets as follows:
Costs and estimated earnings
in excess of billings on
uncompleted contracts $ 810,391 191,885
Billings in excess of costs
and estimated earnings on
uncompleted contracts (34,751) (659,807)
$ 775,640 (467,922)
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
(4) Inventories consist of:
September 30, 1997 March 31, 1997
(unaudited)
Raw materials $ 206,569 283,155
Work in process 37,973 69,460
Finished products 108,805 72,776
$ 353,347 425,391
(5) In January 1994, the Company, Kwang Yang Motor Co. Ltd. ("KYMCO"), and Turn
Luckily Technology Co. Ltd. ("TLT"), entered into a joint venture
agreement (the "Joint Venture Agreement") providing for the formation,
funding, and operation of Taiwan UQM Electric Co. Ltd., a company organized
under the laws of the Republic of China ("Taiwan UQM"). Taiwan UQM was
incorporated in April 1995. In 1994, the Company purchased 39 percent of
the initial equity capital of Taiwan UQM and agreed to invest 39 percent
of any additional capital calls. Pursuant to the Joint Venture Agreement,
the venturers are required to invest additional funds in Taiwan UQM, as
the board of directors of Taiwan UQM by unanimous vote determines to be
required.
In December 1996, Taiwan UQM made an additional capital call which was
payable in two equal installments due March 1, 1997, and June 1, 1997, with
interest accruing at 10% per annum. The Company's 39% share of the
December 1996 capital call was $1,345,285. Although 50% of the Company's
obligation was payable March 1, 1997, it was not paid until April 17, 1997,
at which time the entire obligation plus accrued interest was paid.
The Company's investment in Taiwan UQM is accounted for under the equity
method of accounting. Under this method, the investment originally recorded
at cost, is adjusted to recognize the Company's share of the net earnings
or losses of the joint venture. Income or loss recognition is limited to
the extent of the Company's investment in, advances to and guarantees of
the joint venture. Due to timing considerations, the Financial Position and
Results of Operations for the joint venture are included in the Company's
Consolidated Financial Statements on a three month time lag.
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
Summarized financial information for Taiwan UQM is as follows:
Financial Position June 30, 1997 December 31, 1996
Current assets $ 2,662,486 889,881
Noncurrent assets-
property and equipment 6,607,286 4,542,142
Total assets 9,269,772 5,432,023
Current liabilities 189,327 607,453
Noncurrent liabilities 2,546,321 -
Stockholders' equity 6,534,124 4,824,570
Total liabilities
and equity $ 9,269,772 5,432,023
Six Months Ended Six Months Ended
Results of Operations June 30, 1997 June 30, 1996
Revenue $ 65,408 5,254
Expenses (146,005) (64,951)
Net loss $ (80,597) (59,697)
In June, 1997, the Company entered into a strategic relationship with EV
Global Motors Company (EVG) to develop and market light electrical
transportation products. EVG purchased 1,151,925 shares of the Company's
common stock and warrants to acquire, on a cashless exercise basis an
additional 350,000 shares of common stock. Separately, the Company and EVG
completed a stock purchase transaction pursuant to which the Company
purchased 400,000 shares of EVG common stock in exchange for 200,000 shares
of the Company's common stock. The aggregate value of the shares on the
date of exchange was $1,000,000. The investment in EVG is accounted for
under the cost method of accounting. Under this method, the investment is
carried at acquistion cost and dividends received that are distributed
from net accumulated earnings of the investee are recognized as income.
Dividends received in excess of earnings of the investee are considered
a return of investment and are accounted for as a reduction of the carrying
value of the investment.
On July 31, 1997, EVG exercised warrants to acquire 175,000 shares of
common stock on a cashless basis resulting in the issuance of 116,053
shares of common stock based upon a fair market value of the common stock
on the date of exchange of $7.13 per share. On August 5, 1997, EVG
exercised warrants to acquire an additional 175,000 shares of common stock
on a cashless basis resulting in the issuance of 117,069 shares of common
stock based upon a fair market value of the common stock on the date of
exchange of $7.25 per share.
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
(6) Other current liabilities consist of:
September 30, 1997 March 31, 1997
(unaudited)
Accrued interest $ 6,064 39,218
Accrued legal and accounting fees 22,745 37,171
Accrued payroll, consulting,
personal property and real
estate taxes 74,663 67,207
Equipment purchase commitment 100,769 -
Refund of overpayment - 250,005
Other 81,370 65,622
$ 285,611 459,223
(7) The Company reserved 5,104,000 shares of common stock for key employees,
consultants and key supplier under its Incentive and Non-Qualified Option
Plans of 1992 and 1982. Under these option plans the exercise price of each
option is set at the fair market value of the common stock on the date of
grant and the maximum term of the options is 10 years from the date of
grant. Options granted to employees vest ratably over a three year period.
The maximum number of shares that may be granted to any eligible employee
during the term of the 1982 and 1992 plans is 1,000,000 shares. Options
granted under the Company's plans to employees require the option holder to
abide by certain Company policies which restrict their ability to sell the
underlying common stock.
The following table summarizes activity under the plans during the six
months ended September 30, 1997:
Shares Under Weighted Average
Option Exercise Price
Outstanding at March 31, 1997 2,451,456 $ 4.66
Exercised (154,224) $ 4.61
Forfeited (9,983) $ 3.59
Outstanding at September 30, 1997 2,287,249 $ 4.67
Exercisable at September 30, 1997 1,531,206 $ 5.21
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
The following table presents summarized information about stock options
outstanding at September 30, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
Weighted
Number Average Weighted Number Weighted
Range of Outstanding Remaining Average Exercisable Average
Exercise Prices at 9/30/97 Contractual Life Exercise Price at 9/30/97 Exercise Price
<C> <C> <C> <C> <C> <C>
$0.50 - 1.00 112,117 1.8 years $0.79 112,117 $0.79
2.25 - 3.31 623,256 8.8 years $3.08 134,000 $2.25
3.50 - 5.00 831,994 7.0 years $4.05 565,207 $4.02
5.38 - 8.13 719,882 6.3 years $7.38 719,882 $7.38
0.50 - 8.13 2,287,249 7.0 years $4.67 1,531,206 $5.21
</TABLE>
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 stock 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 10 years from the date of grant. Option
prices are equal to the fair market value of common shares at the date of
grant.
The following table presents summarized activity under the plan during the
six months ended September 30, 1997:
Weighted
Shares Under Average
Option Exercise Price
Outstanding at March 31, 1997 141,333 $ 5.22
Granted 64,000 $ 7.13
Exercised (12,000) $ 5.38
Outstanding at September 30, 1997 193,333 $ 5.85
Exercisable at September 30, 1997 87,556 $ 5.45
The following table presents summarized information about stock options
outstanding for non-employee directors:
<TABLE>
Options Outstanding Options Exercisable
Weighted
Number Average Weighted Number Weighted
Range of Outstanding Remaining Average Exercisable Average
Exercise Prices at 9/30/97 Contractual Life Exercise Price at 9/30/97 Exercise Price
<C> <C> <C> <C> <C> <C>
$4.38 - 6.00 97,333 7.8 years $4.88 55,556 $4.98
6.25 - 7.13 96,000 8.8 years $6.84 32,000 $6.25
193,333 8.3 years $5.85 87,556 $5.45
</TABLE>
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
Directors fees paid through the grant of stock options under the Stock
Option Plan for Non-employee Directors are recorded as compensation expense
based on the fair value of such services.
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, being the market value of the Company's stock at
the time of issuance or the market price of the common stock averaged over
the 30 trading days immediately preceding the date of exercise. The
warrants allowed 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 and expired in August 1997.
On June 19, 1997, warrants to acquire 395,000 shares of common stock were
exercised on a cashless basis resulting in the issuance of 249,154 shares
of common stock. On July 31, 1997, warrants to acquire 45,000 shares of
common stock were exercised on a cashless basis resulting in the issuance
of 29,000 shares of common stock. On August 5, 1997, warrants to acquire
175,000 shares of common stock were exercised on a cashless basis resulting
in the issuance of 116,053 shares of common stock. The remaining warrants
to acquire 175,000 shares of the Company's common stock were exercised on
a cashless basis on August 15, 1997, resulting in the issuance of 117,069
shares of common stock.
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 September 30, 1997.
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. During September 1997, warrants
to acquire 80,000 shares of the Company's common stock were exercised,
resulting in cash proceeds to the Company of $460,000. The remaining
warrants to acquire 70,000 shares of the Company's common stock remain
outstanding as of September 30, 1997.
In connection with the 1996 private placements, the placement agents were
issued warrants to acquire 50,000 shares of the Company's common stock at
$4.75 per share in February, 1996, 38,100 shares of the Company's common
stock at $5.00 per share in May, 1996, and 50,000 shares at $4.25 per share
in September, 1996. The warrants expire three years from the date of
issuance. All of these warrants remain outstanding at September 30, 1997.
In connection with the 1997 private placement, the placement agents were
issued warrants in February 1997, to acquire 225,625 shares of the Company's
stock at an exercise price of $3.50 per share and warrants to acquire 50,000
shares at an exercise price of $4.20 per share. The warrants expire three
years from the date of issuance. All of these warrants remain outstanding
at September 30, 1997.
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
(8) Net loss per common share amounts are based on the weighted average number
of common shares outstanding during the quarter and six months ended
September 30, 1997 and 1996. Outstanding common stock options and warrants
were not included in the computation because the effect of such inclusion
would be antidilutive.
(9) The Company has historically derived significant revenue from contract
services from a few key customers. The customers from which this revenue
has been derived and the percentage of this revenue as a percentage of total
contract services revenue is summarized as follows:
Quarter Ended Six Months Ended
September 30, September 30,
Customers: 1997 1996 1997 1996
Defense Advance Research
Project Agency $ 102,698 - $ 150,055 -
Deere & Company 117,903 - 207,194 -
Houston Metropolitan
Transit Authority 161,124 - 246,878 -
Kia Motors Corporation 87,905 - 512,786 -
Koyo Seiko Company 47,326 - 170,200 -
Asia Pacific
Technology Co., Ltd. 35,076 - 182,651 -
Ford Motor Company - 50,451 - 197,558
Hyundai Motor Company - 135,950 - 135,950
Kwang Yang Motor Co., Ltd. - 24,305 - 150,447
Pentastar Electronics, Inc. - 194,600 - 194,600
$ 552,032 405,306 1,469,764 678,555
Percentage of contract
services revenue 82% 75% 86% 69%
These customers, in total, also represented 53% and 85% of total accounts
receivable at September 30, 1997, and 1996, respectively.
Contract services revenue derived from contracts with agencies of the U.S.
Government and from sub-contracts with U.S. Government prime contractors,
certain portions of which are included in revenue from other key customers
above, totaled $280,320 and $350,346 for the quarter ended September 30,
1997 and 1996, respectively, and $413,941 and $468,717 for the six months
ended September 30, 1997, and 1996, respectively.
(10)The Company has entered into employment agreements with three of its
officers which expire December 31, 1999. The aggregate annual future
compensation under these agreements through the expiration date is $962,625.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This Report contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed in this report. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in this report and
any documents incorporated herein by reference, as well as, in the Company's
Registration Statement on Form S-3 (file no. 23843). These forward-looking
statements represent the Company's judgment as of the date of this Report.
The Company disclaims, however, any intent or obligation to update these
forward-looking statements.
Financial Condition
During the second quarter, the Company executed a license and supply agreement
to build electric motors for Invacare Corporation, the world's leading
manufacturer and distributor of home health care products and mobility products
for people with disabilities, including power wheelchairs. The motors will be
manufactured pursuant to a renewable two-year supply agreement with Unique Power
Products, Inc., a newly formed, wholly owned subsidiary of the Company.
Concurrent with the supply agreement, Unique granted Invacare an exclusive
worldwide license covering the commercial use of other Unique designed motors
for application in the general field of medical and health care products.
The Company's financial condition remained satisfactory throughout the six
months ended September 30, 1997. Cash and cash equivalents declined $2,208,342
to $3,505,215 at September 30, 1997 from $5,713,557 at March 31, 1997 due
principally to the application of cash to operations during the quarter of
$1,725,982 and the Company's additional equity investment in Taiwan UQM in the
amount of $1,345,285. Financing activities throughout the first half, consisting
primarily of issuances of common stock upon the exercise of stock options and
warrants, resulted in cash proceeds to the Company of $1,209,913. Working
capital ( the excess of current assets over current liabilities) rose from
$4,174,184 at March 31, 1997 to $4,486,934 at September 30, 1997.
Accounts receivable declined to $252,597 at September 30, 1997 from $389,314 at
March 31, 1997 reflecting collections of certain past due billings during the
second quarter. The accounts receivable balance at September 30, 1997,
represented approximately 37 days revenue compared to 35 days revenue at
June 30, 1997 and 69 days revenue at March 31, 1997.
Costs and estimated earnings on uncompleted contracts rose $618,506 to $810,391
at the end of the first half due to milestone billing arrangements on certain
commercial and government projects. Estimated earnings on contracts in process
were $463,570 at September 30, 1997 on total contracts in process of $2,876,138,
representing estimated average margins on contracts in process of 16.1 percent
compared to estimated earnings on contracts in process of $490,407 at March 31,
1997 on total contracts in process of $3,649,111, representing estimated average
margins on contracts in process of 13.4 percent at March 31, 1997. The increase
in estimated average margins is attributable to a greater proportion of
contracts with commercial customers and a decline in services applied to
"cost-share" type contracts with the U.S. Government.
Finished product inventories rose while raw materials and work in process
inventories declined resulting in an overall decline in inventory levels from
$425,391 at the beginning of the fiscal year to $353,347 at September 30, 1997.
The decrease in raw materials and work in process inventories is primarily
attributable to higher levels of production activities during the period
directed toward increased stocking of finished good inventories on hand for
resale.
During the second quarter and first half of fiscal 1998 the Company invested
$146,372 and $197,464, respectively, for the acquisition of property and
equipment and $54,101 and $113,754, respectively, in the prosecution of its
trademarks and patent applications throughout the world. Investments for the
acquisition of property and equipment and prosecution of trademark and patent
applications were $149,287 and $42,499, respectively, for the comparable six
month period last year. The increase in expenditures on property and equipment
during the first half of fiscal 1998 over that for the comparable prior year
period was primarily attributable to the construction of a new high power
dynamometer test laboratory at the Company's Golden, Colorado facility. The
increase in patent and trademark expenditures during the first half of fiscal
1998 over that for the comparable prior year period is primarily attributable
to prosecution of the mark "PowerPhase" throughout the world, ongoing patent
continuation fees and prosecution of foreign patent applications.
Investment in Taiwan joint venture declined to $2,548,308 at September 30, 1997
reflecting the Company's recording of its proportionate share of the operating
losses of Taiwan UQM and translation adjustments associated with the devaluation
of the NT dollar against the US dollar.
Other investments rose to $1,000,000 at September 30, 1997 due to the Company's
acquisition of 400,000 shares of the common stock of EVG in exchange for 200,000
shares of the Company's common stock in June.
Accounts payable rose to $222,950 at September 30, 1997 compared to $169,403 at
March 31, 1997. The increase is primarily attributable to increased component
purchases for sponsored development programs and the construction of a new
dynamometer test laboratory.
Note payable to Taiwan joint venture declined $1,345,285 reflecting the
Company's funding of its capital call obligation to Taiwan UQM in April.
Other current liabilities declined to $285,611 at September 30,1997 compared to
$459,223 at March 31, 1997. The decrease was primarily attributable to the
repayment during the first quarter of an inadvertent overpayment submitted by
a customer in the prior quarter ended March 31, 1997.
Billings in excess of costs and estimated earnings on uncompleted contracts
declined to $34,751 at September 30, 1997 from $659,807 at March 31, 1997
reflecting near completion of work on certain sponsored development programs
against advance payments deposited by the Customer with the Company.
Long-term debt declined $24,106 to $702,112 at September 30, 1997 due to
scheduled principal payments on the mortgage debt associated with the Company's
facility.
<PAGE>
Common stock and additional paid-in capital increased to $140,111 and
$29,332,809 at September 30, 1997, respectively, compared to $130,430 and
$27,094,170 at March 31, 1997. The increases were primarily due to the issuance
of common stock upon the exercise of stock options by employees and consultants
of the company ($749,913), the issuance of common stock under the Company's
employee stock purchase program ($19,294), the exercise of underwriter warrants
($460,000) and the issuance of common stock associated with the Company's
investment in EVG ($1,000,000).
Results of Operations
Operations for the quarter ended September 30, 1997, resulted in a net loss of
$609,099 or $0.04 per common share compared to a net loss of $634,101 or $0.05
per share for the comparable quarter last year. Operations for the six months
ended September 30, 1997, resulted in a net loss of $854,448 or $0.06 per common
share compared to a net loss of $1,267,599 or $0.11 per common share for the
comparable prior period last year.
Revenue derived from contract services was $673,759 for the fiscal 1998 second
quarter versus $539,193 for the comparable prior year quarter. Revenue derived
from contract services for the six months ended September 30, 1997 was
$1,703,370 compared to $983,474 for the comparable period last year. The
increases in contract services revenue are attributable to increased demand for
automotive systems projects.
Product sales declined to $118,870 during the second quarter of fiscal 1998 from
$184,081 for the comparable prior year quarter. The decrease is primarily
attributable to decreased sales of all products other than the Company's
PowerPhase system.
Gross profit margins for the second quarter of fiscal 1998 declined to a
negative 1.8 percent compared to 31.9 percent for the comparable quarter last
year. The decline in margins is attributable to cost overruns on several
automotive systems projects in the Company's contract services business.
Gross profit margins from contract services declined to negative 5.1 percent
for the second quarter of fiscal 1998 compared to 34.4 percent for the
comparable quarter last year. The decrease in contract services margins is
generally attributable to cost overruns on several automotive systems programs.
Gross profit margins on product sales declined to 17.3 percent during the second
quarter compared to 24.7 percent for the comparable prior year quarter. The
decline in product sales margins is attributable to lower margins on products
other than the PowerPhase System arising from smaller batch builds which tend
to have higher purchased component costs. Gross profit margins from contract
services for the six months ended September 30, 1997 declined to 7.3 percent
compared to 31.6 percent for the comparable period last year. The decrease is
primarily attributable to cost overruns on automotive systems programs. Gross
profit margins on product sales for the six months ended September 30, 1997
rose to 23.2 percent from 16.5 percent for the comparable period last year.
The increase is attributable to increased sales of the Company's PowerPhase
system.
Research and development expenditures during the second quarter of fiscal 1998
declined $316,467 to $167,899 compared to $484,366 for the comparable quarter
last year. The decrease is attributable to the deployment of technical
personnel on sponsored development activities and reduced levels of internally
funded production engineering activities on the Invacare wheelchair drive
system. For the six months ended September 30, 1997 research and development
expenditures declined $623,751 to $256,737. The decrease is attributable
to reduced levels of production engineering activities on the Invacare
wheelchair drive system and lower levels of work performed on "cost share" type
sponsored development programs.
<PAGE>
General and administrative expenses for the quarter ended September 30, 1997
rose to $371,551 from the prior year level of $265,850 due to higher levels of
business development, legal and accounting expenditures. General and
administrative expenses for the six months ended September 30, 1997 increased
to $688,311 from $531,654 for the comparable period last year. The increase is
primarily due to higher legal, shareholder and salary expenses.
Interest income rose to $46,296 for the second quarter and $97,969 for the first
half compared to $26,856 and $52,826 for the comparable prior year periods,
respectively. The increases are attributable to higher levels of invested cash.
Interest expense declined to $17,735 for the second quarter and $55,489 for the
first half of fiscal 1998 compared to $55,489 and $110,101 for the comparable
periods last year. The decreases are due to elimination of interest costs on
the Company's capital call obligations to Taiwan UQM.
Equity in loss of Taiwan joint venture rose to $16,905 and $31,433 for the
quarter and six months ended June 30, 1997, respectively, compared to $13,643
and $23,282 during the comparable periods last year. The increase is
attributable to expanded staffing and operations at Taiwan UQM preparatory to
the launch of manufacturing operations.
Liquidity and Capital Resources
The Company's cash balances and liquidity during the quarter and six months
ended September 30, 1997, were adequate to meet its operating needs. Net cash
used by operating activities was $1,725,982 for the six months ended
September 30, 1997 compared to net cash used by operations for the comparable
period last year of $963,049. The increase is primarily attributable to the
performance of sponsored development activities against cash prepayments from
customers on deposit with the company, increased levels of accounts receivable
and costs and estimated earnings in excess of billings on uncompleted contracts.
Cash requirements during the period were funded primarily from cash on hand.
In January 1996, Invacare purchased 129,032 shares of common stock at a price of
$3.88 per share. Net proceeds to the Company were $500,000, all of which were
applied to fund the development of a wheelchair motor for Invacare. Contingent
upon achieving development milestones, Invacare further agreed to purchase
additional shares at the then market price, the proceeds of which would be used,
in part, to fund the Company's anticipated capital investment in motor
manufacturing tools and equipment. In August, the Company completed agreements
with Invacare to manufacture motors for its wheelchairs. Coincident to these
agreements Invacare will purchase directly the assets required to launch
production, such as tooling and dedicated manufacturing equipment in lieu of
completing the second investment originally envisioned in the stock purchase
agreement. Accordingly, the Company does not anticipate any further sales of
its equity securities to Invacare.
<PAGE>
In fiscal 1994, the Company, KYMCO and TLT entered into a joint venture
agreement which provided for the formation, capitalization and operation of
Taiwan UQM, a company organized under the laws of the Republic of China.
The Company purchased 39 percent of the initial stock of Taiwan UQM for
NT$1,170,000 (US$45,082 on the transaction date). Pursuant to the joint venture
agreement, the venture partners are obligated to meet future capital calls
as the Board of Directors of Taiwan UQM, by unanimous vote, determines. During
fiscal 1995, the Company was unable to fund its capital call obligations.
In June 1995, the Company, KYMCO and TLT entered into a waiver and option
agreement pursuant to which KYMCO agreed to purchase those shares of Taiwan UQM
underlying the Company's capital call obligations. The purchase price of such
shares was NT$37,830,000 (U.S.$1,403,493 at October 31, 1995). The Company was
granted the option to repurchase the shares for the original capital call
amount plus 10 percent interest and associated transfer taxes. In November
1996, the Company exercised its option and subsequently repurchased the shares
from KYMCO, thus maintaining the Company's ownership position at 39 percent of
the then outstanding shares of Taiwan UQM. The repurchase price plus interest
and taxes totaled NT$44,175,505 (US$1,612,539 on the transaction date).
In November 1996, the Board of Directors of Taiwan UQM announced an additional
capital call to provide cash to fund facility construction and the launch of
electric component production. The Company's capital call obligation pursuant
thereto was NT$37,050,000 (US$1,348,300 as of December 1, 1996), plus interest
at the rate of 10 percent per annum on the outstanding amount from December 1,
1996, through the due date. The obligation was due and payable in two equal
installments on March 1, 1997 and June 1, 1997. During the first quarter of
fiscal 1998, the Company elected to fund the entire capital call obligation in
one payment and remitted approximately $1,384,000 including accrued interest
of approximately $40,000 in complete satisfaction of its capital call
obligation. The Company believes that Taiwan UQM is adequately capitalized to
meet its operating cash requirements over the next twelve months. Accordingly,
the Company does not anticipate any additional capital calls by Taiwan UQM in
fiscal 1998.
Over the next several months, the Company expects to invest substantially
greater amounts of capital to launch manufacturing operations for Invacare.
Anticipated capital expenditures for working capital, production machinery,
equipment, computer hardware and software are expected to exceed $1.5 million.
The Company expects to fund this investment requirement through a combination of
existing cash resources, cash proceeds received from the exercise of outstanding
stock options and warrants and short-term bank lines-of-credit. Although the
Company has, to-date, not entered into formal arrangements for such bank
lines-of-credit, Management believes bank lines-of-credit are readily available
to the Company on terms acceptable to the Company. The Company believes it has
cash resources, in addition to those required to launch volume manufacturing
operations, sufficient to fund non-manufacturing operations through at least
March 31, 1998.
<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
August 19, 1997. 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 9,552,097 508,892
Lee A. Iacocca 9,816,964 244,025
Frank Hodsoll 9,765,324 295,665
William G. Rankin 9,814,871 246,118
H. J. Young 9,512,814 548,175
J. B. Richey 9,509,714 551,275
Proposal 2: Proposal to ratify the appointment of KPMG Peat Marwick LLP as
the Independent Auditors of the Company.
For Against Abstain
9,989,020 15,976 55,993
Proposal 3: Proposal to amend the 1992 Stock Option Plan to increase the
number of shares available for grant from 3,000,000 to 4,000,000
and increase the maximum number of shares available for grant
to an individual during the term of the plan from 500,000 to
1,000,000.
For Against Abstain
4,392,409 1,358,678 456,834
Total votable shares: 13,316,094
Total shares represented in person and by proxy: 10,060,989
Percentage of votable shares voted: 75.56%
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Incentive Stock Option Agreement with Ray A. Geddes
10.2 Non-qualified Stock Option Agreement with Ray A. Geddes
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
<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: November 13, 1997 By:/s/ Donald A. French
Donald A. French
Treasurer and Controller
(Principal Financial and
Accounting 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 SEPTEMBER 30, 1997, AND THE CONSOLIDATED STATEMENTS OF
OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997, AND IS QUALIFIED IN ITS
ENTIIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> SEP-30-1997
<CASH> 3,505,215
<SECURITIES> 0
<RECEIVABLES> 252,597
<ALLOWANCES> 0
<INVENTORY> 1,163,738
<CURRENT-ASSETS> 5,077,568
<PP&E> 4,271,888
<DEPRECIATION> 1,934,226
<TOTAL-ASSETS> 11,573,638
<CURRENT-LIABILITIES> 590,634
<BONDS> 702,112
0
0
<COMMON> 29,472,920
<OTHER-SE> (19,582,257)
<TOTAL-LIABILITY-AND-EQUITY> 11,573,638
<SALES> 346,421
<TOTAL-REVENUES> 2,049,791
<CGS> 1,844,408
<TOTAL-COSTS> 2,897,854
<OTHER-EXPENSES> (35,429)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 41,814
<INCOME-PRETAX> (854,448)
<INCOME-TAX> 0
<INCOME-CONTINUING> (854,448)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (854,448)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
UNIQUE MOBILITY, INC.
1992 STOCK OPTION PLAN
INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT made as of this 4th day of September, 1997, between Unique
Mobility, Inc., a Colorado corporation (the "Company"), and Ray A. Geddes (the
"Option Holder").
1. Stock Option.
Pursuant to the Unique Mobility, Inc. 1992 Stock Option Plan (the "Plan") and
subject to the terms and conditions of this Agreement, the Company hereby
grants to the Option Holder an option (the "Option") to purchase 14,000 shares
of the authorized and unissued $0.01 par value common stock (the "Stock") of
the Company at a price of $7.13 per share (the "Option Price"). The Option is
granted on August 19, 1997 (the "Grant Date"). The Option granted pursuant to
this Agreement is intended to qualify as an incentive stock option within
the meaning of Section 422 of the Internal Revenue Code of 1986, as it may be
amended (the "Code").
2. Exercise of the Option.
(a) The Option shall not become exercisable until the Option Holder has
completed one year of continuous employment after the Grant Date. Upon the
completion of one full year of continuous employment after the Grant Date, the
Option shall become exercisable as to one-third of the number of shares
subject to the Option. Upon the completion of the second full year of
continuous employment after the Grant Date, the Option shall become
exercisable as to an additional one-third of the shares originally subject to
the Option. Upon the completion of the third full year of continuous
employment after the Grant Date, the Option shall become exercisable as to an
additional one-third of the shares originally subject to the Option.
Except as set forth in Sections 4 or 5 hereof, the Option shall not be
exercisable as to any shares as to which the continuous employment requirement
shall not be satisfied, regardless of the circumstances under which the Option
Holder's employment by the Company shall be terminated. The number of shares
as to which the Option may be exercised shall be cumulative, so that once the
Option shall become exercisable as to any shares it shall continue to be
exercisable as to such shares until expiration or termination of the Option as
provided in Section 5 hereof.
(b) The Option may be exercised only by delivery to the Corporate
Secretary of the Company of written notice specifying the number of shares
with respect to which the Option is exercised and payment of the Option Price.
At the request of the Company, such notice shall contain the Option Holder's
representation that he is purchasing such Stock for investment purposes only
and his agreement not to sell any Stock purchased pursuant to the Option in
any manner that is in violation of the Securities Act of 1933, as amended, or
any applicable state law. Such restrictions or notice thereof shall be placed
on the certificates representing the Stock purchased pursuant to the Option,
and the Company may refuse to issue the certificates or to transfer the shares
on its books unless it is satisfied that no violation of such restrictions
will occur. The exercise of the Option shall be deemed effective on the
receipt of such notice by the Corporate Secretary and payment to the Company.
The purchase of such Stock shall take place at the principal offices of the
Company upon the delivery of such notice of exercise, at which time the Option
Price for the Stock shall be paid in full by any of the methods set forth in
Section 2(c) below. A properly executed certificate or certificates
representing the Stock shall be issued by the Company and delivered to the
Option Holder. If certificates are used to pay all or part of the exercise
price, upon such payment, separate certificates shall be delivered
representing each certificate so used, and an additional certificate shall be
delivered representing any additional shares to which the Option Holder is
entitled as a result of the exercise of the Option. If payment is made
pursuant to subparagraph (c)(v) below, the certificate shall be delivered to
the broker.
<PAGE>
(c) The exercise price shall be paid by any of the following methods or
any combination of the following methods, as the Stock Option Committee (the
"Committee") shall determine in its sole discretion:
(i) in cash;
(ii) by certified or cashier's check payable to the order of the
Company;
(iii) by delivery to the Company of certificates representing the
number of shares then owned by the Option Holder, the fair market value of
which equals the purchase price of the Stock purchased pursuant to the Option,
properly endorsed for transfer to the Company; provided however, that the
Option may not be exercised by delivery to the Company of certificates
representing Stock, unless such Stock has been held by the Option Holder for
more than six months; for purposes of this Agreement, the "fair market value"
of any shares of Stock delivered in payment of the Option Price upon exercise
of the Option shall be as defined in Section 2.1(g) of the Plan;
(iv) to the extent permitted under the applicable provisions of state
law, by delivery to the Company of a promissory note, which shall be in a
principal amount equal to the Option Price plus any federal and state income
tax required to be withheld; which shall be full recourse and secured by all
or a portion of the Stock acquired pursuant to the exercise of the Option;
which shall bear interest at a rate determined by the Committee, but not lower
than the rate required to avoid the imputation of interest under the Code;
which shall provide for level quarterly payments of interest and principal
over its term; which shall become payable in full upon the first to occur of
the fifth anniversary of the date the Option is exercised, failure to pay any
payment of principal and interest within five days after it is due or
termination of the Option Holder's employment for any reason; and which shall
contain such other terms and conditions including the provision of security in
addition to the Stock that the Company, in its sole discretion, deems
necessary or appropriate;
(v) by delivery to the Company of a properly executed notice of
exercise together with irrevocable instructions to a broker to deliver to the
Company promptly the amount of the proceeds of the sale of all or a portion of
the Stock or of a loan from the broker to the Option Holder necessary to pay
the exercise price.
3. Adjustment of the Option.
(a) Adjustment by Stock Split, Stock Dividend, Etc. If at any time the
Company increases or decreases the number of its outstanding shares of Stock,
or changes in any way the rights and privileges of such shares by means of the
payment of a stock dividend or the making of any other distribution on such
shares payable in Stock, or through a stock split, subdivision, consolidation,
combination or reclassification or recapitalization involving the Stock, the
numbers, rights and privileges of the shares of Stock included in the Option
shall be increased, decreased or changed in like manner as if such shares had
been issued and outstanding, fully paid and nonassessable at the time of such
occurrence.
(b) Dividends Payable in Stock of Another Corporation, Etc. If at any
time the Company pays or makes any dividend or other distribution upon the
Stock payable in securities or other property (except money or Stock), a
proportionate part of such securities or other property shall be set aside and
delivered to the Option Holder when he exercises the Option. The securities
and other property delivered to the Option Holder upon exercise of the Option
shall be in the same ratio to the total securities and property set aside for
the Option Holder as the number of shares with respect to which the Option is
then exercised is to the total shares subject to the Option.
(c) Other Changes in Stock. If there shall be any change, other than as
specified in the preceding subsections (a) and (b), in the number or kind of
outstanding shares of Stock or of any stock or other securities into which the
Stock shall be changed or for which it shall have been exchanged, then and if
the Committee shall in its discretion determine that such change equitably
requires an adjustment in the number or kind of shares subject to the Option,
such adjustments shall be made by the Committee and shall be effective for all
purposes of this agreement.
(d) Apportionment of Price. Upon any occurrence described in the
preceding subsections (a), (b), and (c), the total Option Price shall remain
unchanged and shall be apportioned ratably over the increased or decreased
number or changed kinds of securities or other properties subject to the
Option.
(e) Rights to Subscribe. If at any time the Company grants, to the
holders of its Stock, rights to subscribe pro rata for additional shares
thereof or for any other securities of the Company or of any other
corporation, there shall then be added to the number of shares subject to the
Option, the Stock or other securities that the Option Holder would have been
entitled to subscribe for if immediately prior to such grant, the Option
Holder had exercised his entire Option, and the Option price shall be
increased by the amount of the price that would have been payable by the
Option Holder for such Stock or other securities.
(f) General Adjustment Rules. No adjustment or substitution provided for
in this Section 3 shall require the company to sell a fractional share under
this Agreement and the total substitution or adjustment with respect to this
agreement shall be limited by deleting any fractional share. In the case of
any such substitution or adjustment, the Option shall be equitably adjusted by
the Committee to reflect the greater or lesser number of shares of Stock or
other securities into which the Stock subject to the Option may have been
changed. Notwithstanding the foregoing subsections (a), (b), (c), (d), and
(e), no adjustment shall be made that would constitute a modification of the
Option within the meaning of Section 424 of the Code.
(g) Determinations by the Committee. Adjustments under this paragraph
shall be made by the Committee, whose determinations with respect thereto
shall be final and binding. No fractional shares shall be issued on account
of any such adjustment.
<PAGE>
4. Reorganization or Change of Control.
(a) Reorganization. If the Company is merged or consolidated with
another corporation or the Company is a party to a reorganization (other than
a merger, consolidation or reorganization in which the Company is the
continuing corporation and which does not result in any reclassification or
change of outstanding shares of stock), or if all or substantially all of the
assets or more than 50% of the outstanding voting stock of the Company
is acquired by any other corporation, business entity or person (other than a
sale or conveyance in which the Company continues as a holding company of an
entity or entities that conduct the business or businesses formerly conducted
by the Company), or in case of a reorganization (other than a reorganization
under the United States Bankruptcy Code) or liquidation of the Company, the
Committee shall, either (i) make appropriate provision for the adoption and
continuation of the Plan by the acquiring or successor corporation and for the
protection of any such outstanding Options by the substitution on an equitable
basis of appropriate stock of the Company or of the merged, consolidated or
otherwise reorganized corporation which will be issuable with respect to the
Stock, provided that no additional benefits shall be conferred upon the Option
Holder as a result of such substitution, and the excess of the aggregate fair
market value of the Stock subject to the Option immediately after such
substitution over the Option Price is not more than the excess of the
aggregate Fair Market Value of the Stock subject to the Option immediately
before such substitution over the Option Price, and provided further that any
such substitution made with respect to the Option shall comply with Section
424(a) of the Code, or (ii) upon written notice to the Option Holder, provide
that the unexercised portion of the Option must be exercised within thirty
(30) days of the date of such notice or the Option will be terminated. If
alternative (i) is implemented, the Committee may, at its sole discretion,
provide that the Option may be exercisable in full without regard to the
applicable exercise periods set forth in Section 2 and if alternative (ii) is
implemented, the Option shall be exercisable in full without regard to the
applicable exercise periods set forth in Section 2 above. However, if the
Option Holder is subject to Section 16(b) of the Securities Exchange Act of
1934, the Option shall not be exercisable until six months after the Grant
Date.
(b) Change of Control. If there is a change in control of the Company,
as defined below, the Option shall become exercisable in full, without regard
to applicable exercise periods set forth in Section 2. For purposes of the
Plan, a "change in control" shall be deemed to have occurred if during any
period of two consecutive years, individuals who at the beginning of such
period constitute the Board of Directors of the Company (the "Board") (and
any new director whose election by the Board or whose nomination for election
by the Company's shareholders was approved by a vote of at least two-thirds of
the directors then still in office who either were directors at the beginning
of such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority thereof.
5. Expiration and Termination of the Option.
The Option shall expire 10 years (the "Option Period") from the date of this
Agreement or prior to such time as follows:
(a) If the Option Holder's employment with the Company is terminated for
cause, as determined by the Company, the Option shall terminate immediately
and shall thereafter be void for all purposes. As used in this Section 5,
"cause" shall mean a gross violation, as determined by the Company, of the
Company's established policies and procedures, provided that the effect of
this Section 5 shall be limited to determining the consequences of a
termination and that nothing in this Section 5 shall restrict or otherwise
interfere with the Company's discretion with respect to the termination of any
employee.
(b) If the Option Holder retires from employment by the Company or its
affiliates during the Option Period but after attaining age 65, the Option may
be exercised by the Option Holder, or in the case of death by the persons
specified in subsection (c) of this Section 5, within three months following
his or her retirement (if otherwise within the Option Period), but not
thereafter. In any such case, the Option may be exercised only as to the
shares as to which the Option had become exercisable on or before the date of
the Option Holder's termination of employment or death.
(c) If the Option Holder dies during the Option Period while still
employed or within the one-month period referred to in (d) below, the Option
may be exercised by those entitled to do so under the Option Holder's will or
by the laws of descent and distribution within fifteen months following the
Option Holder's death, but not thereafter. In any such case, the Option may
be exercised only as to the shares as to which the Option had become
exercisable on or before the date of the Option Holder's death.
(d) If the employment of the Option Holder by the Company is terminated
(which for this purpose means that the Option Holder is no longer employed by
the Company or by any parent or subsidiary corporation of the Company within
the meaning of Section 424 of the Code)within the Option Period for any reason
other than cause, retirement after attaining age 65, or the Option Holder's
death, the Option may be exercised by the Option Holder within three months
following the date of such termination (if otherwise within the Option
Period), but not thereafter. In any such case, the Option may be exercised
only as to the shares as to which the Option had become exercisable on or
before the date of termination of employment.
6. Transferability.
The Option may not be transferred except by will or pursuant to the laws of
descent and distribution, and it shall be exercisable during the Option
Holder's life only by him and after his death only by those entitled to do so
under his will or the applicable laws of descent and distribution.
7. Consideration for the Grant of the Option.
In consideration of the granting of this Option, the Option Holder agrees to
remain in the employ of the Company at the pleasure of the Company for a
continuous period of at least one year from the date of this Agreement at the
salary rate in effect at the date of this Agreement or at such changed rate as
may be fixed from time to time by the Company.
<PAGE>
8. Notice of Disposition; Withholding.
The Option Holder shall notify the Company if Stock acquired pursuant to this
Option is "disposed of" (within the meaning of Section 422 of the Code) within
two years after the date of the grant of this Option or within one year after
the transfer of such Stock to the Option Holder. If the Option Holder does
"dispose of" Stock within such period, the Option Holder shall make
appropriate arrangements with the Company to provide for the amount of
additional withholding required by Sections 3102 and 3402 of the Code and
applicable state income tax laws.
9. Trading Restrictions.
As long as the Option Holder is an employee of the Company, the Option Holder
shall comply at all times with the Company's policy on trading securities of
the Company as such policy is in effect from time to time. In addition, as
long as the Option Holder is an employee of the Company, and unless the Board
of Directors of the Company otherwise agrees in writing, the Option Holder
agrees to sell no Stock that such employee has received through the Company's
employee benefit programs (including Stock acquired otherwise than upon
exercise of an Option) if the sale of such Stock shall exceed 10% of the total
trading volume of the Stock on the date of sale by the Option Holder on any
stock exchange and in the over-the-counter market. If the Option Holder
fails to comply with the Company's policy on trading securities, or violates
the agreement made in the immediately preceding sentence, as determined in the
sole discretion of the Company, the Option Holder shall pay to the Company as
liquidated damages the profit realized (which shall be equal to the excess of
the amount received by the Option Holder over the Option Holder's basis for
the Stock disposed of) in the transaction that resulted in the failure to
comply with the Company's policy. This covenant shall survive the exercise of
an Option and the termination of the Plan.
10. Notices.
Any notice required or permitted to be given under this Agreement shall be in
writing and shall be given by first class registered or certified mail,
postage prepaid, or by personal delivery to the appropriate party, addressed:
(a) If to the Company, at 425 Corporate Circle, Golden, Colorado 80401;
or
(b) If to the Option Holder, at 425 Corporate Circle, Golden, Colorado
80401, or at such other address as may have been furnished to the Company by
the Option Holder.
Any such notice shall be deemed to have been given as of the date so mailed in
the case of mailed notice, or as of the date delivered in the case of personal
delivery.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
UNIQUE MOBILITY, INC.
/s/ Donald A. French
By: Donald A. French, Treasurer
OPTION HOLDER
/s/ Ray A. Geddes
By: Ray A. Geddes
UNIQUE MOBILITY, INC.
1992 STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT made as of this 4th day of September, 1997, between Unique
Mobility, Inc., a Colorado corporation (the "Company"), and Ray A. Geddes (the
"Option Holder").
1. Stock Option.
Pursuant to the Unique Mobility, Inc. 1992 Stock Option Plan (the "Plan") and
subject to the terms and conditions of this Agreement, the Company hereby
grants to the Option Holder an option (the "Option") to purchase 36,000 shares
of the authorized and unissued $0.01 par value common
stock (the "Stock") of the Company at a price of $7.13 per share (the "Option
Price"). The Option is granted on August 19, 1997 (the "Grant Date"). The
Option granted pursuant to this Agreement is not intended to qualify as an
incentive stock option within the meaning of Section 422 of the Internal
Revenue Code of 1986, as it may be amended (the "Code").
2. Exercise of the Option.
(a) The Option shall not become exercisable until the Option Holder has
completed one year of continuous employment after the Grant Date. Upon the
completion of one full year of continuous employment after the Grant Date, the
Option shall become exercisable as to one-third of the number of shares
subject to the Option. Upon the completion of the second full year of
continuous employment after the Grant Date, the Option shall become
exercisable as to an additional one-third of the shares originally subject to
the Option. Upon the completion of the third full year of continuous
employment after the Grant Date, the Option shall become exercisable as to an
additional one-third of the shares originally subject to the Option.
Except as set forth in Sections 4 or 5 hereof, the Option shall not be
exercisable as to any shares as to which the continuous employment requirement
shall not be satisfied, regardless of the circumstances under which the Option
Holder's employment by the Company, or service with the Company, shall be
terminated. The number of shares as to which the Option may be exercised shall
be cumulative, so that once the Option shall become exercisable as to any
shares it shall continue to be exercisable as to such shares until expiration
or termination of the Option as provided in Section 5 hereof.
(b) The Option may be exercised only by delivery to the Corporate
Secretary of the Company of written notice specifying the number of shares
with respect to which the Option is exercised and payment of the Option Price.
At the request of the Company, such notice shall contain the Option Holder's
representation that he is purchasing such Stock for investment purposes only
and his agreement not to sell any Stock purchased pursuant to the Option in
any manner that is in violation of the Securities Act of 1933, as amended, or
any applicable state law. Such restrictions or notice thereof shall be placed
on the certificates representing the Stock purchased pursuant to the Option,
and the Company may refuse to issue the certificates or to transfer the shares
on its books unless it is satisfied that no violation of such restrictions
will occur. The exercise of the Option shall be deemed effective on the
receipt of such notice by the Corporate Secretary and payment to the Company.
The purchase of such Stock shall take place at the principal offices of the
Company upon the delivery of such notice of exercise, at which time the Option
Price for the Stock shall be paid in full by any of the methods set forth in
Section 2(c) below. A properly executed certificate or certificates
representing the Stock shall be issued by the Company and delivered to the
Option Holder. If certificates are used to pay all or part of the exercise
price, upon such payment, separate certificates shall be delivered
representing each certificate so used, and an additional certificate shall be
delivered representing any additional shares to which the Option Holder is
entitled as a result of the exercise of the Option. If payment is made
pursuant to subparagraph (c)(v) below, the certificate shall be delivered
to the broker.
<PAGE>
(c) The exercise price shall be paid any of the following methods or any
combination of the following methods. as the Stock Option Committee (the
"Committee") shall determine in its sole discretion:
(i) in cash;
(ii) by certified or cashier's check payable to the order of the
Company;
(iii) by delivery to the Company of certificates representing the
number of shares then owned by the Option Holder, the fair market value of
which equals the purchase price of the Stock purchased pursuant to the Option,
properly endorsed for transfer to the Company; provided however, that the
Option may not be exercised by delivery to the Company of certificates
representing Stock, unless such Stock has been held by the Option Holder for
more than six months; for purposes of this Agreement, the "fair market value"
of any shares of Stock delivered in payment of the Option Price upon exercise
of the Option shall be as defined in Section 2.1(9) of the Plan;
(iv) to the extent permitted under the applicable provisions of state
law, by delivery to the Company of a promissory note, which shall be in a
principal amount equal to the Option Price plus any federal and state income
tax required to be withheld; which shall be full recourse and secured by all
or a portion of the Stock acquired pursuant to the exercise of the Option;
which shall bear interest at a rate determined by the Committee, but not lower
than the rate required to avoid the imputation of interest under the Code;
which shall provide for level quarterly payments of interest and principal
over its term; which shall become payable in full upon the first to occur of
the fifth anniversary of the date the Option is exercised, failure to pay any
payment of principal and interest within five days after it is due or
termination of the Option Holder's employment for any reason; and which shall
contain such other terms and conditions including the provision of security in
addition to the Stock that the Company, in its sole discretion, deems
necessary or appropriate;
(v) by delivery to the Company of a property executed notice of
exercise together with irrevocable instructions to a broker to deliver to the
Company promptly the amount of the proceeds of the sale of all or a portion of
the Stock or of a loan from the broker to the Option Holder necessary to pay
the exercise price.
3. Adjustment of the Option.
(a) Adjustment by Stock Split. Stock Dividend. Etc. If at any time the
Company increases or decreases the number of its outstanding shares of Stock,
or changes in any way the rights and privileges of such shares by means of the
payment of a stock dividend or the making of any other distribution on such
shares payable in Stock, or through a stock split, subdivision, consolidation,
combination or reclassification or recapitalization involving the Stock, the
numbers, rights and privileges of the shares of Stock included in the Option
shall be increased, decreased or changed in like manner as if such shares had
been issued and outstanding, fully paid and nonassessable at the time of such
occurrence.
(b) Dividends Payable in Stock of Another Corporation. Etc. If at any
time the Company pays or makes any dividend or other distribution upon the
Stock payable in securities or other property (except money or Stock), a
proportionate part of such securities or other property shall be set aside and
delivered to the Option Holder when he exercises the Option. The securities
and other property delivered to the Option Holder upon exercise of the Option
shall be in the same ratio to the total securities and property set aside
for the Option Holder as the number of shares with respect to which the Option
is then exercised is to the total shares subject to the Option.
(c) Other Changes in Stock. If there shall be any change, other than as
specified in the preceding subsections (a) and (b), in the number or kind of
outstanding shares of Stock or of any stock or other securities into which the
Stock shall be changed or for which it shall have been exchanged, then and if
the Committee shall in its discretion determine that such change equitably
requires an adjustment in the number or kind of shares subject to the Option,
such adjustments shall be made by the Committee and shall be effective for all
purposes of this Agreement.
(d) Apportionment of Price. Upon any occurrence described in the
preceding subsections (a), (b), and (c), the total Option Price shall remain
unchanged and shall be apportioned ratably over the increased or decreased
number or changed kinds of securities or other properties subject to the
Option.
(e) Rights to Subscribe. If at any time the Company grants, to the
holders of its Stock, rights to subscribe pro rata for additional shares
thereof or for any other securities of the Company or of any other
corporation, there shall then be added to the number of shares subject to the
Option, the Stock or other securities that the Option Holder would have been
entitled to subscribe for if immediately prior to such grant, the Option
Holder had exercised his entire Option, and the Option price shall be
increased by the amount of the price that would have been payable by the
Option Holder for such Stock or other securities.
(f) General Adjustment Rules. No adjustment or substitution provided for
in this Section 3 shall require the company to sell a fractional share under
this Agreement and the total substitution or adjustment with respect to this
Agreement shall be limited by deleting any fractional share. In the case of
any such substitution or adjustment, the Option shall be equitably adjusted by
the Committee to reflect the greater or lesser number of shares of Stock or
other securities into which the Stock subject to the Option may have been
changed. Notwithstanding the foregoing subsections (a), (b), (c), (d), and
(e), no adjustment shall be made that would constitute a modification of the
Option within the meaning of Section 424 of the Code.
(g) Determinations by the Committee. Adjustments under this paragraph
shall be made by the Committee, whose determinations with respect thereto
shall be final and binding. No fractional shares shall be issued on account of
any such adjustment.
<PAGE>
4. Reorganization or Change of Control.
(a) Reorganization. If the Company is merged or consolidated with another
corporation or the Company is a party to a reorganization (other than a
merger, consolidation or reorganization in which the Company is the continuing
corporation and which does not result in any reclassification or change of
outstanding shares of stock), or if all or substantially all of the assets or
more than 50% of the outstanding voting stock of the Company is acquired by
any other corporation, business entity or person (other than a sale or
conveyance in which the Company continues as a holding company of an entity or
entities that conduct the business or businesses formerly conducted by the
Company), or in case of a reorganization (other than a reorganization under
the United States Bankruptcy Code) or liquidation of the Company, the
Committee shall, either (i) make appropriate provision for the adoption and
continuation of the Plan by the acquiring or successor corporation and for the
protection of any such outstanding Options by the substitution on an equitable
basis of appropriate stock of the Company or of the merged, consolidated or
otherwise reorganized corporation which will be issuable with respect to the
Stock, provided that no additional benefits shall be conferred upon the Option
Holder as a result of such substitution, and the excess of the aggregate Fair
Market Value of the Stock subject to the Option immediately after such
substitution over the Option Price is not more than the excess of the
aggregate Fair Market Value of the Stock subject to the Option immediately
before such substitution over the Option Price, and provided further that any
such substitution made with respect to the Option shall comply with Section
424(a) of the Code, or (ii) upon written notice to the Option Holder, provide
that the unexercised portion of the Option must be exercised within thirty
(30) days of the date of such notice or the Option will be terminated. If
alternative (i) is implemented, the Committee may, at its sole discretion,
provide that the Option may be exercisable in full without regard to the
applicable exercise periods set forth in Section 2 and if alternative (ii) is
implemented, the Option shall be exercisable in full without regard to the
applicable exercise periods set forth in Section 2 above. However, if the
Option Holder is subject to Section 16(b) of the Securities Exchange Act of
1934, the Option shall not become exercisable until six months after the Grant
Date.
(b) Change of Control. If there is a change in control of the Company, as
defined below, the Option shall become exercisable in full, without regard to
applicable exercise periods set forth in Section 2. For purposes of the Plan,
a "change in control" shall be deemed to have occurred if during any period of
two consecutive years, individuals who at the beginning of such period
constitute the Board of Directors of the Company (the "Board") (and any new
director whose election by the Board or whose nomination for election by the
Company's shareholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority thereof.
5. Expiration and Termination of the Option.
The Option shall expire 10 years (the "Option Period") from the date of this
Agreement or prior to such time as follows:
(a) If the Option Holder's employment with the Company is terminated for
cause, as determined by the Company, the Option shall terminate immediately
and shall thereafter be void for all purposes. As used in this Section 5,
"cause" shall mean a gross violation, as determined by the Company, of the
Company's established policies and procedures, provided that the effect of
this Section 5 shall be limited to determining the consequences of a
termination and that nothing in this Section 5 shall restrict or otherwise
interfere with the Company's discretion with respect to the termination of any
employee.
(b) If the Option Holder retires from employment by the Company or its
affiliates during the Option Period but after attaining age 65, the Option may
be exercised by the Option Holder, or in the case of death by the persons
specified in subsection (c) of this Section 5, within three months following
his or her retirement (if otherwise within the Option Period), but not
thereafter. In any such case, the Option may be exercised only as to the
shares as to which the Option had become exercisable on or before the date of
the Option Holder's termination of employment or death.
(c) If the Option Holder dies during the Option Period while still
employed or within the one-month period referred to in (d) below, the Option
may be exercised by those entitled to do so under the Option Holder's will or
by the laws of descent and distribution within fifteen months following the
Option Holder's death, but not thereafter. In any such case, the Option may be
exercised only as to the shares as to which the Option had become exercisable
on or before the date of the Option Holder's death.
(d) If the employment of the Option Holder by the Company is terminated
(which for this purpose means that the Option Holder is no longer employed by
the Company or by any parent or subsidiary corporation of the Company within
the meaning of Section 424 of the Code) within the Option Period for any
reason other than cause, retirement after attaining age 65, or the Option
Holder's death, the Option may be exercised by the Option Holder within one
month following the date of such termination (if otherwise within the Option
Period), but not thereafter. In any such case, the Option may be exercised
only as to the shares as to which the Option had become exercisable on or
before the date of termination of employment.
<PAGE>
6. Transferability.
The Option may not be transferred except by will or pursuant to the laws of
descent and distribution, and it shall be exercisable during the Option
Holder's life only by him and after his death only by those entitled to do so
under his will or the applicable laws of descent and distribution; provided
however, that, during his lifetime, the Option Holder may transfer the Option
to a member of his immediate family, a trust of which members of his immediate
family are the sole beneficiaries, or a partnership of which members of his
immediate family or trusts for the sole benefit of his immediate family are
the only partners. For this purpose immediate family means the Option Holder's
spouse, children, stepchildren, grandchildren, parents, grandparents, siblings
(including half brothers and sisters), and individuals who are family members
by adoption.
7. Consideration for the Grant of the Option.
In consideration of the granting of this Option, the Option Holder agrees to
remain in the employ of the Company at the pleasure of the Company for a
continuous period of at least one year from the date of this Agreement at the
salary rate in effect at the date of this Agreement or at such changed rate as
may be fixed from time to time by the company
8. Withholding.
(a) The Option Holder shall make appropriate arrangements with the
Company to provide for the amount of withholding that may be required by
Sections 3102 and 3402 of the Code and applicable state income tax laws.
(b) The Option Holder may elect to pay all such amounts of tax
withholding, or any part thereof, if any withholding is required, by electing
to transfer to the Company, or to have the Company withhold from shares
otherwise issuable to the Option Holder, shares of Stock having a value equal
to the amount required to be withheld or such lesser amount as may be elected
by the Option Holder. All elections shall be subject to the approval or
disapproval of the Committee. The value of shares of Stock to be withheld
shall be based on the fair market value of the Stock on the date that the
amount of tax to be withheld is to be determined (the "Tax Date"). Any such
election by an Option Holder to have shares of Stock withheld for this purpose
shall be subject to the following restrictions:
(i) All elections must be made prior to the Tax Date.
(ii) All elections shall be irrevocable.
(iii) If the Option Holder is subject to Section 16 of the Securities
Exchange Act of 1934 ("Section 16"), the Option Holder may not exercise the
Option within six months of the date of grant.
(iv) If the Option Holder is subject to Section 16, any such election
must be made either six months prior to the Tax Date or in the ten day "window
period" beginning on the third day following the release of the Company's
quarterly or annual summary statement of sale and earnings.
<PAGE>
9. Compliance with Certain Company Policies.
The Option Holder shall comply at all times with the Company's policy on
trading securities of the Company as such policy is in effect from time to
time. In addition, the Option Holder agrees to sell no Stock (including Stock
acquired otherwise than upon exercise of an Option) if the sale of such Stock,
together with all other sales of Stock by any of the Company's directors or
employees on any stock exchange or in the over-the-counter market, shall
exceed 10% of the total trading volume of the Stock on the date of sale by the
Option Holder on any stock exchange and in the over-the counter market. If the
Option Holder fails to comply with the Company's policy on trading securities,
or violates the agreement made in the immediately preceding sentence, as
determined in the sole discretion of the Company, the Option Holder shall pay
to the Company as liquidated damages the profit realized (which shall be equal
to the excess of the amount received by the Option Holder over the Option
Holder's basis for the Stock disposed of) in the transaction that resulted in
the failure to comply with Company's policy. This condition shall survive the
exercise of an Option and the termination of the Plan.
10. Notices.
Any notice required or permitted to be given under this Agreement shall be in
writing and shall be given by first class registered or certified mail,
postage prepaid, or by personal delivery to the appropriate party, addressed:
(a) If to the Company, at 425 Corporate Circle, Golden, Colorado 80401;
or
(b) If to the Option Holder, at 425 Corporate Circle, Golden, Colorado
80401, or at such other address as may have been furnished to the Company by
the Option Holder.
Any such notice shall be deemed to have been given as of the date so mailed in
the case of mailed notice, or as of the date delivered in the case of personal
delivery.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
UNIQUE MOBILITY, INC.
By:/s/ Donald A. French
Donald A. French, Treasurer
OPTION HOLDER
/s/ Ray A. Geddes
Ray A. Geddes
