Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for us of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec.240.14a-12
UNIQUE MOBILITY, INC.
(Named of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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UNIQUE MOBILITY, INC.
425 Corporate Circle
Golden, Colorado 80401
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 14, 1998
The annual meeting of shareholders of Unique Mobility, Inc. will be held on
September 14, 1998, at 10:00 a.m., New York Time at the American Stock Exchange,
86 Trinity Place, New York, New York 10006 for the following purposes:
1. To elect a Board of seven (7) directors to serve for the ensuing year
and thereafter until their successors are duly elected and qualified.
2. To consider and vote upon a proposal to ratify the appointment of KPMG
Peat Marwick LLP to act as independent auditors of the Company for the
fiscal year ending March 31, 1999.
3. To consider and vote upon a proposal to increase the number of shares
available for grant under the Unique Mobility, Inc. Stock Option Plan
for Non-Employee Directors.
4. To transact such other business as may properly come before the meeting.
The record date for the Annual Meeting of Shareholders has been fixed at July
20, 1998. Only shareholders of record at the close of business on that date will
be entitled to notice of and to vote at the meeting.
By order of the Board of Directors
August 6, 1998 /s/ Elaine J. England
YOUR VOTE IS IMPORTANT. All shareholders, whether or not they expect to attend
the Annual Meeting, are requested to complete, date, sign and mail the enclosed
proxy, which is solicited by the Board of Directors. The enclosed envelope may
be used for that purpose. If you attend the meeting, you may vote in person even
though you have given a proxy
<PAGE>
PROXY STATEMENT
UNIQUE MOBILITY, INC.
425 Corporate Circle
Golden, Colorado 80401
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 14, 1998
This proxy statement is being mailed on or about August 7, 1998, to the
shareholders of Unique Mobility, Inc. in connection with the solicitation by the
Board of Directors of the enclosed form of proxy for the Annual Meeting of
Shareholders to be held on September 14, 1998. The last Annual Meeting of
Shareholders was held on August 19, 1997.
If the enclosed proxy is properly signed and returned to the Company, the shares
represented by the proxy will be voted at the meeting. If a shareholder
indicates in his proxy a choice with respect to any matter to be voted upon, the
shares will be voted in accordance with the shareholder's choice. If no choice
is indicated, the shares will be voted "for" each of the proposals. A
shareholder giving a proxy may revoke it at any time before it is voted by
giving written notice to the Secretary of the Company, by executing a proxy
bearing a later date or by attending the meeting and voting in person.
PERSONS MAKING THE SOLICIATION
This proxy is solicited on behalf of the Board of Directors of the Company. The
solicitation will be made predominately by mail. The expense of such
solicitation will be borne by the Company and will include reimbursement paid to
brokerage firms and others for their expenses in forwarding solicitation
material regarding the meeting to beneficial owners. Further solicitation of
proxies may be made by telephone or oral communication with some shareholders of
the Company following the original solicitation. All such further solicitation
will be made by regular employees of the Company, who will not be additionally
compensated therefor, or by the Company's transfer agent, in which case the
cost, which is not expected to exceed $1,000, will be borne by the Company.
SHAREHOLDERS ENTITLED TO VOTE
Shareholders of record at the close of business on July 20, 1998, will be
entitled to vote at the meeting. As of that date there were 15,914,852 shares of
the Company's $.01 par value common stock outstanding, each share being entitled
to one vote. The Company has no other classes of voting securities. The
Company's articles of incorporation provide that one-third of the outstanding
<PAGE>
shares of the common stock entitled to vote, represented in person or by proxy,
shall constitute a quorum at any shareholders' meeting. Each proposal contained
herein to be voted upon at the meeting, other than the election of directors,
shall be approved if the votes cast in favor of the proposal exceed the votes
cast opposing the proposal. In the election of directors, that number of
candidates equaling the number of directors to be elected, having the highest
number of votes cast in favor of their election, are elected to the Board of
Directors. Cumulative voting is not allowed in the election of directors or for
any other purposes.
With regard to the election of directors, votes may be cast in favor of or
withheld from each nominee; votes that are withheld will be excluded entirely
from the vote and will have no effect on the vote. Abstentions may be specified
on all proposals except the election of directors and will be counted as present
for purposes of determining the existence of a quorum regarding the item on
which the abstention is noted. Abstentions will have no effect on the vote.
Under the rules of the American Stock Exchange (AMEX), brokers who hold shares
in street name have the authority to vote on certain items, including the
election of directors, when they have not received instructions from the
beneficial owners. With respect to other proposals, AMEX rules provide that no
broker may vote shares held for beneficial owners without specific instructions
from such beneficial owners. Under applicable Colorado law, a broker non-vote
will have no effect on the outcome of the matters to be voted on at the meeting.
ELECTION OF DIRECTORS
Pursuant to the bylaws of the Company, the Board of Directors shall consist of
not fewer than three directors. The Board of Directors currently consists of
seven members. The Board of Directors has set the number of directors at seven
and has nominated seven candidates to stand for election to the Board of
Directors. Proxies may not be voted for more than seven persons. The Board of
Directors is not classified, and each director serves for a term of one year and
thereafter until his successor is duly elected and qualified.
Pursuant to the Share Exchange Agreement by which the Company acquired all of
the stock of Franklin Manufacturing Company, the Company agreed to appoint Mr.
Franklin to the Company's Board of Directors and to nominate him to the Board of
Directors at each shareholder meeting during the term of his employment
agreement, which expires on April 30, 2001.
At the Annual Meeting, the shareholders will elect seven members to the Board of
Directors. In the absence of instructions to the contrary, the proxy holders
will vote the shares represented by proxy in favor of the nominees listed below.
The Company expects each of the nominees listed below to be able to serve as a
director. If any nominee should become unavailable, however, it is intended that
the proxy holders will vote for a substitute designated by management.
<PAGE>
Officer
Position with or
Name Age the Company Director Business Experience (1)
Since
Ray A. 65 Chairman of the 1981 President from 1991 through
Geddes Board and Chief 1995, Chairman of the Board
Executive Officer; of Directors and Chief
Member of Executive Executive Officer since 1984.
Committee and
Compensation and
Benefits Committee
Frank 59 Director and Member 1993 Consultant to industry and
Hodsoll of Compensation and government since 1992; Deputy
Benefits Committee, Director for Management,
Stock Option United States Office of
Committee and Audit Management and Budget
Committee (Washington, D.C.) from 1991
through 1992.
William 54 Director, President 1992 President and Chief Operating
G. Rankin and Chief Operating Officer since January 1996;
Officer Executive Vice President -
Operations from 1992 through
1995.
H.J. 68 Director and Member 1994 Senior Counselor, Kearns and
Young of Executive West (Washington, D.C.) an
Committee and Audit international public
Committee. relations firm since 1994;
Senior Vice President, Edison
Electric Institute
(Washington D.C.) from 1982
through 1994.
J.B. 61 Director, Member of 1995 President, Invacare
Richey the Executive Technologies and Senior Vice
Committee, Audit President-Total Quality
Committee and Stock Management since 1992.
Option Committee Director, Invacare
Corporation, Steris
Corporation and Royal
Appliance Manufacturing Co.
Lee A. 73 Director, Member of 1997 Chairman of the Board of
Iaccoca Compensation and Directors and Chief Executive
Benefits Committee Officer, EV Global Motors
and Stock Option Company, since March 1997;
Committee Consultant to Chrysler
Corporation from 1992 through
1994.
Michael 47 Director and Vice 1998 Vice President Electronics
G. President - Manufacturing since May 1998;
Franklin Electronics President Franklin
Manufacturing Manufacturing Company since
1985.
No family relationship exists between any director, executive officer,
significant employee or person nominated or chosen by the Company to become a
director or executive officer.
There are no arrangements or understandings between any director and any other
person pursuant to which any director was nominated as a director except as
follows:
The Company has executed a stock purchase Agreement with Invacare Corporation
whereby the Company has agreed to nominate and recommend for election to the
Company's Board of Directors one person designated by Invacare for so long as
Invacare owns at least 100,000 shares of the Company's common stock and is not
in default of certain agreements.
In connection with the stock exchange between the Company and EV Global Motors
Company ("EVG") described under "Certain Relationships and Related
<PAGE>
Transactions," the Company has nominated Mr. Iacocca to the Company's Board of
Directors and EVG has elected Mr. Geddes to EVG's Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOREGOING NOMINEES.
During the fiscal year ended March 31, 1998 the Board of Directors held meetings
on fourteen occasions. Each incumbent director attended or participated in more
than seventy-five percent of the meetings of the Board and board committees on
which he served during the period he was a director. Participation at meetings
was sometimes by telephone, which is authorized under Colorado law. The votes of
each director are recorded in the minutes for each matter considered by the
Board of Directors. None of the directors listed above has been involved during
the last five years in any legal proceedings that are material to an evaluation
of the ability or integrity of that person to act as a director of the Company.
The Board of Directors has an Executive Committee, Audit Committee, Compensation
and Benefits Committee and a Stock Option Committee. The Company does not have a
Nominating Committee. The Executive Committee, which makes policy
recommendations to the Board of Directors, consists of three directors and held
no meetings during fiscal 1998.
The Audit Committee, which reviews the annual audit performed by the Company's
independent auditors, consists of three directors and met once in fiscal 1998.
See also "Compensation and Benefits Committee and Stock Option Committee Report
on Executive Compensation" below.
MANAGEMENT
The executive officers of the Company are:
Name Age Position
Ray A. Geddes 65 Chairman of the Board of Directors
and Chief Executive Officer
William G. Rankin 54 Director, President and Chief
Operating Officer
Donald A. French 42 Treasurer and Chief Financial
Officer
Michael G. Franklin 47 Director, Vice President-Electronics
Manufacturing
Ray A. Geddes, a director since 1981, joined the Company as Chairman of the
Board, Chief Executive Officer and Treasurer in 1984. From 1991 through 1995,
Mr. Geddes held the additional office of President. Mr. Geddes is also a
Director of Taiwan UQM Electric Co., Ltd. ("Taiwan UQM"), a Taiwan-based
corporation of which Unique owns 38%, and a director of EVG. Prior to joining
the Company, Mr. Geddes was an independent consultant to the automotive industry
from 1974 through 1984. For twelve years prior to that, Mr. Geddes was employed
by Ford Motor Company in various management capacities including Executive Vice
President of Ford's Italian Automobile Group where he was responsible for the
production and marketing of the Ford Pantera sports car and Program Manager for
the production, marketing, and field support activities for several specialty
<PAGE>
vehicles, including the Shelby Mustang, Ford Cobra and Ford GT sports racing
car. Mr. Geddes holds a Master of Business Administration and Juris Doctor
Degree from the University of Michigan. He is Treasurer and a member of the
board of directors of the Electric Vehicle Association of the Americas and a
member of The Society of Automotive Engineers.
William G. Rankin, President and Chief Operating Officer since 1996, Executive
Vice President-Operations and member of the Board of Directors from 1994 through
1995, joined the Company in 1992. Mr. Rankin is also a Director of Taiwan UQM.
Prior to joining the Company, Mr. Rankin held a variety of management positions
with Deere and Company, a manufacturer of agricultural, construction, and
consumer equipment. From 1986 to 1992, Mr. Rankin served as General Manager of
Deere Tech Services, a division of Deere and Company which developed, installed
and marketed computer integrated manufacturing technologies; from 1982 through
1986, as Manager of Computer-Aided Manufacturing Services; and from 1976 through
1982, as Manager of Materials Management Research and Planning.
Donald A. French, Treasurer and Chief Financial Officer, joined the Company in
1987. Mr. French served as Corporate Secretary from 1987 through 1988 and
Controller from 1987 through 1998. Prior to joining the Company, Mr. French was
a practicing Certified Public Accountant from 1985 to 1986. Prior to that Mr.
French served as Vice President and General Manager of Gaechter, Inc., an
importer and distributor of apparel and eyewear from 1983 to 1984. From 1981 to
1982, Mr. French served as Supervisor of Financial Accounting for Husky Oil
Company, a multinational oil and gas company.
Michael G. Franklin, Vice President Electronics Manufacturing, member of the
Board of Directors and President, Franklin Manufacturing Company, joined the
Company in 1998. Mr. Franklin founded and has served as President and Director
of Franklin Electronics Company, a distributor of electronics components since
1983 and Franklin Manufacturing Company, a manufacturer of electronic and wire
harness assemblies since 1985. From 1980 through 1983 Mr. Franklin served as
Regional Product Specialist for the Connector Division of Panduit Corporation
and from 1977 through 1980 as a Regional Sales Representative for Amp., Inc.
Section 16(a) Beneficial Ownership Reporting Compliance
Under the securities laws of the United States, the Company's directors, its
executive (and certain other) officers, and any persons holding more than 10
percent of the Company's common stock are required to report their ownership of
the Company's common stock and any changes in that ownership to the Securities
and Exchange Commission, the American Stock Exchange, the Boston Stock Exchange,
the Chicago Stock Exchange and the Pacific Stock Exchange. The Company is
required to report in this statement any failure to file timely reports during
fiscal 1998. Based on its review of Form 3, Form 4 and Form 5 filings, the
Company believes that the annual report of changes in beneficial ownership on
Form 5 for the fiscal year ended March 31, 1998 of Messrs. Geddes, Rankin and
French due in June 1998, was not filed until July, 1998.
<PAGE>
Executive Compensation
The following table sets forth information concerning compensation earned by the
Chief Executive Officer and any other executive officer whose total annual
salary and bonus exceeded $100,000 for the year ended March 31, 1998 and five
month transition period ended March 31, 1997 and each of the preceding two
fiscal years ended October 31, 1996 and 1995:
Summary Compensation Table
Long-term
Compensation
Awards
Number of
Securities
Name of Underlying
Individual Fiscal Annual Options Other
and Position Year Compensation Granted Compensation
Salary Bonus
Ray A. Geddes, 1998 $174,953 $ -0- 149,731 $31,266 (1)
Chairman and 1997(3) $166,622 $ -0- 78,000 $32,415 (1)
Chief Executive 1996 $162,533 $ -0- 98,926 $17,870 (1)
Officer 1995 $152,375 $ -0- -0- $16,975 (1)
William G. Rankin, 1998 $148,248 $ -0- 96,377 $13,968 (1)
Director, President 1997(3) $141,198 $ -0- 127,459 $11,124 (2)
and Chief Operating 1996 $136,873 $ -0- 80,478 $6,978 (2)
Officer 1995 $123,960 $ -0- -0- $ 7,128 (2)
Donald A. French 1998 $111,321 $ -0- 74,892 $13,110 (1)
Treasurer and 1997(3) $101,206 $ -0- 94,541 $10,164 (2)
Chief Financial 1996 $ 97,519 $ -0- 59,355 $ 5,572 (2)
Officer 1995 $ 91,424 $ -0- -0- $ 5,714 (2)
(1) Represents matching contributions to the Company's 401(k) Savings Plan,
Company paid car allowance, certain professional fees, and key man life
insurance premiums.
(2) Represents matching contributions to the Company's 401(k) Savings Plan and
key man life insurance premiums.
(3) Based on the period April 1, 1996, through March 31, 1997.
The foregoing compensation tables do not include certain fringe benefits made
available on a non-discriminartory basis to all Company employees such as group
health insurance, dental insurance, long-term disability insurance, vacation and
sick leave.
<PAGE>
Option Grants During Fiscal 1998
Potential
Realizable
Value of
Percentage Assumed
of Total Annual Rates
Number of Options of Stock
Securities Granted to Price
Name of Underlying Employees Exercise Expirat- Appreciation
Individual Options in Fiscal Price Per tion for the
and Position Granted (1) 1998 Share Date Option Term
5%(2) 10%(3)
Ray A. Geddes
Chairman and
Chief Executive 36,000 6.4 $7.13 8-19-97 $161,311 $ 408,795
Officer 113,731 20.3 $8.00 3-24-08 $572,199 $1,450,063
William G. Rankin
Director, President
And Chief Operating
Officer 96,377 17.2 $8.00 3-24-08 $484,888 $1,228,801
Donald A. French
Treasurer and
Chief Financial
Officer 74,892 13.3 $8.00 3-24-08 $376,793 $ 954,868
(1) Represents options granted pursuant to the 1992 Stock Option Plan. The
options granted vest as to one-third of the aggregate number of underlying
shares on each of the next three annual anniversary dates following the
date of grant. Additionally, the options are subject to forfeiture and have
limitations as to marketability.
(2) The market capitalization of the Company, as determined by multiplying the
outstanding number of shares of common stock at fiscal 1998 year end by the
potential realizable share value achieved by applying the price
appreciation methodology utilized in this table, would be approximately
$212 million versus a market capitalization of approximately $130 million
at March 31, 1998. Accordingly, the potential realizable value as assumed
annual rates of stock price appreciation over the ten-year term to all
shareholders is approximately $82 million assuming no increase in the
number of shares of common stock outstanding over the ten-year term.
(3) The market capitalization of the Company, as determined by multiplying the
outstanding number of shares of common stock at fiscal 1998 year end by the
potential realizable share value achieved by applying the price
appreciation methodology utilized in this table, would be approximately
$337 million versus a market capitalization of approximately $130 million
at March 31, 1998. Accordingly, the potential realizable value as assumed
annual rates of stock price appreciation over the ten-year term to all
shareholders is approximately $207 million assuming no increase in the
number of shares of common stock outstanding over the ten-year term.
<PAGE>
Aggregate Option Exercises During Fiscal Year 1998 and Option Values at the End
of Fiscal Year 1998
Value of
Number of Securities Unexercised
Underlying Unexer- in-the-money
cised Options at Options at
Number of Fiscal Year End Fiscal Year End
Name of Shares
Individual Acquired Value Exer- Unexer- Exer- Unexer-
and Position on Exercise Realized cisable cisable cisable cisable
Ray A. Geddes,
Chairman and
Chief Executive
Officer -0- -0- 465,887 234,706 $1,371,538 $505,842
William G.
Rankin, Director,
President and
Chief Operating
Officer -0- -0- 439,595 228,176 $1,635,126 $679,799
Donald A. French
Treasurer and
Chief Financial
Officer -0- -0- 208,579 174,371 $ 719,450 $446,386
Compensation and Benefits Committee and
Stock Option Committee Report on Executive Compensation1
This report combines reports of both the Compensation and Benefits Committee and
the Stock Option Committee.
The Compensation and Benefits Committee of the Board of Directors is responsible
for establishing Company policy regarding executive compensation. The
Compensation and Benefits Committee currently consists of Messrs. Iacocca,
Geddes, and Hodsoll.
The Stock Option Committee administers the 1992 Stock Option Plan and determines
how many options will be granted to executive officers and other employees of
the Company as a group. The Stock Option Committee currently consists of Messrs.
Hodsoll, Richey and Iacocca.
The Compensation and Benefits Committee determines all elements of executive
compensation except grants of stock options. Mr. Geddes does not participate in
deliberations regarding the grant of options to executive officers or other
employees of the Company. Mr. Geddes also does not participate in Compensation
<PAGE>
and Benefit Committee deliberations and recommendations as to his own
compensation.
Policy
The Company's compensation program for its Chief Executive Officer is based on
beliefs and principles designed to align compensation with business strategy,
company values, and management initiatives. The program:
Rewards the Chief Executive Officer for long-term strategic management and the
enhancement of shareholder value by cash remuneration and by delivering
appropriate ownership in the Company through the grant of options.
Integrates compensation programs with both the Company's annual and long-term
strategic planning processes.
Supports a performance-oriented environment that rewards performance with
respect to Company goals.
Attracts and retains key executives critical to the long-term success of the
Company.
The Company's Compensation package for employees generally and executive
officers in particular consists of both cash remuneration and equity based
compensation. The Company maintains a variety of benefit programs which are
designed to allow the Company to attract and retain talented individuals in a
variety of disciplines. All employees may participate in the following benefit
plans upon the attainment of certain entrance requirements:
Unique Mobility Health Benefit Plan
401(K) Savings Plan of Unique Mobility, Inc.
Unique Mobility, Inc. Stock Purchase Plan (not available to Mr. Geddes)
In addition, employees may be eligible for participation in the following
benefit plans at the discretion of the Company's Board of Directors:
Unique Mobility, Inc. 1992 Stock Option Plan
Unique Mobility, Inc. Employee Stock Bonus Plan
The Board of Directors believes that equity based compensation is critical to
the Company's ability to attract and retain qualified employees. The Company's
equity based compensation plans are designed to encourage and create ownership
in the Company's common stock, not only by executive officers, but by all
employees generally. The Board believes that the equity based plans of the
Company meet the objective of aligning key employees' long-range interests with
those of shareholders by providing key employees with the opportunity to build a
meaningful stake in the Company. The principal Company plans used to facilitate
this objective are the 1992 Stock Option Plan and the Employee Stock Purchase
Plan. Under the 1992 Stock Option Plan, employees are granted the right to
acquire shares of the Company's common stock at a fixed price over a term not to
exceed ten years. To further the Company's goal of encouraging equity ownership,
all options granted under the 1992 Stock Option Plan since 1994 provide that
option holders may not sell stock received through employee benefit programs if
<PAGE>
the sale of such stock exceeds 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. The 1992 Stock Option Plan also provides for
incremental vesting of stock options and restricts trading by option holders to
specified periods throughout the Company's fiscal year.
Performance Evaluation of Chief Executive Officer
The Compensation and Benefits Committee meets at least once with respect to each
fiscal year, without the Chief Executive Officer present, to evaluate his
performance. The Committee last met in fiscal 1998 to evaluate the performance
of the Chief Executive Officer for fiscal 1998. Accordingly, this report covers
the CEO's performance evaluation for fiscal 1998.
The Chief Executive Officer's performance is evaluated based principally on the
following criteria:
The achievement of the Company's long-term business goals and objectives during
the immediately preceding one year period.
The achievement of specified individual and overall Company objectives during
the immediately preceding one year period.
The performance of the Company's common stock during the preceding one year
period.
In view of the Company's stage of development, the measure of achievement
against goals and objectives tends to be subjective and the performance of the
Company's common stock in the marketplace tends to be based on factors other
than the widely-recognized financial performance measures of product sales, net
profits and dividends. Accordingly, the Committee has relied in its review of
the Chief Executive Officer's compensation on the following objective measures
of performance against goals and objectives, which are listed below in
descending order of importance:
The number and quality of strategic alliances and acquisitions initiated and/or
completed as measured against targeted goals. It is the Company's plan to form
strategic alliances with one or more major companies in order to develop
products and commercialize developed products as a means of accelerating the
Company's growth in existing commercial markets and the high investment, high
risk market for mass produced vehicle traction drives for the automotive sector.
In addition, the Company has adopted a strategy to grow through acquisition of
Company's whose operations or markets are synergistic with the Company's
operations. During fiscal 1998 the Company completed a Cooperation Agreement
with Orbital Engine Co. and initiated discussions with several prospective
strategic alliance partners. The Company also continued to participate actively
in its strategic alliance with KYMCO for the development and commercialization
of an electric propulsion system for application to motor scooters, the
establishment of manufacturing operations for such systems, and the manufacture
of conventional starters and alternators through Taiwan UQM. In addition, the
Company commenced the set-up of manufacturing operations in UPP and completed
the acquisition of Aerocom Industries, Inc. and Franklin Manufacturing Company
which expanded the Company's manufacturing capability and revenue base.
The capitalization and financial resources available to the Company as measured
against targeted objectives. The Company completed an offering of its common
<PAGE>
stock under Regulation D during fiscal 1998 which resulted in net proceeds to
the Company of approximately $5.8 million. A portion of these proceeds was
subsequently utilized to complete the acquisition of Franklin Manufacturing
Company. In addition, the Company maintained an adequate capitalization and
possessed adequate financial resources to support operations throughout fiscal
1998.
The number and quality of sponsored development programs and their contribution
to the technical objectives of the Company. The Company achieved higher levels
of revenue from sponsored development programs and prototype product sales
during fiscal 1998 compared to the prior year.
Technology advances and enhancements arising during the measurement period from
internally funded research and development activities. The Company successfully
extended its high voltage product line during fiscal 1998 as a result of
internally funded, and sponsored research and development activities. In
addition, the Company was granted a U.S. patent covering its "Phase Advance"
technology and filed for patent coverage on one additional motor invention. The
Compensation and Benefits Committee also reviewed other technological advances
that are not the subject of patents and that the Company chooses not to make
public at this time because they are confidential business information, the
disclosure of which would have an adverse effect on the Company.
Based on these factors, the Compensation and Benefits Committee elected to
increase the Chief Executive Officer' salary five (5) percent to $181,433 and
grant the Chief Executive Officer options to acquire 149,731 shares of the
Company's common stock at the prevailing market price on the date of grant under
the 1992 Stock Option Plan.
Additional Information
The compensation of the executive officers other than the Chief Executive
Officer is set by the Compensation and Benefits Committee and Stock Option
Committee based on the recommendations of the Chief Executive Officer, who
evaluates subjectively and objectively their performance against assigned
responsibilities and tasks.
The Company has executed employment agreements with three executive officers and
Mr. Geddes. The employment agreements provide for the payment of severance
benefits to the executive officers if the executive is terminated "without
cause", (as such term is defined in the employment agreements) (see also
"Employment Agreements" below). The Compensation and Benefits Committee believes
it advisable to provide compensation to executive managers upon termination of
employment to encourage the executive to commit his services for the longer
duration of the Employment Agreements. The Compensation and Benefits Committee
established the salaries in the employment agreements applying the criteria
discussed above, and the employment agreements themselves were not a factor in
determining salaries.
During fiscal 1998 the Stock Option Committee met four times and granted options
to acquire 561,000 shares of common stock to employees of the Company, of which
options to acquire, 321,000 shares of common stock, or 57 percent, were granted
to executive officers as a group. In addition, the Company granted options to
acquire 40,000 shares of common stock to consultants. All options granted during
<PAGE>
fiscal 1998 to employees and consultants are exercisable at an amount equal to
the fair market value of the Company's common stock on the date of grant.
The Compensation and Benefits Committee of the Board of Directors:
Ray A. Geddes
Frank Hodsoll
Lee Iacocca
The Stock Option Committee of the Board of Directors:
Frank Hodsoll
J. B. Richey
Lee Iacocca
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation and Benefits Committee currently consists of three
directors (Messrs. Geddes, Iacocca and Hodsoll) and the Stock Option Committee
currently consists of three outside directors (Messrs. Hodsoll, Iacocca and
Richey). The purpose of the Compensation and Benefits Committee is to determine
compensation and benefits for executive officers of the Company (except stock
options). The Compensation and Benefits Committee held one meeting during fiscal
1998. The purpose of the Stock Option Committee is to administer the Company's
Stock Option Plans and make recommendations to the Board of Directors on the
grant of stock options. The Stock Option Committee met three times during fiscal
1998.
Mr. Geddes is Chairman of the Board and Chief Executive Officer.
Mr. Richey, who serves on the Stock Option Committee, is an officer and director
of Invacare, which owns 0.8 percent of the Company's common stock. In December
1995, the Company completed a stock purchase agreement with Invacare Corporation
pursuant to which, in January 1996, Invacare acquired 129,032 shares of the
Company's common stock at $3.88 per share. In addition, in August 1997 the
Company completed an exclusive worldwide license and supply agreement with
Invacare covering the commercial use of UQM products in the field of medical
and health care products.
The Company has further agreed to use its best efforts to have a representative
of Invacare elected to the Company's board of directors for so long as Invacare
owns more than 100,000 shares of the Company's common stock. Mr. J. B. Richey,
Senior Vice President-Total Quality Management and Director of Invacare
Corporation, was appointed to the Company's Board of Directors in 1995 pursuant
to this provision, and is a management nominee in these proxy materials.
In June 1997 EV Global Motors Company purchased 1,151,925 shares of common stock
of the Company in a private third-party transaction. Also in June 1997, EVG
acquired in a private third-party transaction, warrants to acquire 350,000
shares of the common stock of the Company. In July and August 1997, EVG
exercised its warrant as to 350,000 shares utilizing the net issuance feature of
the warrant which resulted in the issuance of an aggregate of 233,122 shares of
the Company's common stock to EVG. As of June 25, 1998 EVG beneficially held
1,473,806 shares or 9.27 percent of the Company's common stock. Mr. Iacocca, who
serves on the Compensation and Benefit Committee and Stock Option Committee, is
<PAGE>
an officer and director of EVG. Mr. Geddes, the Company's Chairman and Chief
Executive Officer, serves as a Director of EVG and beneficially owns 405,000
shares or 1.73 percent of the common stock of EVG.
Employment Agreements
The Company has entered into Employment Agreements with Messrs. Geddes, Rankin
and French pursuant to which each has agreed to serve in his present capacity
for a term expiring December 31, 1999. The Employment Agreements provide that
Messrs. Geddes, Rankin and French will receive an annual base salary of
$181,433, $153,749 and $119,473, respectively. In addition, the Company has
entered into an Employment Agreement with Mr. Franklin expiring April 30, 2001.
The Employment Agreement provides that Mr. Franklin shall receive an annual base
salary of $140,000. Messrs. Geddes, Rankin, French and Franklin also receive the
use of an automobile and may receive bonuses and stock options. Messrs. Geddes,
Rankin and French were granted options to acquire 149,731, 96,377, and 74,892
shares of common stock, respectively during fiscal 1998. Mr. Franklin was
granted stock options to acquire 100,000 shares of common stock coincident with
the execution of his Employment Agreement on April 30, 1998.
Messrs. Geddes, Rankin and French's Employment Agreements provide that if
employment is terminated by the Company without cause during or after the term
of the agreement (after three months' notice) or upon retirement after age 65,
the officer shall receive one month's salary for each year of full-time
employment, but not less than 12 months salary and not more than 24 months
salary. If the officer terminates employment, he shall receive three months
salary, unless the Company is in default, which shall be considered termination
by the Company without cause. On a termination by the Company following a change
of control of the Company, the officer shall have the option of receiving all
amounts remaining due in the agreement or twice the payment due on a termination
by the Company in the absence of a change of control. If an officer dies during
employment, his estate shall receive three months compensation. Mr. Franklin's
Agreement provides that if employment is terminated without cause during the
term of the Agreement, that Mr. Franklin's salary under the Agreement shall
continue for the remaining term of the Agreement.
The employment agreements further provide that the Company shall maintain at its
expense, life insurance coverage on Messrs. Geddes, Rankin, French and Franklin
payable to their designees in an amount equal to three times the annual
compensation payable to each executive.
Pursuant to the Employment Agreements' Messrs. Geddes, Rankin, French and
Franklin have agreed to at no time disclose to others any confidential
information relating to the business affairs of the Company for any purpose
other than the conduct of the Company's business and each has agreed to assign
to the Company all right, title and interest in any inventions and patents
developed in whole or in part by them, individually or with others, at any time
during the term of the Employment Agreements, or six months thereafter, which
relate to the business of the Company.
The Employment Agreements further provide that Messrs. Geddes, Rankin, and
French, for a period of one year after the term of their respective Employment
Agreements, and Mr. Franklin for a term of three years, will not become
affiliated with any person, firm or corporation whose business is similar to or
in competition with the Company. Messrs. Geddes, Rankin and French have agreed
that for a period of one year after termination of their Employment Agreement,
<PAGE>
and in the case of Mr. Franklin, for a term of three years, to not induce or
attempt to induce any employee of the Company to leave the employ of the
Company; nor will they induce or attempt to induce any customer, supplier or
licensee to cease doing business with the Company.
BOARD OF DIRECTORS COMPENSATION
In fiscal 1993, the Board of Directors of the Company established the Unique
Mobility, Inc. Stock Option Plan for Non-Employee Directors which is designed to
encourage directors to participate in the ownership of the Company and therefore
to more closely align their interests with those of the Company's shareholders.
The plan was approved by the Company's shareholders in February 1994. Directors
of the Company who are not officers may elect to receive an annual retainer of
$12,000 in cash or the grant of options to acquire that number of shares of the
Company's common stock established each year by the Board of Directors in
accordance with the terms of the Unique Mobility, Inc. Stock Option Plan for
Non-Employee Directors, plus reimbursement for ordinary and necessary expenses
of attending meetings. The Company has proposed that the shareholders ratify an
increase in the total number of shares available for grant under the stock
option plan for non-employee directors from 250,000 shares to 500,000 shares and
certain other amendments which are more fully described below. See "Amendment to
the Stock Option Plan for Non-Employee Directors". In addition, directors upon
their initial election to the Board of Directors, are awarded 2,000 shares of
the Company's common stock at a purchase price of $0.01 per share. Directors who
are full-time officers of the Company are not entitled to additional
compensation for their service as directors.
The following table sets forth information concerning remuneration to directors
of the Company during fiscal 1998:
Number of
Securities
Underlying Shares of
Options Price Expiration Common Stock
Name of Director Granted Per Share Date Awarded
Ray A. Geddes(1) - - - -
Frank Hodsoll 16,000 $7.13 8-18-08 -
H. J. Young 16,000 $7.13 8-18-08 -
J. B. Richey 16,000 $7.13 8-18-08 -
Lee A. Iacocca 16,000 $7.13 8-18-08 -
William G. Rankin(1) - - - -
Michael G. Franklin(1) - - - -
(1) Serves without compensation in his capacity as an officer of the
Company.
All directors who are eligible to receive compensation as a director for the
term of service beginning August 19, 1997, elected to receive stock options in
lieu of cash payments.
<PAGE>
Performance Graph2
The following graph represents the yearly percentage change in the cumulative
total return on the common stock of Unique Mobility, Inc., the group of
companies comprising the S&P Electrical Equipment Index, and those companies
comprising the S&P 500 Index for the five year period from 1994 through 1998:
Figure 1 Total Shareholders Returns Graph - line graph of the following indexed
values by year:
Base
Period
Mar 93 Mar 94 Mar 95 Mar 96 Mar 97 Mar 98
Unique Mobility, Inc. 100 96.43 70.53 63.39 51.79 120.53
Electrical Equipment 500 100 110.44 124.53 176.14 222.74 368.80
S&P 500 Index 100 101.47 117.27 154.92 185.63 274.73
SECURITY OWNERSHIP OF CERTAIN OWNERS AND MANAGEMENT
The following table shows the ownership of the Company's $0.01 par value common
stock by (i) beneficial owners of 5 percent or more of the Company's common
stock, (ii) each director and nominee director, (iii) the Chief Executive
Officer and each other executive officer whose annual salary and bonus exceeds
$100,000 and (iv) all directors and executive officers as a group, as of June
25, 1998. Unless otherwise noted, each shareholder exercises sole voting and
investment power with respect to the shares beneficially owned:
Number of
Common Shares Percent of
Name of Shareholder Beneficially Owned Class (1)
Ray A. Geddes(2) 1,033,243 6.23%
William G. Rankin 672,214 4.06%
Donald A. French 417,091 2.56%
Frank Hodsoll 54,000 .34%
Jack Young 63,333 .40%
J. B. Richey(3) 18,000 -
EV Global Motors Company(4) 1,473,806 9.27%
Lee A. Iacocca(5) 1,473,806 9.27%
Michael G. Franklin 363,379 2.27%
Director and Executive
Officers as a Group (8 persons) 4,095,066 22.91%
<PAGE>
(1) Calculated separately for each holder on the basis of the actual number of
outstanding shares as of June 30, 1998. Assumes that shares issuable upon
exercise of options and warrants held by such person (but not by anyone else)
and exercisable within 60 days from the date of this document have been issued
as of such date.
(2) Mr. Geddes' address is 425 Corporate Circle, Golden, Colorado 80401.
(3) Mr. Richey is an affiliate of Invacare Corporation which owns 129,032
shares (0.8%). Mr. Richey disclaims beneficial ownership of Invacare
Corporation's shares.
(4) EV Global Motors Company's address is 10900 Wilshire Boulevard, Suite 520,
Los Angeles, California 90024.
(5) Mr. Iacocca is an affiliate of EV Global Motors Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain transactions between the Company and members of the Compensation and
Stock Option Committee's of the Company's Board of Directors are described above
under "Compensation Committee Interlocks and Insider Participation".
SELECTION OF AUDITORS
At the meeting, the shareholders will be called upon to ratify the appointment
of independent auditors to serve for fiscal 1999.
THE BOARD OF DIRECTORS AND THE MANAGEMENT OF THE COMPANY RECOMMEND THAT THE
SHAREHOLDERS VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK,
LLP, DENVER, COLORADO who have been the independent auditors of the Company
since 1985. A representative of that firm, who will be present at the meeting,
will have the opportunity to make a statement should he desire to do so and can
be expected to respond to appropriate questions. In the event the shareholders
do not ratify the appointment of KPMG Peat Marwick LLP as independent auditors,
management may reconsider its choice of independent auditors.
To be adopted, the proposal must be approved by the affirmative vote of a
greater number of votes cast for the proposal than are cast against the
proposal. If a ballot is called for, proxies in the accompanying form appointing
the persons whose names are printed therein to act will (unless the proxy form
has been marked against or authority to vote is withheld) be voted in favor of
the proposal.
AMENDMENT TO THE STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
On October 11, 1993, the Board of Directors (the "Board") adopted the Unique
Mobility, Inc. Stock Option Plan for Non-Employee Directors (the "Plan"),
subject to shareholder approval. The shareholders approved the Plan at the
meeting on February 18, 1994.
The Board and the management of the Company believe that the recruitment and
retention of qualified individuals to serve on the Board is essential to the
success of the Company and will be enhanced by providing incentive to such
individuals to serve on the Board and to continue service on the Board.
Moreover, the Board and management believe that it is important to the success
of the Company to provide individuals who serve on the Board and who are not
<PAGE>
Company employees with a more direct interest in the future success of the
Company.
On August 19, 1997, the Board adopted resolutions to amend the Plan in two
respects: (1) to increase the number of shares available for the grant of
options under the Plan from 250,000 to 500,000 and (2) to change the number of
shares subject to each option granted under the Plan from 16,000 to the number
determined each year by the Board.
Under the Plan, options ("Options") to purchase up to 500,000 shares of Unique's
$0.01 par value common stock (the "Stock") may be granted to "non-employee
directors." The number of shares of Stock subject to the Plan and to outstanding
Options will be adjusted to account for certain dilutive changes in the
Company's capitalization. As of July 23, 1998 the last reported sale price of
the Stock on the American Stock Exchange was $6.25.
For purposes of the Plan, a "non-employee director" is a member of the Board who
is not a Company employee. As of July 31, 1998, there were four non-employee
directors on the Board.
Non-employee directors may elect to receive their entire annual retainer in cash
or to receive a grant of Options under the Plan in lieu of cash. The annual
retainer is paid for a period of service commencing on the date of the annual
meeting of shareholders and ending on the date of the annual meeting of
shareholders in the following year.
Each non-employee director must elect no later than January 31 between a cash
payment of the next year's annual retainer or a grant of an Option under the
Plan. The Options are granted on the date of the annual meeting of shareholders.
Each year, prior to January 31, the Board will determine the number of shares
that will be subject to Options granted on the date of the next annual meeting
of shareholders. All Options granted under the Plan are nontransferable except
by will or the laws of descent and distribution.
The Option price is the "fair market value" of the Stock on the date the Option
is granted. "Fair market value" is the last reported sale price of the Stock on
the American Stock Exchange on the date as of which fair market value is
determined.
Each Option will vest in annual increments of one-third beginning on the first
anniversary of the date the Option is granted.
An Option will be exercisable for a period of ten years unless the non-employee
director's service on the Board ceases before the expiration of the ten-year
Option term. If the non-employee director is removed for cause, the entire
Option, whether or not vested, will be immediately void. If the non-employee
director leaves the Board on account of disability, the Option can be exercised
for one year after termination of service. If the non-employee director dies
while serving on the Board or within three months after leaving the Board (other
than on account of removal for cause or termination on account of disability),
the Option can be exercised for fifteen months after the non-employee director's
death. If the non-employee director ceases to serve on the Board for any reason
other than removal for cause, disability, or death, the Option may be exercised
for three months after the non-employee director's termination of service.
A non-employee director can exercise an Option by giving written notice to the
Company and by paying the Option price by (1) cash, (2) certified, cashier's or
<PAGE>
other check acceptable to the Company, (3) delivery to the Company of
irrevocable instructions to a broker to deliver to the Company the proceeds of a
loan or the sale of the Stock to pay the Option price, (4) delivery to the
Company of a promissory note (to the extent permissible under Colorado corporate
law), which is in the principal amount of the Option price, is full recourse and
secured by all or a portion of the Stock to be acquired, bears interest at a
rate at least equal to the rate required to avoid the imputation of interest
under the Internal Revenue Code, provides for level quarterly payments of
principal and interest, and becomes payable in full five years after the Option
is exercised, within five days after any default, or termination of the
non-employee director's membership on the Board for any reason, or (5) delivery
to the Company of a number of shares of Stock, the "fair market value" of which
is equal to the Option price, provided such shares have been held for at least
six months or such other period as shall be sufficient for the Company to avoid,
if possible, the recognition of expense with respect to the Option for
accounting purposes.
Each non-employee director who is granted an Option must agree to abide by the
Company's policies on trading the Company's securities. Moreover, each
non-employee director must agree to refrain from selling Stock acquired from
Company compensation plans, if the sale on any stock exchange or the
over-the-counter market exceeds 10% of the total trading volume on the exchange
or over-the-counter market on the date of the sale. If the non-employee director
fails to comply with these policies, as determined in the sole discretion of the
Company, the non-employee director must pay the Company, as liquidated damages,
the profit realized on the sale. This agreement by the non-employee director
survives the exercise of an Option and the termination of the Plan.
Upon a "change in control" of the Company, the outstanding Options will become
fully vested regardless of the non-employee holder's length of service. For this
purpose, a "change in control" will occur if, during any period of two
consecutive years, the persons who were the majority of the Board at the
beginning of the two year period and new members of the Board whose nomination
or election was approved by at least two-thirds of the Board are no longer the
majority.
If the Company is a party to a merger, consolidation or other reorganization
(unless the Company is the continuing corporation and it does not result in any
reclassification or exchange of outstanding shares), or if all or substantially
all of the Company's assets are sold or more than 50% of the Company's stock is
acquired by another person or entity (other than a sale whereby the Company
continues as a holding company of an entity that continues the Company's
business), or if the Company is liquidated, the Company may either (1) provide
for the protection of the outstanding Options by assumption or substitution of
options to purchase the securities into which the Stock is changed on an
equitable basis and the Company may, in its discretion, accelerate the vesting
of the outstanding Options (in which case all vesting restrictions shall lapse)
or (2) give written notice to all Option holders that the Options must be
exercised within 30 days of the date of the notice or the Options will be
terminated.
The Board may amend, modify, suspend or terminate the Plan but no such action
may impair any Option previously granted under the Plan or deprive any
non-employee director of any Stock that he may have acquired through or as a
result of the Plan. The Plan provides that the Company will obtain shareholder
approval of amendments to the Plan to the extent required by the securities laws
or the listing requirements of any exchange on which the Stock is listed.
<PAGE>
There are no federal income tax consequences to the non-employee director or the
Company on the grant of an Option. Upon exercise of an Option, the non-employee
director will recognize income and the Company will be entitled to a deduction
in an amount equal to the amount by which the fair market value of the Stock on
the date the Option is exercised exceeds the Option price. The non-employee
director's basis for the Stock is equal to the sum of the Option price and the
income recognized. The holding period begins on the date the Option is
exercised.
If a non-employee director exercises an Option by paying the exercise price with
shares of Stock, the non-employee director will be treated as having made a
nontaxable exchange of the number of shares transferred for an equal number of
shares received (the "Exchange Stock"). The basis and holding period of the
Exchange Stock will be the same as the basis and holding period of the Stock
transferred. All shares received in excess of the Exchange Stock (the "Excess
Stock") are treated as income to the non-employee director, and the Company will
have a corresponding deduction. The amount of income is equal to the fair market
value of the Excess Stock on the date the Option is exercised. The Excess Stock
has a basis equal to the amount included in income with respect to the
acquisition of such Excess Stock and a holding period that begins on the date
the Option is exercised.
When the non-employee director disposes of the Stock in a taxable transaction,
the difference between the non-employee director's basis for the Stock (the sum
of the Option price and the income recognized) and the fair market value of the
Stock will be treated as capital gain or loss, so long as the Stock is held as a
capital asset. The Company is not entitled to a deduction upon the non-employee
director's disposition of the Stock.
If all outstanding Options become vested upon a "change in control," as
described above, the value of the acceleration in vesting will be treated as a
"parachute payment" within the meaning of Code section 280G. If the value of the
acceleration of vesting together with the value of any other payments received
by the non-employee director in connection with the change in control results in
an "excess parachute payment," as defined in Code section 280G, the non-employee
director will be subject to an excise tax equal to 20% of the "excess parachute
payment." The Company will not be entitled to a deduction for any amount treated
as an "excess parachute payment."
At present, the accounting treatment for Options is different from the federal
income tax treatment for the Company. The grant of an Option does not affect net
income so long as the Option price is not less than the fair market value of the
Stock at the date the Option is granted. Options granted with an Option price
less than the fair market value are deemed to be compensatory and will reduce
the Company's net income.
THE BOARD AND MANAGEMENT RECOMMEND A VOTE FOR THE APPROVAL OF THE AMENDMENT TO
THE NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN.
To be adopted, the votes cast in favor of the proposal must exceed the votes
cast opposing the proposal. Proxies in the accompanying form appointing the
persons whose names are printed therein to act will (unless the proxy form has
been marked against or authority to vote is withheld) be voted in favor of the
proposal.
<PAGE>
PROPOSALS BY SHAREHOLDERS
In accordance with rules of the Securities and Exchange Commission, shareholders
of the Company may present proposals to the Company for inclusion in the
Company's proxy statement prepared in connection with its next regular Annual
Meeting of Shareholders.
Proposals to be included in the proxy statement prepared in connection with the
next Annual Meeting of Shareholders to be held in September 1999 must be
received by the Company no later than March 31, 1999, in order to be considered
for inclusion.
OTHER MATTERS
As of the date of this proxy statement, the Board of Directors is not aware of
any other matters to be presented for action at the meeting, nor has it been
advised that others will present any other matters. If any other matters do
properly come before the meeting, the proxy holders intend to vote the proxies
held by them in accordance with their best judgment on such matters.
ANNUAL REPORT
Upon the receipt of a written request from any shareholder, the Company will
mail, at no charge to the shareholder, a copy of the Company's 1998 Annual
Report on Form 10-K, including the financial statements and schedules required
to be filed with the Securities and Exchange Commission pursuant to Rule 13a-1
under the Exchange Act, for the Company's most recent fiscal year. Written
requests for such Report should be directed to:
Secretary
Unique Mobility, Inc.
425 Corporate Circle
Golden, Colorado 80401
Phone (303) 278-2002
The Company's Annual Report on Form 10-K is also available at the web site that
the Securities and Exchange Commission maintains at http://www.sec.gov.
APPROVAL OF DIRECTORS
The Board of Directors of the Company has approved the contents of this proxy
statement and its mailing to the shareholders.
/s/Elaine J. England
Elaine J. England, Secretary
<PAGE>
PROXY THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS Unique
Mobility, Inc., 425 Corporate Circle, Golden, Colorado 80401 The undersigned
hereby appoints Ray A. Geddes and Donald A. French as proxies, each with the
power to appoint his substitute, and hereby authorizes them to represent and
vote, as designated below, all the shares of common stock of Unique Mobility,
Inc. held of record by the undersigned on July 20, 1998 at the Annual Meeting of
Shareholders to be held on September 14, 1998 or any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR LISTED
BELOW:
1. TO ELECT SEVEN DIRECTORS TO THE COMPANY'S BOARD OF DIRECTORS TO HOLD OFFICE
UNTIL THE NEXT ANNUAL MEETING OF SHAREHOLDERS AND UNTIL THEIR SUCCESSORS
ARE ELECTED. Ray A. Geddes Frank Hodsoll William G. Rankin H.J. Young J. B.
Richey Lee A. Iacocca Michael G. Franklin
ELECTION OF DIRECTORS FOR all nominees listed above WITHHOLD AUTHORITY
(except as marked to the contrary to vote for all
above) nominees listed above
(INSTRUCTION: To withhold authority to vote for any individual nominee strike a
line through the nominee's name above.)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSAL:
2. PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE
INDEPENDENT AUDITORS OF THE COMPANY.
FOR AGAINST ABSTAIN
3. PROPOSAL TO INCREASE THE NUMBER OF SHARES AVAILABLE FOR GRANT UNDER THE
UNIQUE MOBILITY, INC. STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS.
FOR AGAINST ABSTAIN
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting. The Board of Directors is
not aware of any other matters to be presented at the meeting for approval
by the shareholders.
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE NAMED NOMINEES AND FOR PROPOSALS 2 AND 3.
Please sign exactly as name appears below. When shares
are held by joint tenants, both should sign. When signing as
attorney, administrator, trustee or guardian, please give
full title as such. If a corporation, please sign in full
corporate name by President or other authorized officer. If
a partnership, please sign in partnership name by authorized
person.
Dated , 1998
Signature
Please mark, sign, date and return the proxy
card promptly using the enclosed envelope. Signature, if held jointly
<PAGE>
UNIQUE MOBILITY, INC.
STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
Effective November 1, 1993
As Amended, Effective August 19, 1997
<PAGE>
UNIQUE MOBILITY, INC.
STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
The board of directors of Unique Mobility, Inc., a Colorado corporation (the
"Company"), established the Unique Mobility, Inc. Stock Option Plan for
Non-Employee Directors (the "Plan"), effective November 1, 1993 (the "Effective
Date"). The Plan is hereby amended and restated, effective August 19, 1997.
PURPOSES
The purposes of the Plan are to provide certain directors of the Company who are
not also employees of the Company added incentive to continue in the service of
the Company and a more direct interest in the future success of the operations
of the Company by granting to such directors options ("Options") to purchase
shares of the $0.01 par value common stock (the "Stock") of the Company upon the
terms and conditions described below.
ARTICLE I
GENERAL
1.1 Definition. For purposes of the Plan and as used herein, a "non-employee
director" is an individual who (a) is a member of the Board of Directors of the
Company (the "Board") and (b) is not an employee of the Company. For purposes of
the Plan, an employee is an individual whose wages are subject to the
withholding of federal income tax under section 3401 of the Internal Revenue
Code of 1986, as amended from time to time (the "Code"). A non-employee director
to whom an Option is granted is referred to herein as a "Holder."
1.2 Nature of Options. The Options granted hereunder shall be options that do
not satisfy the requirements of Section 422 of the Code.
ARTICLE II
OPTIONS
2.1 Participation. The non-employee directors on the Effective Date and each
non-employee director elected thereafter shall receive Options to purchase Stock
in accordance with Sections 2.2 and 2.3 on the terms and conditions herein
described.
2.2 Election.
(a) General. Pursuant to resolutions of the Board, the Company pays each
non-employee director an annual retainer for the approximately 12-month period
of service commencing on the date for the regularly scheduled annual meeting of
the shareholders and ending at the close of business on the day before the date
for the regularly scheduled annual meeting of the shareholders in the following
calendar year. This 12-month period shall be referred to as a "Period of
Service." Prior to the commencement of a non-employee director's Period of
<PAGE>
Service, the non-employee director may elect, as provided in this section 2.2,
to receive all of the non-employee director's annual retainer for the Period of
Service in the form of a grant of Options pursuant to this Plan. A non-employee
director who does not make a timely election shall be deemed to have elected to
receive all of his annual retainer for the Period of Service in cash.
(b) Elections. No later than six months prior to the first day of a Period
of Service, each individual who is then a non-employee director shall make an
election to receive all of his annual retainer as a director for such Period of
Service in the form of cash or in the form of a grant of Options pursuant to
this Plan. The election must be in writing and must be delivered to the
Secretary of the Company no later than the close of business on the date that is
six months prior to the first day of the Period of Service for which the
election is made. A non-employee director who does not timely file an election
shall be deemed to have elected to receive all of his annual retainer for such
Period of Service in cash.
(c) Newly Elected Directors. Each individual who is newly elected to the
Board may elect, within 30 days of his election to the Board, to receive all of
his annual retainer for his first Period of Service in cash or in the form of a
grant of Options under this Plan. The election must be in writing and must be
delivered to the Secretary of the Company no later than the close of business on
the thirtieth day after the non-employee director's election to the Board. A
non-employee director who does not timely file an election shall be deemed to
have elected to receive all of his annual retainer for such Period of Service in
cash.
2.3 Grant.
(a) General. Each non-employee director who has elected to receive his
annual retainer for a Period of Service in the form of an Option shall be
granted an Option to purchase shares of Stock on the date of the annual meeting
of the Company's shareholders with respect to such Period of Service, on the
terms and conditions set forth in this Plan. Each Option pursuant to this
Section 2.3(b) shall entitle the non-employee director to purchase the number of
shares of Stock determined by resolution of the Board no later than the date by
which the non-employee directors must make their elections, unless insufficient
shares are available for grant to each electing director on such date, in which
case each such director shall automatically receive an option to purchase his
pro rata portion of the shares that are then available for grant under the Plan.
(b) Initial Grants to Newly Elected Directors. Each newly elected
non-employee director who has elected to receive his annual retainer for his
first Period of Service in the form of an Option shall be granted an Option to
purchase shares of Stock on the date that is six months after the date of his
election to receive an Option, on the terms and conditions set forth in this
Plan. Each Option granted pursuant to this Section 2.3(b) shall entitle the
non-employee director to purchase the number of shares of Stock subject to
Options granted for the Period of Service during which the newly elected
director's service commences, unless insufficient shares are available for grant
to each electing non-employee director on such date, in which each such
non-employee director shall automatically receive an option to purchase his pro
rata portion of the shares that are then available for grant under the Plan. If
<PAGE>
the Period of Service for which the non-employee director was elected is shorter
than 12 months, the number of shares subject to the Option shall be equal to the
number of shares granted for the Period of Service during which the newly
elected director's service commences, multiplied by a fraction, the numerator of
which is the number of months in the Period of Service and the denominator of
which is 12.
2.4 Terms. Options issued pursuant to the Plan shall have the following terms
and conditions in addition to those set forth elsewhere herein:
(a) Number. Each non-employee director shall receive under the Plan Options
to purchase the number of shares of Stock specified in Section 2.3, subject to
adjustment as provided in Article III. Such grants shall be effective at the
times specified in Section 2.3.
(b) Price. The price at which each share of Stock covered by the Option may
be purchased by each non-employee director shall be the Fair Market Value (as
defined in Section 5.5) of the Stock on the date of grant, subject to adjustment
as provided in Article III.
(c) Duration of Options. The period within which each Option may be
exercised shall expire ten years from the date the Option is granted (the
"Option Period"), unless terminated sooner pursuant to subsection (d) below or
fully exercised prior to the end of such period.
(d) Termination of Service, Death, Etc. The Option shall terminate in the
following circumstances if the Holder ceases to be a director of the Company:
(i) If the Holder is removed as a director of the Company during the
Option Period for cause, the Option shall be void thereafter for
all purposes.
(ii) If the Holder ceases to be a director of the Company on account
of disability within the meaning of Section 22(e)(3) of the Code,
the Option may be exercised by the Holder (or, in the case of
death thereafter, by the persons specified in Section
2.4(d)(iii)) within one year following the date on which the
Holder ceased to be a director (if otherwise within the Option
Period), but not thereafter. In any such case, the Option may be
exercised as to all shares then subject to the Option without
regard to the service requirement in subsection 2.4(g).
(iii)If the Holder dies during the Option Period while still serving
as a director or within the three-month period referred to in
Section 2.4(d)(iv) below, the Option may be entitled to do so
under the Holder's will or by the laws of descent and
distribution within fifteen months following the Holder's death
(if otherwise within the Option Period), but not thereafter. In
any such case, the Option may be exercised as to all shares then
subject to the Option without regard to the service requirement
in subsection 2.4(g).
(iv) If the Holder ceases to be a director within the Option Period
for any reason other than removal for cause, disability or death,
the Option may be exercised by the Holder within three months
following the date of such termination (if otherwise within the
<PAGE>
Option Period), but not thereafter. In any such case, the Option
may be exercised as to all shares then subject to the Option
without regard to the service requirement in subsection 2.4(g).
(v) With respect to all Options granted after the date this amended
and restated Plan is signed, subparagraphs, (ii), (iii), and (iv)
shall not apply. An Option granted after the date this amended
and restated Plan is signed shall terminate at the end of the
Option Period or if the Holder is removed from the Board for
cause before the end of the Option period, the Option shall
thereafter be void for all purposes.
(e) Transferability, Exercisability. Each Option granted under the Plan
shall not be transferable by a Holder other than by will or the laws of descent
and distribution and shall be exercisable during the Holder's lifetime only by
the Holder or, in the event of disability or incapacity, by the Holder's
guardian or legal representative.
(f) Exercise, Payments, etc.
(i) The method of exercising each Option granted shall be by delivery
to the Company of written notice specifying the number of shares
with respect to which the Option is exercised. The purchase of
Stock pursuant to the Option shall take place at the principal
office of the Company within thirty days following delivery of
such notice, at which time the purchase price of the Stock shall
be paid in full by any of the methods set forth in Section
2.4(f)(ii) or a combination thereof. The Option shall be
exercised when the purchase price is paid in full. If the
purchase price is paid by means of a broker's loan transaction as
described in clause (C) of Section 2.4(f)(ii), in whole or in
part, the closing of the purchase of the Stock under the Option
shall take place on the date on which, and only if, the sale of
Stock upon which the broker's loan was based has been closed and
settled, unless the Holder makes an irrevocable written election,
at the time of exercise of the Option, to have the exercise
treated as fully effective for all purposes upon receipt of the
purchase price by the Company regardless of whether or not the
sale of the Stock by the broker is closed and settled. A properly
executed certificate or certificates representing the Stock shall
be delivered to the Holder upon payment therefor. If Options on
less than all shares evidenced by an Option Certificate are
exercised, the Company shall deliver a new Option Certificate
evidencing the Option on the remaining shares on delivery of the
outstanding Option Certificate for the Option being exercised.
(ii) The exercise price shall be paid by any of the following methods
or any combination of such methods, at the option of the Holder:
(A) cash, or (B) certified, cashier's or check acceptable to the
Company, payable to the order of the Company; or (C) delivery to
the Company of irrevocable instructions to a broker to deliver
promptly to the Company the amount of sale or loan proceeds
required to pay the purchase price of the Stock; or (D) delivery
to the Company of a promissory note (to the extent permissible
under Colorado corporate law), which shall be in a principal
amount equal to the purchase price, which shall be full recourse
<PAGE>
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 principal and interest
over its tenure, 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 Holder's
services as a director 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; or (E) delivery to
the Company of certificates representing the number of shares of
Stock then owned by the Holder, the Fair Market Value of which
(determined as of the date the notice of exercise is delivered to
the Company) equals the price of the Stock to be purchased
pursuant to the Option, properly endorsed for transfer to the
Company. No Option may be exercised by delivery to the Company of
certificates representing Stock that has been held by the Holder
for less than six months or such other period as shall be
sufficient for the Company to avoid, if possible, the recognition
of expense with respect to the Option for accounting purposes.
(g) Service Required for Exercise. Except as set forth in Sections 2.4(d),
4.1 and 4.2, each Option shall become exercisable in increments after each year
of continuous service by the Holder as of non-employee director of the Company
commencing with the first year of continuous service from the date of grant. The
number of shares as to all or part of which the Option may be exercised after
one year of continuous service as a non-employee director after the date of
grant shall be 1/3 of the total number of shares covered by the Option, with an
additional 1/3 being exercisable after the second year of continuous service,
and an additional 1/3 after the third year of continuous service. Except as set
forth in Sections 4.1 and 4.2, the Option shall not be exercisable as to any
shares as to which the continuous service requirement has not been satisfied,
regardless of the circumstances under which the Holder ceased to be a director.
The number of shares as to which the Option may be exercised shall be
cumulative, so that once the Option becomes exercisable as to any shares it
shall continue to be exercisable as to those shares until expiration or
termination of the Option as provided in the Plan.
(h) Compliance with Certain Company Policies. The 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 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, employees and consultants 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 Holder on any stock exchange and in the
over-the-counter market. If the 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
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 Holder over the
Holder's basis for the Stock disposed of) in the transaction that resulted in
the failure to comply with the Company's policy. This condition shall survive
the exercise of an Option and the termination of the Plan.
<PAGE>
ARTICLE III
AUTHORIZED STOCK
3.1 Number of Shares. A total of 500,000 shares are authorized for issuance
under the Plan in accordance with the provisions of the Plan. This authorization
may be increased from time to time by approval of the Board and by the
shareholders of the Company if, in the opinion of counsel for the Company, such
shareholder approval is required. Shares that may be issued upon the exercise of
Options shall be applied to reduce the maximum number of Shares remaining
available for use under the Plan. The Company shall at all times during the term
of the Plan and while any Options are outstanding retain as authorized and
unissued Stock, or as treasury Stock, at least the number of Shares from time to
time required under the provisions of the Plan, or otherwise assure itself of
its ability to perform its obligations hereunder.
3.2 Unused and Forfeited Stock. Any Shares that are subject to an Option under
this Plan that are not used because the terms and conditions of the Option are
met, including any shares that are subject to an Option that expires or is
terminated for any reason shall automatically become available for use under the
Plan. Any Shares that are used to pay the Option Price shall not become
available for the grant of Options under the Plan.
3.3 Adjustments for Stock Split, Stock Dividends, Etc. If the Company shall at
any time increase or decrease the number of its outstanding Shares or change in
any way the rights and privileges of such Shares by means of the payment of a
stock dividend or any other distribution upon such Shares payable in stock, or
through a stock split, subdivision, consolidation, combination, reclassification
or recapitalization involving the Stock, then in relation to the Stock that is
affected by one or more of the above events, the numbers, rights and privileges
of the following shall be increased, decreased or changed in like manner as if
they had been issued and outstanding, fully paid and nonassessable at the time
of such occurrence: (i) the shares of Stock as to which Options may be granted
under the Plan; and (ii) the Shares then subject to each outstanding Option.
3.4 Dividend Payable in Stock of Another Corporation, Etc. If the Company shall
at any time pay or make any dividend or other distribution to the holders of
Stock payable in securities of another corporation or other property (except
money or Stock), a proportionate part of such securities or other property shall
be set aside and delivered to any Holder then holding an Option for the
particular type of Stock for which the dividend or other distribution was made,
upon exercise thereof. Prior to the time that any such securities or other
property are delivered to a Holder in accordance with the foregoing, the Company
shall be the owner of such securities or other property and shall have the right
to vote the securities, receive any dividends payable on such securities, and in
all other respects shall be treated as the owner. If securities or other
property that have been set aside by the Company in accordance with this Section
are not delivered to a Holder because an Option is not exercised, then such
securities or other property shall remain the property of the Company and shall
be dealt with by the Company as it shall determine in its sole discretion.
3.5 Other Changes in Stock. If there shall be any change, other than as
specified in Sections 3.3 and 3.4, in the number or kind of outstanding Shares
<PAGE>
of Stock or of any Stock or other securities into which the Stock shall be
changed or for which it shall have been exchanged, 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 outstanding Options or which have been
reserved for issuance pursuant to the Plan but are not then subject to an
Option, then such adjustments shall be made by the Committee and shall be
effective for all purposes of the Plan and on each outstanding Option that
involves the particular type of stock for which a change was effected.
3.6 Rights to Subscribe. If the Company shall at any time grant 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 be
reserved with respect to the Shares then subject to an Option held by any Holder
of the particular class of Stock involved, the Stock or other securities which
the Holder would have been entitled to subscribe for if immediately prior to
such grant the Holder had exercised his entire Option. If, upon exercise of any
such Option, the Holder subscribes for the additional Stock or other securities,
the Holder shall pay to the Company the price that is payable by the Holder for
such Stock or other securities.
3.7 General Adjustment Rules. No adjustment or substitution provided for in this
Article III shall require the Company to issue a fractional share under any
Option and the total substitution or adjustment with respect to each Option
shall be limited by deleting any fractional share. In the case of any such
substitution or adjustment, the purchase price with respect to each such 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.
3.8 Determination by the Committee, Etc. Adjustments under this Article III
shall be made by the Committee, whose determinations with regard thereto shall
be final and binding.
ARTICLE IV
CORPORATE REORGANIZATION; CHANGE OF CONTROL
4.1 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), 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 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, as to the Plan and
outstanding Options, 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 Holders
holding such Options as a result of such substitution, and the excess of the
<PAGE>
aggregate Fair Market Value of the Shares subject to Options immediately after
such substitution over the purchase price thereof is not more than the excess of
the aggregate Fair Market Value of the Shares subject to Options immediately
after such substitution over the purchase price thereof is not more than the
excess of the aggregate Fair Market Value of the shares subject to such Options
immediately before such substitution over the purchase price thereof, or (ii)
upon written notice to the Holders, provide that all unexercised Options must be
exercised within thirty days of the date of such notice or they will be
terminated. If alternative (i) is implemented, the Committee may, at its sole
discretion, provide that Options may be exercisable in full without regard to
the applicable exercise periods set forth in the Option agreements and if
alternative (ii) is implemented, Options shall be exercisable in full without
regard to the applicable exercise periods set forth in the Option agreements.
4.2 Change of Control. In the event of a change in control of the Company, as
defined below, all Options shall become exercisable in full, without regard to
applicable exercise periods set forth in Article II. 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 (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.
ARTICLE V
GENERAL PROVISIONS
5.1 Expiration. The Plan shall terminate whenever the Board adopts a resolution
to that effect. After termination, no additional Options shall be granted under
the Plan, but the Company shall continue to recognize Options previously
granted.
5.2 Amendments, Etc. The Board may from time to time amend, modify, suspend or
terminate the Plan. Nevertheless, no such amendment, modification, suspension,
or termination shall impair any Option theretofore granted under the Plan or
deprive any Holder of any shares of Stock that he may have acquired through or
as a result of the Plan without the consent of the Holder. The Plan may not be
amended more than once every six months with respect to the persons entitled to
be granted Options hereunder, the timing of grants for participants, the number
of shares of Stock to be granted as Options to individual participants or the
price thereof, other than amendments necessary to comport with changes in the
Code or the rules and regulations thereunder. The Company shall obtain the
approval of shareholders to any amendment or modification of the Plan to the
extent required by Rule 16b-3 (or any successor applicable rule) or by the
listing requirements of the National Association of Securities Dealers, Inc. or
any stock exchange on which the Company's securities are quoted or listed for
trading.
5.3 Treatment of Proceeds. Proceeds from the sale of Stock pursuant to Options
granted under the Plan shall constitute general funds of the Company.
5.4 Fair Market Value. The "Fair Market Value" of a share of Stock shall be the
last reported sale price of the Stock on the American Stock Exchange on the day
the determination is to be made. If, however, the Stock should be listed or
<PAGE>
admitted for trading on a national securities exchange, the Fair Market Value of
a share of Stock shall be the closing price on the day the determination is to
be made. If the Stock is not listed or traded on NASDAQ or on any national
securities exchange, the Fair Market Value for purposes of the grant of Options
under the Plan shall be determined by the Committee in good faith.
5.5 Section Headings. The Section headings are included herein only for
convenience, and they shall have no effect on the interpretation of the Plan.
5.6 Severability. If any article, section, subsection or specific provision is
found to be illegal or invalid for any reason, such illegality or invalidity
shall not effect the remaining provisions of the Plan, and the Plan shall be
construed and enforced as if such illegal and invalid provision had never been
set forth in the Plan.
5.7 Rule 16b-3. This Plan is intended to comply with the requirements of Rule
16b-3 and any successor applicable rule so that grants under the Plan will not
affect the status of non-employee directors as disinterested persons for
purposes of Rule 16b-3 and that such grants will otherwise satisfy the
requirements of Rule 16b-3. To the extent the Plan does not conform to such
requirements, it shall be deemed amended to so conform without any further
action on the part of the Board of Directors or shareholders.
UNIQUE MOBILITY, INC.,
a Colorado corporation
Date: July 20, 1998 By: /s/Donald A. French
<PAGE>
Cover page consisting of graphic art and the following text:
UQM
Driving the World with Electric Power
Unique Mobility, Inc.
Annual Report 1998
<PAGE>
Photos (inside front cover): Ethos I HEV, Kia Sephia EV, Ethos 3 EV,
Saturn HEV, Advanced Technology Transit Bus,HMMWV HEV, electric bicycle,
electric scooter, electric wheelchair and the following text:
UQM Driving the World with Electric Power!
<PAGE>
Company Highlights
Recent Events
- - The Company opened a newly constructed 25,000 square foot factory in
Frederick, Colorado, to house the Aerocom Industries acquisition and Unique
Power Products, a wholly-owned motor manufacturing subsidiary.
- - The Company acquired Franklin Manufacturing, a $10 million, St. Charles,
Missouri-based manufacturer of printed circuit boards, wire harnesses and
electronic assemblies; in addition to its rapidly growing core business,
Franklin will manufacture UQM controllers and related electronic components.
- - The Company acquired Aerocom Industries, a $2 million, Colorado-based
manufacturer of precision gears; in addition to its rapidly growing core
business, Aerocom will produce speed reduction gear sets for the Company's
integrated electric power systems.
- - The Company was awarded a U.S. Patent covering phase advance control, a key
technology that significantly extends the power range of electronically
commutated permanent magnet motors.
- - With PEI Electronics (formerly Chrysler Pentastar), the Company demonstrated a
Unique-powered 4WD hybrid-electric HMMWV ("Hummer") to the Department of Defense
and members of the automotive press.
- - Deere & Co. (NYSE:DE) joined Unique in a program to develop a dual fuel engine
generator for large-scale, hybrid-electric vehicles pursuant to a cost share
contract from the U.S. Department of Defense.
- - The Company signed a multiyear license and supply agreement with Invacare
Corporation (NASDAQ:IVCR) to manufacture UQM motors for power wheelchairs; J.B.
Richey, Senior Vice President of Invacare Corporation and President of Invacare
Technologies, was reelected to the Unique board.
- - Lee Iacocca's EV Global Motors became the Company's largest shareholder with
the purchase of a ten percent equity position and Unique acquired one percent of
EV Global; Lee Iacocca joined Unique's board of directors and Unique's CEO, Ray
A. Geddes, was appointed to the board of EV Global.
Bar Graphs graphing the following information and values:
Shareholder's equity
Millions of dollars 3.7 4.4 5.6 8.6 16.7
fiscal period ended 10-31-94 10-31-95 10-31-96 3-31-97 3-31-98
Book value per common share
Dollars 0.37 0.42 0.48 0.66 1.09
fiscal period ended 10-31-94 10-31-95 10-31-96 3-31-97 3-31-98
Working capital
Millions of dollars 2.1 1.1 2.5 4.2 7.6
fiscal period ended 10-31-94 10-31-95 10-31-96 3-31-97 3-31-98
Total debt
Millions of dollars 0.93 2.3 2.18 2.12 1.19
fiscal period ended 10-31-94 10-31-95 10-31-96 3-31-97 3-31-98
<PAGE>
Picture of Ray A. Geddes, Chairman and Chief Executive Officer
To Our Shareholders:
I am pleased to present our inaugural annual report in a year of "firsts" for
Unique Mobility.
What an eventful year it was! We sharpened our focus, developed a manufacturing
strategy, repositioned the Company from product developer to product producer,
completed two key acquisitions, and began to fill our order book. Moreover, we
made great strides in our mission to become a leading provider of advanced
vehicle power systems for energy efficient, environmentally clean transportation
throughout the world.
Our transition into the world of commercial production is a major milestone for
Unique. Over the years, we've built a technology portfolio that represents a
cumulative investment of more than $37 million. Much of this effort was funded
by our customers and clients - major companies and government agencies who
turned to us to advance the state-of-the art in highly efficient, power dense
electric motors and controls.
Now we're ready to make good on this investment - a step that portends a sharp
increase in revenue and shareholder value arising from a number of new products
and services.
Manufacturing Strategy Unique has achieved worldwide recognition as a leader in
the development of highly efficient, power dense, (small and lightweight)
permanent magnet motors and controls. Our registered trademark "UQM" has
appeared on engineered products shipped all over the globe. Our client list has
included an impressive array of "blue chip" automotive, industrial and
commercial organizations.
In the midst of these accomplishments, however, we encountered a critical
roadblock. The roadblock was our lack of the structural, financial and human
resources to manufacture in volume what we developed.
This led us to devise a manufacturing strategy that could be quickly implemented
to fill the gap. In line with this strategy we established Unique Power Products
(motors), acquired Aerocom Industries (gears), and Franklin Electronics (printed
circuit boards and wire harnesses). With these transactions, our revenue
run-rate tripled and our order backlog jumped to more than $20 million.
Moreover, we now have the in-house capability to supply customers with a wide
range of integrated electric propulsion systems, subsystems and components.
Product Programs
During the year, we've seen our long association with Invacare Corporation
mature into a customer-supplier relationship. In August 1997, we executed a
multiyear license and supply agreement with Invacare that calls for Unique Power
Products to launch production during fiscal 1999.
In June 1997, EV Global Motors Company became our largest shareholder and its
Chairman, Lee Iacocca, joined our board. EV Global is committed to the near-term
commercialization of electric bicycles, electric scooters and neighborhood
electric vehicles. We're working closely with EV Global to develop motors and
controls for these exciting new products.
In May 1998, Taiwan UQM Electric Co., Ltd., our joint venture in the Republic of
China, launched production of small motors for KYMCO, our joint venture partner.
KYMCO has announced it will introduce an electric scooter in the Taiwan market
this fall and has appointed EV Global its distributor for electric scooters in
the Americas, Bermuda and the Caribbean Islands. Taiwan UQM will be KYMCO's
principal supplier of electric propulsion systems.
Acquisitions
In January 1998, we acquired Aerocom for a total valuation of $4.7 million,
including assumption of debt. Aerocom's core business is the precision grinding
of gears for customers in the automotive, industrial and aerospace markets. Its
revenue for calendar year 1997 was approximately $2 million.
<PAGE>
Our rationale for the Aerocom acquisition was based on its synergy with Unique's
electric motor product line (most motors require a speed reducing gear set) as
well as its current order backlog and the potential for future growth through
the cross marketing of Unique/Aerocom products and services.
In April 1998, we acquired Franklin Electronics for a total valuation of $9.5
million, including assumption debt. Franklin is an ISO 9002 certified
manufacturer of printed circuit boards, cable harnesses and electronic
assemblies for customers in the automotive, computer, medical,
telecommunications and industrial markets. Franklin's revenue for the year ended
September 30, 1997, was approximately $10 million.
Our rationale for the Franklin acquisition was based on our need for electronics
manufacturing capability (all brushless permanent magnet motors require
electronic control) as well as its current backlog and its potential for future
growth through the cross marketing of Unique/Franklin products and services.
The acquisition of Aerocom and Franklin has expanded our product offerings far
beyond that of motors and controllers. By including gears, gear assemblies and a
wider array of electronic devices, we have opened up opportunities to supply
components to new markets and to offer "one-stop shopping" to customers that
require integrated motor, gear and electronic control systems.
Future Outlook
Historically, Unique has developed technology primarily for application in
electric and hybrid-electric vehicles. At present, we are addressing this market
with a focus on low voltage propulsion systems and auxiliary automotive
components.
During fiscal 1999, Unique traction drives will appear in electrically propelled
wheelchairs, bicycles and scooters. Other near-term traction applications
include golf carts, warehouse vehicles, neighborhood vehicles, lawn and grounds
care equipment, floor cleaners and sweepers and fork lift trucks. We have also
targeted several related markets such as generators, DC-DC converters, battery
management systems, battery chargers, power steering pump motors, air
conditioning compressor motors, fuel cell compressor motors and cooling fan
motors.
In the longer term, we believe that Unique can become a key supplier to the
emerging automotive markets for battery-electric, fuel cell-electric and
hybrid-electric vehicles. Our key relationships with industry leaders should
serve to enhance and accelerate our path to production in this vital new segment
of the transportation industry.
Accordingly, we are pursuing sources offunding to develop more advanced
propulsion systems for both on-road automotive mass markets and off-road niche
markets. We expect that the U.S. Departments of Defense, Energy and
Transportation will continue to solicit proposals for such efforts, including
potentially sizable awards as part of the Partnership for a New Generation of
Vehicles (PNGV). As in the past, we will respond, hopefully with success, to
those opportunities that match our product development and commercialization
goals.
In the meantime, we foresee a sharp increase in revenues and steady improvement
in cash flows as a result of our entry into the markets for gears and electronic
contract manufacturing. As flexible, low-cost players in these very large
markets, we believe both Aerocom and Franklin have significant upside potential
and will contribute greatly to the future growth of our Company.
Of course, our people are at the heart of our past and future achievements. Our
employees know how to succeed during periods of change and uncertainty. They are
customer-committed and achievement-oriented people. They share our goal to
manage Unique Mobility to enrich the lives of those we serve, to improve the
environment in which we live and to provide the best possible return on your
investment.
/s/Ray A. Geddes
Ray A. Geddes
Chairman and Chief Executive Officer
<PAGE>
Building The Infrastructure
Expanding to Meet the Future
Engineering and Product Development Center
Unique Mobility's corporate offices and its Engineering and Product Development
Center are based in Golden, Colorado, adjacent to the foothills of the Rocky
Mountains and the Denver-Boulder-Colorado Springs high-tech corridor. Located
nearby is the National Renewable Energy Laboratory together with a host of
aerospace, electronics and telecommunications companies that are available for
consultation and technical support.
The Engineering and Product Development Center includes engineering and
drafting/design offices, an electronics laboratory, a mechanical assembly shop,
a dynamometer test facility and an experimental garage. All machines, tools and
test equipment required to produce prototype systems and components, pilot
production runs and production tooling are on site.
Unique's engineering group has computing facilities that comprise five
Pro/ENGINEER workstations and more than 40 IBM-compatible personal computers NT
networked with full access to the web.
The electronics lab is equipped to fabricate and test both analog and digital
controllers, control software and computer area networks. The power lab has the
capability to test motors, generators and controllers for systems rated up to
250 horsepower.
The Engineering and Product Development Center is a critical element of Unique's
strategy for sustained growth. It is an indispensable source of new products and
ideas that will open expansive new markets for the Company, its partners and its
licensees.
Photos: The Company's Golden, Colorado facility and the equipment located
in the facility (8 photos)
<PAGE>
Manufacturing Operations: Mechanical Products
Manufacturing operations for mechanical products - motors and gears - are
performed by two of the Company's wholly-owned subsidiaries, Unique Power
Products and Aerocom Industries. They are housed together in a newly constructed
25,000 square foot facility in Frederick, Colorado. Unique Power Products was
established in January 1997 to plan for and launch production of an innovative
new wheelchair motor for Invacare Corporation, the world's largest producer of
power wheelchairs.
Since its inception, Unique Power Products has developed manufacturing
processes, purchased tooling and equipment, established a supply base and
recruited key personnel in preparation for a production launch during the
current fiscal year. ISO 9002 quality certification is scheduled for October
1998.
Aerocom was acquired in January 1998 and relocated to Frederick in June 1998.
Aerocom gears are used in the transmissions of large off-highway construction
and agricultural machinery as well as in aerospace actuators. Aerocom's customer
list includes Caterpillar, Inc., Dana Corporation, Eaton Corporation, Funk
Manufacturing Co. (a subsidiary of Deere & Co.), Honeywell Space Flight Systems
and Sunstrand Aviation.
Aerocom is fully equipped with precision gear grinding, hobbing and shaping
machines together with a full complement of general machining, welding and
inspection equipment. Aerocom's capacity has been recently expanded to include
an oil quench heat treat oven and the manufacture of complete gear shaft
assemblies.
Photos: Manufacturing facility in Frederick, Colorado, manufacturing equipment,
and end products of customers containing components manufactured at
the Frederick, Colorado facility (10 photos)
<PAGE>
Building The Infrastructure
Expanding to Meet the Future
Manufacturing Operations: Electronics
Franklin Electronics, acquired in April 1998, is an established manufacturer of
thru-hole and surface mount printed circuit boards, cable harness assemblies and
complete electronic boxes. It is located in a 31,000 square foot facility in St.
Charles, Missouri.
Franklin serves the automotive industry (Chrysler, Ford, General Motors and
Honda) as a Tier 2 supplier to Siemens Electromechanical Components and Methode
Electronics. Franklin also serves the computer, industrial and telecommunication
markets through customers such as Blaw Knox Construction, Ferro Magnetics,
Flight Safety International, L.R. Nelson Corporation and Montgomery Kone.
Franklin is fully equipped with state-of-the-art screen-printing, pick and
place, chip-shooter, insertion and wave soldering systems and is ISO 9002
certified. The marriage of Unique's engineering and product development
expertise with this high volume, high quality, low cost manufacturing capability
is expected to open up a host of new business opportunities for the Company.
Photos: Manufacturing facility in St. Charles, Missouri, manufacturing
equipment, and customer end products containing components
manufactured at the St. Charles facility (10 photos)
<PAGE>
Manufacturing Operations: Taiwan Joint Venture
Unique has established a beachhead from which to serve Asian markets through
Taiwan UQM Electric Co., Ltd., its joint venture with KYMCO. KYMCO is Taiwan's
largest producer of motor scooters with factories in Taiwan and in Mainland
China. Taiwan UQM has been licensed to manufacture UQM motors and controllers
exclusively in Taiwan and non-exclusively in Asia, except for Japan and India.
Taiwan is requiring its motor scooter industry, which produces more than one
million units annually, to begin to market electric scooters starting with the
year 2000. KYMCO has announced to the public that it will introduce its first
electric scooter in the fall of 1998, and that it hopes to lead the industry as
a producer of electric scooters.
In support of the KYMCO electric scooter program, Taiwan UQM has constructed and
equipped a 75,000 square foot engineering and manufacturing facility in the city
of Tao-Yuan. Production of starter motors and alternators for KYMCO's gasoline
powered scooters was launched in May 1998. Production of scooter motors is
scheduled to begin in the fourth calendar quarter.
Photos: Taiwan manufacturing facility, manufacturing equipment and electric
motor scooter (6 photos)
<PAGE>
Accessing Markets Through Partnerships
Accelerating the Path to Commercialization
A key element of the Company's strategy to tap near-term markets is based on the
supply of motors and controllers for small lightweight vehicles that do not
require exotic batteries for high speed or extended range. To implement this
strategy, Unique has formed strategic partnerships with leaders in the field of
light electric transportation. Three of these important relationships are
profiled below.
Invacare Corporation (NASDAQ:IVCR)
Invacare is a shareholder of the company and J. B. Richey, Invacare's Senior
Vice President of Total Quality Management, is a member of the Unique board of
directors.
Invacare produces and distributes products used by people recovering at home
from accidents or illness, and for long-term use by a child or an adult who has
a physical disability. Distribution covers the United States, Canada, Europe,
Australia and New Zealand. Invacare's total revenue in 1997 was $653 million.
Invacare's electrically powered products include power wheelchairs, home care
beds, motorized scooters and power tilt and recliner devices.
Unique and Invacare have collaborated on the development of an innovative new
wheelchair motor that offers smooth operation and improved controllability.
Unique has granted Invacare an exclusive worldwide license to use its technology
in medical products.
Photo: J.B. Richey, Sr. Vice President-Total Quality Management, Invacare
Corporation
EV Global Motors Company
EV Global was founded by Lee Iacocca to develop and mass-market light electric
transportation in cooperation with strategic partners around the world. Mr.
Iacocca believes that light electric vehicles offer a practical solution for
urban package delivery, for short trips to work, or to run errands, as well as
for fun and fitness. His vision encompasses a range of products, such as
electric bicycles, scooters, pedicabs and small four-wheeled neighborhood
vehicles.
EV Global is Unique's largest shareholder with a ten percent equity position and
a seat on the Unique board. Conversely, Unique has a one percent shareholding in
EV Global and Ray A.Geddes, the Company's Chairman and CEO, sits on the EV
Global board. Unique is currently working closely with Mr. Iacocca's staff to
develop electric propulsion systems for several of EV Global's product programs.
Photos: Lee Iacocca, Chairman and CEO, EV Global Motors Company;
Lee Iacocca and Ray A. Geddes (two pictures)
Kwang Yang Motor Co., Ltd. (KYMCO)
KYMCO is Taiwan's largest producer of motor scooters, a principal form of
transportation in the Republic of China. With factories in Kaohsiung, Taiwan,
and in Mainland China, KYMCO markets its products throughout Asia and Europe.
KYMCO also plans to market electric scooters in the Western Hemisphere through a
recently completed distribution arrangement with EV Global.
KYMCO is privately held and has annual revenues of approximately $1 billion.
Unique and KYMCO have collaborated on the development of an advanced electric
power system (motor, controller, DC/DC converter and charger) for application to
motor scooters. Two percent of the scooters produced for sale in Taiwan
(approximately 20,000 units) are required to be electric by the year 2000.
Unique has granted KYMCO a license to use the developed products in scooters
exclusively in Asia (except for Japan and India) and non-exclusively throughout
the rest of the world.
Separately, Unique, KYMCO and Turn Luckily Technology, an automotive engineering
consulting firm, formed a joint venture, Taiwan UQM Electric Co., Ltd., to
manufacture the developed products and other products under a companion license
from the Company. Taiwan UQM is currently preparing to produce power systems for
KYMCO scooters in support of KYMCO's announcement that it will introduce its
first electric model in the fall of 1998.
Photo: KYMCO board of directors and Taiwan UQM management
<PAGE>
Developing the Power for Future Transportation
The Emerging Market for Electric and Hybrid-Electric Vehicles
In a world that produces over 56 million cars, trucks and buses annually, the
potential market for battery-electric, fuel cell-electric and hybrid-electric
vehicles is immense, especially in those cases where a premium is placed on fuel
efficiency and improved air quality.
Unique has a long history of integrating battery-electric propulsion systems
into passenger cars beginning with the ElecTrek all-composite sedan produced by
the Company from 1980 through 1983. Since that time, Unique has developed
advanced motors and controllers for the BMW electric car program, an integrated
propulsion system for the Pininfarina Ethos 3 EV and a similar system for the
1998 Kia Sephia EV show car.
The major forces driving the commercialization of battery-electric vehicles lie
in the demand for energy security and clean air. However, unfavorable battery
cost/performance metrics and the lack of battery charging infrastructure have
relegated the all-electric vehicle to niche market status.
Over the long term, a mass market for alternative-powered vehicles is expected
to emerge as advances in fuel cell and hybrid-electric technologies begin to
mature. In the meantime, hybrid-electric niche markets are beginning to appear.
These markets include large trucks, buses and off-highway equipment such as
agricultural, mining and military vehicles.
Recent efforts by Unique in the hybrid-electric niche market include hub-mounted
traction motors and controls for the DOT-funded Advanced Technology Transit Bus
(ATTB) and a 4WD traction system and high-output generator for the
hybrid-electric HMMWV developed in collaboration with PEI Electronics for the
Defense Advanced Research and Development Agency (DARPA).
No matter which type of vehicle energy source prevails - battery-electric, fuel
cell electric or hybrid-electric - highly efficient, power dense electric
motors, generators, and electronic controls will be in demand. Unique believes
it is well positioned to become a key player in both the near-term niche markets
and the emerging mass-market for these critical components and systems.
Photo: graphical representation of a hybrid electric automobile
<PAGE>
Implementing A Strategy For Growth
A Plan to Achieve New Strength and Diversity
Seizing the Opportunity
Unique expects to experience dramatic growth over the next few years through a
combination of an expansive build-up of its manufacturing operations, strategic
alliances to access new markets and accretive acquisitions that leverage its
core competencies.
Aggressive Product Commercialization
Unique has laid the foundation for an international manufacturing infrastructure
and has secured its first multiyear purchase agreements. The Company anticipates
that several new accounts will be added to its customer list during fiscal 1999.
Recent acquisitions have brought manufacturing capacity on line to accommodate a
strong upsurge in new business and credit lines have been established to finance
additional capacity.
Strategic Alliances to Access Key Markets
Unique has successfully partnered with leading companies and organizations
worldwide to develop new products and enter new markets. The Company is
aggressively pursuing these relationships in order to expand its product lines
and to reach new markets, both domestically and overseas. Prospective alliances
with key automotive and industrial OEM suppliers are being developed to access
the emerging automotive mass markets for alternative vehicle power systems.
Accretive Acquisitions
Unique launched an aggressive acquisition campaign with the recent acquisition
of Aerocom Industries and Franklin Electronics. These acquisitions brought with
them a four-fold increase in consolidated revenue and accretive earnings and
cash flow. The Company will continue to act on its acquisition strategy to
accelerate growth. Target candidates will have increasing revenue and
profitability, a product and marketing strategy that is consistent with Unique's
existing business and key management personnel.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company changed its fiscal year end from October 31 to March 31 commencing
with periods beginning after October 31, 1996. This change resulted in a
five-month transition period for financial reporting purposes commencing on
November 1, 1996, and ending on March 31, 1997. This report covers the Company's
financial condition at March 31, 1998 and March 31, 1997 and results of
operations, changes in stockholders' equity and changes in cash flows for the
year ended March 31, 1998, the five-month transition period ended March 31, 1997
("Fiscal 1997") and the fiscal years ended October 31, 1996 and 1995,
respectively.
Financial Condition
The Company's financial condition strengthened during Fiscal 1998 due to the
sale of 626,875 shares of common stock pursuant to offerings under Regulation D
of the Securities Act of 1933, the issuance of common stock upon the exercise of
outstanding common stock warrants and options, the acquisition of Aerocom
Industries, Inc. and an investment in EV Global Motors Company. Cash proceeds to
the Company from the Regulation D offering, net of offering costs, amounted to
$4,673,797 and cash proceeds received upon the exercise of outstanding common
stock warrants and options amounted to $3,024,709. Primarily as a result, cash
and cash equivalents rose to $7,005,533 at March 31, 1998 from $5,713,557 at
March 31, 1997 and shareholders' equity rose to $16,731,132 from $8,574,799.
Subsequent to year-end, the Company used $4,000,000 in cash as part of the
consideration to acquire Franklin Manufacturing Company. Working capital
(the excess of current assets over current liabilities) increased to
$7,566,627 at March 31, 1998 from $4,174,184 at March 31, 1997.
<PAGE>
Accounts receivable rose $716,152 to $1,105,466 at March 31, 1998 from $389,314
at March 31, 1997. The increase is attributable to the consolidation of the
trade accounts receivable of the two new subsidiaries, Aerocom and UPP, which
accounted for $371,815 and $304,177 of the increase, respectively.
Costs and estimated earnings on uncompleted contracts increased $262,853 to
$454,738 at March 31, 1998 from the fiscal 1997 year end level of $191,885. The
increase was due to increased levels of contract services in process and
milestone billing arrangements on such contracts. Estimated earnings on
contracts in process rose to $515,782 at March 31, 1998 on costs incurred on
contracts in process of $1,724,552 compared to estimated earnings on contracts
in process of $490,407 on costs incurred on contracts in process of $3,158,704
at March 31, 1997. The increase reflects improved margins on contracts in
process and is attributable to greater labor content in contracts in process and
a reduction in anticipated cost overruns.
Raw materials and finished products inventories declined by $206,778 and
$55,061, respectively, to $76,377 and $17,715, respectively, at March 31, 1998
compared to $283,155 and $72,776, respectively, at the beginning of Fiscal 1998.
The decrease is primarily attributable to an inventory write-down associated
with the Company's decision to terminate its past practice of batch production
of specialty motors and controllers and the associated stocking of these
specialty components in inventory. Coincident with this decision, the Company
intends to cease the marketing of these products to the solar racing market,
which has historically accounted for approximately $300,000 in specialty product
sales, although the Company intends to continue to produce these components for
customers on a custom build basis. Likewise, the Company recorded an inventory
write-down on its entire line of prototype motors, controllers and associated
components. The Company intends to devote substantially all of its marketing,
sales and engineering personnel to securing and executing development programs,
both customer and internally funded, which have a higher probability of
resulting in products that can be manufactured in volume and sold in existing
commercial markets. Work in process inventories rose $90,365 to $159,825 at
March 31, 1998 due to production of twenty SR286 motors and associated controls
pursuant to existing customer orders.
In January, 1998 the Company acquired all of the outstanding common stock of
Aerocom for $3,377,020. The purchase price consisted of a cash payment of
$337,702 and the issuance of 371,555 shares of the Company's common stock. The
acquisition was accounted for under the purchase method of accounting. Under
this method, the excess of the purchase price over the net assets acquired is
first allocated to increase the recorded value of the tangible assets acquired
to their fair market value, with any excess then recorded as goodwill. The
excess of the purchase price over the net assets acquired of Aerocom resulted in
an increase in the recorded value of property and equipment in the amount of
$1,788,598 with the excess of $1,297,087 being recorded as goodwill.
The Company invested $703,562 for the acquisition of property and equipment
during Fiscal 1998 compared to $118,608 for the five-month period ended
March 31, 1997 and $182,011 and $440,079 in Fiscal 1996 and 1995, respectively.
The increase in capital expenditures is primarily attributable to the purchase
of manufacturing equipment by Aerocom coincident with the expansion of their
manufacturing capabilities.
<PAGE>
Investment in Taiwan joint venture declined to $2,044,393 at Fiscal 1998 year
end from $2,677,730 at the beginning of the fiscal year. The decrease is
attributable to the Company's proportionate share of operating losses which
amounted to $246,648 during Fiscal 1998 and foreign currency translation
adjustments which amounted to $386,689.
Patent and trademark costs, net of accumulated amortization, was $575,985 at
March 31, 1998 an increase of $73,688 from the Fiscal 1997 year end level. The
increase is primarily attributable to increased legal fees, application fees and
maintenance fees which amounted to $110,411 during Fiscal 1998 compared to
$47,865 for the five-month transition period ended March 31, 1997 and $92,390
and $64,766 for fiscal 1996 and 1995, respectively. Prior to June 1997, Alcan
Aluminium Limited paid one-half of the Company's qualifying patent prosecution
costs. Coincident with Alcan's sale of its equity stake in the Company this
reimbursement provision expired, contributing, in part, to the increase in
patent and trademark costs.
Accounts payable rose to $389,791 at March 31, 1998 from $169,403 at the end of
Fiscal 1997. The increase is primarily attributable to the consolidation of the
trade accounts payable of Aerocom which accounted for $147,197 of the increase.
Other current liabilities increased to $876,357 at Fiscal 1998 year end, from
$459,223 at March 31, 1997. The increase is primarily attributable to the
consolidation of the other current liabilities of Aerocom and UPP which
accounted for $113,709 and $467,871 of the increase. The principal components of
the increase were accrued machinery and equipment purchases which rose $402,834
and accrued material purchases which rose $82,357.
Billings in excess of costs and estimated earnings on uncompleted contracts
declined $659,357 to $450 at March 31, 1998 from $659,807 at March 31, 1997 due
to the completion of work on a large program where the customer made a
substantial prepayment.
Long-term debt rose $303,706 during Fiscal 1998 due to the assumption of debt
upon the acquisition of Aerocom. Long-term debt consists of term debt on the
manufacturing equipment of its gear manufacturing operations and mortgage debt
on the Company's facility in Golden, Colorado.
Common stock and additional paid-in capital increased to $153,946 and
$38,852,446 at March 31, 1998, respectively, compared to $130,430 and
$27,094,170 at March 31, 1997. The increases were due to the sale of common
stock to investors in the amount of $4,673,797; proceeds received upon the
exercise of warrants of $1,932,375; sales of common stock to employees and
consultant's through the Company's benefit plans and the exercise of options of
$1,163,892; the issuance of common stock for the acquisition of Aerocom of
$3,039,318; and the exchange of common stock for the common stock of EVG of
$1,000,000.
Results of Operations
Operations for the year ended March 31, 1998, resulted in a net loss of
$3,266,360 or $0.23 per share compared to a net loss of $1,201,085 or $0.12 per
share for the five-month transition period ended March 31, 1997, a net loss of
$2,904,743 or $0.26 per share for the year ended October 31, 1996 and a net loss
of $1,330,433 or $0.13 per share for the year ended October 31, 1995.
<PAGE>
Revenue derived from contract services was $2,790,496 during fiscal 1998
compared to $700,132 for the five months ended March 31, 1997 and $1,436,484 and
$4,031,951 for the fiscal years ended October 31, 1996 and 1995, respectively.
The increase in contract services revenue over the annualized Fiscal 1997 and
the Fiscal 1996 levels is attributable to increased levels of sponsored
development activities in 1998 which were driven by several contracts with
governmental agencies for the development of higher power systems and an
electric vehicle conversion program for an international automotive OEM. The
decline in fiscal 1998 revenue compared to fiscal 1995 is due to the performance
of a multi-million dollar research program in fiscal 1995 for the US Department
of Energy and Ford Motor Company.
Product sales during Fiscal 1998 rose to $1,274,236 compared to $152,016 for the
five month transition period last year and $611,213 and $701,700 in Fiscal 1996
and 1995, respectively. The increase is primarily due to product sales by
Aerocom subsequent to its acquisition which amounted to $531,787. Product sales
by the technology segment remained at approximately the same levels as in prior
years.
Gross profit margins for fiscal 1998 increased to 11.0 percent compared to a
margin of 10.3 percent for the five-month transition period last year and
declined compared to margins of 15.1 percent and 28.7 percent for fiscal 1996
and 1995, respectively. Gross profit on contract services was 5.6 percent for
the year ended March 31, 1998 compared to 9.8 percent for the five-month
transition period ended March 31, 1997, 18.6 percent for the fiscal year ended
October 31, 1996 and 31.0 percent for the fiscal year ended October 31, 1995.
The decline in gross profit margins during fiscal 1998 compared to all prior
periods is attributable to increased material content in programs performed in
fiscal 1998 and cost overruns on various development programs which negatively
impacted margins. Gross profit on product sales in Fiscal 1998 was 23.1 percent
compared to a margin of 12.9 percent for the five-month transition period ended
March 31, 1997, 6.7 percent for the fiscal year ended October 31, 1996 and 15.2
percent for the fiscal year ended October 31, 1995. The increase in margins on
product sales in Fiscal 1998 is primarily attributable to higher margins on
product sales of gears which averaged 32.5 percent during the period following
the acquisition of Aerocom.
Research and development expenditures in fiscal 1998 declined to $902,407
compared to the annualized rate for the five month transition period ended March
31, 1997 of $1,232,506 and the fiscal 1996 and 1995 amounts of $1,698,352 and
$1,298,311, respectively. The decrease is generally attributable to decreasing
levels of internally-funded development activities and declining levels of
development expenditures on the product launch for Invacare Corporation.
General and administrative expense for Fiscal 1998 was $2,121,340 compared to
$695,263 for the five-month transition period ended March 31, 1997 and
$1,354,713 and $1,193,030 during fiscal 1996 and 1995, respectively. The
increase over the prior periods presented is generally attributable to the
consolidation of the general and administrative expenses of Aerocom and UPP
which amounted to total expenditures of $115,607 during Fiscal 1998, legal and
accounting expenditures related to the negotiation and due diligence for the
Aerocom and Franklin acquisitions which totaled $105,887, higher levels of
investor relations, marketing and business development expenditures which
totaled $85,073 and the write-off of an accounts receivable from a customer who
filed for bankruptcy of $229,872.
Interest income increased to $191,186 in Fiscal 1998 compared to $54,802 for the
five-month transition period last year and $113,582 and $50,890 for Fiscal 1996
and 1995, respectively. The increase is attributable to higher levels of
invested cash during Fiscal 1998.
<PAGE>
Interest expense was $96,073 during Fiscal 1998 which represents a decrease from
the annualized Fiscal 1997 amount and the amounts reported for Fiscal 1996 and
1997. The decrease is attributable to generally lower interest rates in Fiscal
1998 and the funding of capital call obligations to Taiwan UQM during Fiscal
1997 which carried a 10 percent interest rate throughout the period they were
due and not paid.
Equity in loss of Taiwan joint venture rose to $246,648 for the year ended
March 31, 1997 compared to $24,121 for the five-month transition period ended
March 31, 1997 and $45,164 and $11,952 for the fiscal years ended October 31,
1996 and 1995, respectively. The increase is due 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 throughout Fiscal 1998 were adequate
to meet operating needs. Net cash used by operating activities was $3,679,072
for the year ended March 31, 1998. Cash requirements throughout the period were
funded primarily through the sale of common stock to investors and cash received
upon the exercise of outstanding common stock warrants and options.
During the first quarter of Fiscal 1998, the Company entered into a strategic
alliance with EV Global Motors Company. As part of this alliance EVG exchanged
400,000 shares of its common stock for 200,000 shares of the Company's common
stock. The value of the exchange transaction was $1,000,000. Coincident with
this transaction Mr. Lee Iacocca, EVG's Chief Executive Officer joined the
Company's board of directors and Ray Geddes, the Company's Chief Executive
Officer, joined EVG's board of directors. As of May 31, 1998 EVG beneficially
owned 1,455,806 shares of the Company's common stock or 9.2 percent making EVG
the Company's largest shareholder.
During the fourth quarter of Fiscal 1998, the Company completed the acquisition
of all of the outstanding common stock of Aerocom Industries, Inc., a
privately-held Boulder, Colorado based precision gear manufacturer. The
acquisition price was $3,377,020 consisting of a cash payment of $337,702 and
the issuance of 371,555 shares of the Company's common stock. In addition, the
Company assumed $1,264,464 of then existing Aerocom liabilities and debt. The
cash portion of the transaction was paid from existing cash balances of the
Company. Subsequent to the acquisition, the Company began construction of a
25,000 square foot manufacturing plant in Frederick, Colorado. The plant is
situated on 2 acres of land and the Company holds an option to acquire an
adjacent 2 acre parcel to accommodate future expansion of the facility.
Construction cost of the plant, including land acquisition costs, is expected to
be $1.2 million. Construction financing was provided from existing cash
balances. The Company has received a commitment from a commercial bank for
mortgage financing which is expected to amount to approximately $.9 million.
Coincident with this expansion, prior to the end of Fiscal 1998 the Company
expended $461,550 for year manufacturing equipment of the approximately $2
million it expects to expend on such equipment prior to the end of calendar
1998. These expenditures are expected to increase its manufacturing capability,
both in manufacturing processes and throughput capacity. In order to expand its
operations and fund its capital expenditure needs, the Company secured financing
from a commercial bank which consists of a $.75 million revolving line-of-credit
and term loan financing for up to $2 million of manufacturing equipment
purchases, including the refinancing of existing term equipment loans. All
financing of the subsidiary has been unconditionally guaranteed by Unique as the
parent entity.
<PAGE>
During the fourth quarter of Fiscal 1998, the Company completed the private
placement of 626,875 units of its securities, at $8.00 per unit, to
institutional investors and individual investors in an offering under Regulation
D of the Securities Act. Each unit sold consisted of one share of common stock
and one warrant to purchase one share of common stock at $8.00 per share for a
period of two years subsequent to the date of the offering. The warrants may be
called after one year from the date of the offering if the closing price of the
common stock on the American Stock Exchange has been $16.00 or more for a period
of 20 days. Net proceeds to the Company were $4,673,797. Subsequent, to the end
of Fiscal 1998, the Company acquired Franklin Manufacturing Company, a
privately-held St. Charles, Missouri manufacturer and distributor of electronic
assemblies and components. The Company completed the acquisition of the
outstanding common stock of Franklin for $4 million in cash, the assumption of
approximately $3.1 million in liabilities and debt and the issuance of 286,282
shares of the Company's common stock. The Company intends to negotiate an
increase in Franklin's revolving line-of-credit to accommodate future growth,
however, there can be no assurance that such negotiations will be successful.
All financing of Franklin has been unconditionally guaranteed by the Company. In
June 1998, Franklin was notified by a significant customer, who accounted for
$3,380,401 of revenue for the fiscal year ended September 30, 1997, to cease
production due to a labor dispute between the United Auto Workers and General
Motors Corporation. If the labor dispute is not settled expeditiously, the
cessation of product shipments to the customer could have a material adverse
effect on the Company's results of operations.
The Company met capital calls from Taiwan UQM of $1.4 million in both fiscal
1996 and 1997. Taiwan UQM reported a net loss of approximately $.6 million in
fiscal 1998. Further losses or capital investment by Taiwan UQM could result in
additional capital calls by Taiwan UQM.
During the first half of Fiscal 1999, the Company expects to invest
substantially greater amounts of capital to launch manufacturing operations and
supply motors to Invacare Corporation pursuant to a supply agreement executed
during Fiscal 1998. Anticipated capital expenditures for working capital,
production machinery, equipment, computer hardware and software are expected to
be approximately $1.5 million. The Company expects to fund this investment
requirement through a combination of existing cash resources 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. However, there can be no assurance that such bank financing can be
obtained. The Company believes it has cash resources sufficient to fund
non-manufacturing operations over the next year.
For the longer-term, the Company expects to continue its strategy of growing its
business through expanding its product line of permanent magnet motors and
controllers, seeking strategic alliances to accelerate the commercialization of
its technology and pursuing synergistic and accretive acquisitions. The Company
expects to finance its future growth from existing cash resources, cash flow
from operations, if any, and through the issuance of equity or debt securities
or a combination thereof. There can, however, be no assurance that such
financing or capital will be available on terms acceptable to the Company. In
the event financing or capital for future growth as envisioned under the
Company's strategy is not available, the Company believes it can configure its
operations such that existing cash balances and cash flow from operations will
be sufficient to meet its operating requirements.
<PAGE>
Independent Auditors' Report
The Board of Directors
Unique Mobility, Inc.:
We have audited the accompanying consolidated balance sheets of Unique Mobility,
Inc. and subsidiaries as of March 31, 1998 and 1997, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year ended March 31, 1998, the five months ended March 31, 1997 and each of
the years in the two-year period ended October 31, 1996. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements of Taiwan UQM Electric
Co., Ltd., (a 38.25 percent owned investee company). The Company's investment at
March 31, 1998 in Taiwan UQM Electric Co., Ltd. was $2,044,393, and for the year
ended March 31, 1998 the Company recognized equity in the losses of Taiwan UQM
Electric Co., Ltd of $(246,648). The financial statements of Taiwan UQM Electric
Co., Ltd. were audited by other auditors whose report has been furnished to us,
and our opinion, insofar as it relates to the amounts included for Taiwan UQM
Electric Co., Ltd. for the year ended March 31, 1998 is based solely on the
report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits and the report of
the other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Unique Mobility, Inc. and
subsidiaries as of March 31, 1998 and 1997, and the results of their operations
and their cash flows for the year ended March 31, 1998, the five months ended
March 31, 1997 and each of the years in the two-year period ended
October 31, 1996, in conformity with generally accepted accounting principles.
/s/KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Denver, Colorado
May 22, 1998
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, March31,
Assets 1998 1997
Current assets:
Cash and cash equivalents .............. $ 7,005,533 5,713,557
Accounts receivable (note 14) .......... 1,105,466 389,314
Costs and estimated earnings in excess
of billings on uncompleted contracts
(note 3) ............................. 454,738 191,885
Inventories (note 4) ................... 253,917 425,391
Prepaid expenses ....................... 158,764 115,260
Other .................................. 18,361 17,675
Total current assets ........... 8,996,779 6,853,082
Property and equipment, at cost:
Land (notes 5 and 9) ................... 444,480 335,500
Building (notes 5 and 9) ............... 1,511,635 1,438,090
Molds .................................. 102,113 102,113
Transportation equipment ............... 209,920 258,675
Machinery and equipment ................ 5,605,326 1,963,146
7,873,474 4,097,524
Less accumulated depreciation .......... (2,186,805) (1,764,288)
Net property and equipment ..... 5,686,669 2,333,236
Investment in Taiwan joint venture (note 6) 2,044,393 2,677,730
Investment in EV Global (note 7) .......... 1,000,000 --
Patent and trademark costs, net of
accumulated amortization of $63,542
and $45,551(note 13) ................... 575,985 502,297
Goodwill, net of accumlated amortization
of $16,215 (note 2) .................... 1,280,872 --
Other assets .............................. 853 4,354
$ 19,585,551 12,370,699
(Continued)
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
March 31, March 31,
Liabilities and Stockholders' Equity 1998 1997
Current liabilities:
Accounts payable ....................... $ 389,791 169,403
Note payable to Taiwan joint venture
(note 6) ............................. -- 1,345,285
Other current liabilities (note 8) ..... 876,357 459,223
Current portion of long-term
debt (note 9) ........................ 163,554 45,180
Billings in excess of costs and
estimated earnings on uncompleted
contracts (note 3) ................... 450 659,807
Total current liabilities ....... 1,430,152 2,678,898
Long-term debt, less current portion
(note 9) ............................... 1,029,924 726,218
Total liabilities ............... 2,460,076 3,405,116
Minority interest in consolidated
subsidiary (note 5) .................... 394,343 390,784
Stockholders' equity (notes 11 and 12):
Common stock, $.01 par value, 50,000,000
shares authorized; 15,394,621 and
13,042,964 shares issued ............. 153,946 130,430
Additional paid-in capital ............. 38,852,446 27,094,170
Accumulated deficit .................... (21,798,724) (18,532,364)
Notes receivable from officers ......... (56,056) (83,646)
Cumulative translation adjustment ...... (420,480) (33,791)
Total stockholders' equity ...... 16,731,132 8,574,799
Commitments (notes 6, 9, 16, 19 and 20)
$ 19,585,551 12,370,699
See accompanying notes to consolidated financial statements.
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year Five Months
Ended Ended
March 31, March 31, Year Ended October 31,
1998 1997 1996 1995
<S> <C> <C> <C> <C>
Revenue:
Contract services (note 14) ......... $ 2,790,496 700,132 1,436,484 4,031,951
Product sales ....................... 1,274,236 152,016 611,213 701,700
4,064,732 852,148 2,047,697 4,733,651
Operating costs and expenses:
Costs of contract services .......... 2,635,599 631,823 1,168,757 2,781,866
Costs of product sales .............. 980,034 132,418 570,481 594,782
Research and development ............ 902,407 513,544 1,698,352 1,298,311
General and administrative .......... 2,121,340 695,263 1,354,713 1,193,030
Amortization of goodwill ............ 16,215 -- -- --
Write-down of inventory ............. 416,736 -- -- --
7,072,331 1,973,048 4,792,303 5,867,989
Operating loss .............. (3,007,599) (1,120,900) (2,744,606) (1,134,338)
Other income (expense):
Interest income ..................... 191,186 54,802 113,582 50,890
Interest expense .................... (96,073) (84,704) (202,798) (177,051)
Equity in loss of Taiwan joint
venture (note 6) .................. (246,648) (24,121) (45,164) (11,952)
Minority interest share of earnings
of consolidated subsidiary ........ (70,905) (27,725) (69,400) (64,627)
Other ............................... (36,321) 1,563 43,643 6,645
(258,761) (80,185) (160,137) (196,095)
Net loss .................... $ (3,266,360) (1,201,085) (2,904,743) (1,330,433)
Net loss per common share -
basic and diluted (note 1n) $ (.23) (.12) (.26) (.13)
Weighted average number of shares
of common stock outstanding .......... 13,924,434 12,043,481 11,021,742 10,090,778
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Number of Notes
common Additional Cumulative Accumu- receivable Total
shares Common paid-in translation lated due from Treasury stockholders'
issued stock capital adjustment deficit officers stock equity
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at October 31, 1994 ......... 9,925,545 $ 99,255 16,790,995 -- (13,096,103) (50,671) (95,472) 3,648,004
Issuance of common stock in private
offerings, net of offering costs
of $141,446 (note 11) .............. 581,111 5,812 1,944,742 -- -- -- -- 1,950,554
Issuance of common stock upon exercise
of employee options ................ 64,786 648 99,628 -- -- (1,750) (22,130) 76,396
Issuance of common stock under
employee stock purchase plan ....... 511 5 2,521 -- -- -- -- 2,526
Issuance of warrants for services
(note 12) .......................... -- -- 50,000 -- -- -- -- 50,000
Net loss ............................. -- -- -- -- (1,330,433) -- -- (1,330,433)
Balances at October 31, 1995 ......... 10,571,953 105,720 18,887,886 -- (14,426,536) (52,421) (117,602) 4,397,047
Issuance of common stock in private
offerings, net of offering costs
of $247,309 (note 11) ............. 1,057,708 10,577 3,898,802 -- -- -- -- 3,909,379
Issuance of common stock upon
exercise of employee options ....... 100,542 1,005 153,205 -- -- (13,395) (10,250) 130,565
Issuance of common stock under
employee stock purchase plan ....... 6,668 67 20,200 -- -- -- -- 20,267
Issuance of common stock for
services ........................... 14,494 145 61,246 -- -- -- -- 61,391
Cumulative translation adjustment .... -- -- -- (21,030) -- -- -- (21,030)
Net loss ............................. -- -- -- -- (2,904,743) -- -- (2,904,743)
Balances at October 31, 1996 ......... 11,751,365 117,514 23,021,339 (21,030)(17,331,279) (65,816) (127,852) 5,592,876
Issuance of common stock in private
offerings, net of offering costs
of $365,688 (note 11) .............. 1,289,288 12,893 4,133,927 -- -- -- -- 4,146,820
Issuance of common stock upon
exercise of employee options ....... 40,105 401 62,429 -- -- (17,830) -- 45,000
Issuance of common stock for
services ........................... 1,547 15 3,934 -- -- -- -- 3,949
Cumulative translation adjustment .... -- -- -- (12,761) -- -- -- (12,761)
Retirement of treasury stock ......... (39,341) (393) (127,459) -- -- -- 127,852 --
Net loss ............................. -- -- -- -- (1,201,085) -- -- (1,201,085)
Balances at March 31, 1997 ........... 13,042,964 130,430 27,094,170 (33,791)(18,532,364) (83,646) -- 8,574,799
Issuance of common stock in private
offerings, net of offering costs
of $341,202 (note 11) .............. 626,875 6,269 4,667,528 -- -- -- -- 4,673,797
Issuance of common stock upon
exercise of employee and directors
options ............................ 226,332 2,263 1,081,888 -- -- -- -- 1,084,151
Issuance of common stock upon
exercise of warrants ............... 918,026 9,180 1,923,195 -- -- -- -- 1,932,375
Issuance of common stock under
employee stock purchase plan ....... 7,523 75 23,963 -- -- -- -- 24,038
Issuance of common stock for
services ........................... 4,000 40 28,480 -- -- -- -- 28,520
Compensation expense accrued for
issuance of common stock options
granted for services ............... -- -- 19,000 -- -- -- -- 19,000
Issuance of common stock for
acquisition of Aerocom ............. 371,555 3,716 3,035,602 -- -- -- -- 3,039,318
Issuance of common stock for
investment in EV Global ............ 200,000 2,000 998,000 -- -- -- -- 1,000,000
Cumulative translation adjustment .... -- -- -- (386,689) -- -- -- (386,689)
Repayment of executive note .......... (2,654) (27) (19,380) -- -- 27,590 -- 8,183
Net loss ............................. -- -- -- -- (3,266,360) -- -- (3,266,360)
Balances at March 31, 1998 ........... 15,394,621 $ 153,946 38,852,446 (420,480)(21,798,724) (56,056) -- 16,731,132
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year Five Months
Ended Ended
March 31, March 31, Year Ended October 31,
1998 1997 1996 1995
<S> <C> <C> <C> <C>
Cash flows used by operating activities:
Net loss ....................................... $(3,266,360) (1,201,085) (2,904,743) (1,330,433)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization ............. 545,295 159,473 375,590 346,567
Minority interest share of earnings of
consolidated subsidiary ................. 70,905 27,725 69,400 64,627
Noncash compensation expense for
common stock and warrants issued
for services ............................ 28,520 3,949 61,391 50,000
Noncash compensation expense for stock
options granted to consultants .......... 19,000 -- -- --
Equity in loss of Taiwan joint venture .... 246,648 24,121 45,164 11,952
(Gain) loss on sale of property and
equipment ............................... 32,180 -- (45,676) (3,534)
Write-off of patent costs ................. 18,731 55,529 -- --
Other ..................................... -- 1,210 (20,092) (466)
Change in operating assets and liabilities:
Accounts receivable and costs and
estimated earnings in excess of
billings on uncompleted contracts .... (609,588) 167,846 (148,782) 161,223
Inventories ............................ 331,294 (17,246) (3,444) 70,450
Prepaid expenses and other current
assets ............................... (41,084) (66,910) (12,846) 27,105
Accounts payable and other current
liabilities .......................... (395,256) 106,497 (25,681) (200,703)
Billings in excess of costs and
estimated earnings on uncompleted
contracts ............................ (659,357) 634,122 25,685 (137,247)
Net cash used by operating
activities ..................... (3,679,072) (104,769) (2,584,034) (940,459)
Cash provided by(used by)investing activities:
Cash paid for acquisition of subsidiary, net ... (337,702) -- -- --
Acquisition of property and equipment .......... (703,562) (118,608) (182,011) (440,079)
Increase in patent and trademark costs ......... (110,411) (47,865) (92,390) (64,766)
Investment in Taiwan joint venture ............. -- (1,375,121) -- --
Proceeds from sale of certificates of deposit
and other investments ........................ -- -- 319,107 117,127
Proceeds from sale of property and equipment ... 25,250 -- 63,361 -
Net cash provided by (used by)
investing activities ............ $(1,126,425) (1,541,594) 108,067 (387,718)
</TABLE>
(Continued)
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
<TABLE>
<CAPTION>
Year Five Months
Ended Ended
March 31, March 31, Year Ended October 31,
1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Cash flows provided by financing activities:
Proceeds from borrowings .................... $ -- -- -- 212,337
Repayment of debt ........................... (212,440) (34,085) (83,045) (250,905)
Repayment of note payable for investment
in Taiwan joint venture ................... (1,345,285) -- -- --
Proceeds from sale of common stock, net ..... 4,673,797 4,146,820 3,909,379 1,950,554
Issuance of common stock upon exercise
of employee options ....................... 1,092,334 45,000 130,565 76,396
Issuance of common stock under employee
stock purchase plan ....................... 24,038 -- 20,267 2,526
Issuance of common stock upon exercise of
warrants .................................. 1,932,375 -- -- --
Distributions paid to holders of minority
interest .................................. (67,346) (28,061) (67,345) (67,347)
Net cash provided by financing
activities .................... 6,097,473 4,129,674 3,909,821 1,923,561
Increase in cash and cash
equivalents ................... 1,291,976 2,483,311 1,433,854 595,384
Cash and cash equivalents at beginning of period 5,713,557 3,230,246 1,796,392 1,201,008
Cash and cash equivalents at end of period ..... $ 7,005,533 5,713,557 3,230,246 1,796,392
Interest paid in cash during the period ........ $ 129,599 276,591 82,494 89,133
</TABLE>
Non-cash investing and financing transactions:
Cumulative translation adjustments of $386,689 were recorded for the year ended
March 31,1998, $12,761 for the five months ended March 31, 1997, and $21,030 for
the year ended October 31, 1996.
In January 1998, the Company purchased all of the outstanding stock of Aerocom
Industries, Inc. for $337,702 cash and 371,555 shares of the Company's common
stock (see note 2).
In June 1997, the Company entered into a stock purchase agreement with EV Global
Motors Company (EVG) whereby the Company exchanged 200,000 shares of its common
stock for 400,000 shares of EVG (see note 7).
In December 1996, the Company financed an additional investment in the Taiwan
joint venture through the issuance of a note payable in the amount of $1,345,285
(see note 6).
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. For the year ended March 31, 1998 and the five
months ended March 31, 1997, there were no such transactions. For the years
ended October 31, 1996 and 1995, the Company issued 13,666 and 32,130 shares of
common stock for options exercised for an aggregate exercise price of $10,250
and $22,130, respectively, for which the Company received 2,000 and
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
5,365 shares of common stock as payment for the exercise price. The shares
received were recorded at cost as treasury stock and were subsequently retired.
In accordance with the provisions of the Company's stock option plans, 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 shareholders' equity in the consolidated
financial statements. There were no notes receivable exchanged for the exercise
of options during the year ended March 31, 1998. For the five months ended March
31, 1997, the Company issued 20,105 shares of common stock for an aggregate
exercise price of $17,830 for which the Company received promissory notes for
the same amount. For the years ended October 31, 1996 and 1995, the Company
issued 13,395 and 2,900 shares of common stock for an aggregate exercise price
of $13,395 and $1,750, respectively, for which the Company received promissory
notes for the same amount.
See accompanying notes to consolidated financial statements.
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies
(a) General Business
Unique Mobility, Inc. and subsidiaries (the "Company") is engaged in
the research, development and commercialization of permanent magnet
electric motors and the electric controls for such motors. The
Company's revenue is derived primarily from contract research and
development services and sales of products developed from such
technology. Through its recently acquired wholly-owned subsidiary,
Aerocom Industries, Inc, the Company provides contract grinding
services and manufactures high-precision gears for the aerospace and
commercial industries.
The Company's operations are based in the United States with a
significant investment in a joint venture in Taiwan.
(b) Principles of Consolidation
The consolidated financial statements include the accounts of Unique
Mobility, Inc. and those of all majority-owned or controlled
subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation.
The minority interests as of March 31, 1998 and 1997, consisted of the
other stockholders' ownership interests in a subsidiary of the
Company. See Note 5.
(c) Cash and Cash Equivalents
The Company considers cash on hand and investments with original
maturities of three months or less to be cash equivalents.
(d) Inventories
Inventories are stated at the lower of cost or market. Cost is
determined by the first-in, first-out method.
(e) Property and Equipment
Property and equipment is stated at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the
assets which range from three to five years, except for the building
which is depreciated over 31 years. Maintenance and repairs are
charged to expense as incurred.
(f) Investment in Taiwan Joint Venture
The Company's investment in a joint venture located in Taiwan 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.
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Income or loss recognition is limited to the extent of the Company's
investment in, advances to and guarantees of the joint venture.
Commencing with the five months ended March 31, 1997, due to timing
considerations, the financial position and results of operations for
the Taiwan joint venture are included in the Company's consolidated
financial statements on a three-month time lag. Accordingly, the
consolidated statements of operations, stockholders' equity and cash
flows include activity of the Taiwan joint venture for the year ended
December 31, 1997, the two months ended December 31, 1996, and the
twelve months ended October 31, 1996 and 1995. Similarly, the
accompanying consolidated balance sheets and related footnote
disclosures as of March 31, 1998 and 1997, include the financial
position of the Taiwan joint venture as of December 31, 1997 and 1996,
respectively. The cumulative foreign currency translation adjustments
with respect to the Taiwan joint venture were calculated using the
average rates in effect during the year ended December 31, 1997, and
the two and twelve-month periods ended December 31, 1996, and October
31, 1996 and 1995, respectively, and the spot rates in effect at the
respective December 31, 1997 and 1996 balance sheet dates.
(g) Patent and Trademark Costs
Patent and trademark costs consist primarily of legal expenses, and
represent those costs incurred by the Company for the filing of patent
and trademark applications and the annual fees paid to maintain the
patents in good standing. Amortization of patent and trademark costs
is computed using the straight-line method over the estimated useful
life of the asset, typically 17 years for patents, and 40 years for
trademarks.
(h) Goodwill
The excess of the consideration exchanged over the fair value of the
net assets obtained in acquisitions is recorded as goodwill.
Amortization of goodwill is calculated using the straight-line method
over a period of 20 years.
(i) Long-Lived Assets
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of ("SFAS 121"). SFAS 121 requires that long-lived assets and
certain identifiable intangibles held and used by an entity be
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
The Company adopted SFAS 121 in 1996 and the adoption of SFAS 121 did
not have an effect on the Company's consolidated financial statements.
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(j) Contract Services Revenue and Cost Recognition
Revenue relating to long-term fixed price contracts is recognized
using the percentage of completion method. Under the
percentage-of-completion method, contract revenues and related cost
are recognized based on the percentage that costs incurred to date
bear to total estimated costs.
Changes in job performance, estimated profitability and final contract
settlements may result in revisions to cost and revenue, and are
recognized in the period in which the revisions are determined.
Contract costs include all direct materials, subcontract and labor
costs and other indirect costs. General and administrative costs are
charged to expense as incurred. At the time a loss on a contract
becomes known, the entire amount of the estimated loss is accrued.
The aggregate of costs incurred and estimated earnings recognized on
uncompleted contracts in excess of related billings is shown as a
current asset, and billings on uncompleted contracts in excess of
costs incurred and estimated earnings is shown as a current liability.
Revenue relating to cost-plus type contracts is recognized as costs
are incurred. Revenue relating to "milestone billing" contracts is
recognized upon completion of the various stages (milestones) of the
project, based upon the contractual amounts.
(k) Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes.
Under the asset and liability method of Statement 109, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled.
Under Statement 109, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that
includes the enactment date.
(l) Research and Development
Costs of researching and developing new technology or significantly
altering existing technology are charged to operations as incurred.
(m) Equity Instruments Issued for Non-Employee Services
The Company periodically issues common stock to non-employees for
services rendered. The cost of these services is recorded based upon
the fair market value of the Company's common stock on the date of
issuance.
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(n) Foreign Currency Translation
The net assets of the foreign investment of the Company is translated
at the appropriate period-end exchange rates. Income and expense
accounts are translated at average monthly exchange rates. Net
exchange gains or losses resulting from such translation are excluded
from results of operations and accumulated as a separate component of
stockholders' equity. Gains and losses from foreign currency
transactions are included in other income (expense).
(o) Loss Per Common Share
In March 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings per
Share ("SFAS 128"), which specifies the computation, presentation and
disclosure requirements for earnings per share. SFAS 128 is effective
for periods ending after December 15, 1997 and requires retroactive
restatement of earnings per share in prior periods. The statement
replaces the calculation of "primary earnings per share" with "basic
earnings per share" and redefines the "diluted earnings per share"
computation. Common stock equivalents were not included in the
computations because their effect was anti-dilutive. Adoption of SFAS
128 did not effect the reported net loss per common share for the year
ended March 31, 1998, the five months ended March 31, 1997 or the
years ended October 31, 1996 or 1995. The fair value of the
pre-emptive rights arising from the issuance of employee stock options
during the five months ended March 31, 1997, has been treated in a
manner similar to a preferred stock dividend in the calculation of net
loss per common share. The estimated aggregate fair value of these
rights, determined using the Black-Scholes option pricing model, was
$201,000.
(p) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
(q) Reclassifications
Certain prior year amounts have been reclassified to conform to the
current period presentation.
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) Acquisition of Aerocom
On January 16, 1998, the Company acquired all of the outstanding common
stock of Aerocom Industries, Inc. ("Aerocom") for cash and shares of the
Company's common stock totaling $3,377,020. The allocation of the purchase
price, based on preliminary estimates of fair value which may be subject to
adjustment, was as follows:
Accounts receivable $ 369,417
Inventories 159,820
Property, plant and equipment 2,812,054
Goodwill 1,297,087
Other 3,106
4,641,484
Debt and other liabilities
assumed (1,264,464)
Purchase price $ 3,377,020
The acquisition has been accounted for using the purchase method of
accounting and the results of Aerocom's operations have been included with
those of the Company since January 16, 1998. The unaudited pro forma
revenue, net loss, and loss per common share for the year ended March 31,
1998, assuming the acquisition occurred on November 1, 1996, is as follows:
Year Ended Five Months Ended
March 31, 1998 March 31, 1997
Revenue $ 5,515,859 1,438,293
Net loss $(3,200,747) (1,206,853)
Basic and diluted loss
per common share $ (.23) (.11)
The pro forma information does not necessarily represent the results that
would have occurred if the acquisition had been consummated on November 1,
1996, nor are they necessarily indicative of the results of future
operations.
(3) Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts
and Billings in Excess of Costs and Estimated Earnings on Uncompleted
Contracts
At March 31, 1998, the estimated period to complete contracts in process
ranged from 1 to 12 months, and the Company expects to collect
substantially all related accounts receivable and costs and estimated
earnings in excess of billings on uncompleted contracts as of March 31,
1998, within one year.
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The following summarizes contracts in process at March 31, 1998,
and 1997:
March 31, March 31,
1998 1997
Costs incurred on uncompleted
contracts ........................ $ 1,724,552 3,158,704
Estimated earnings ................. 515,782 490,407
2,240,334 3,649,111
Less billings to date .............. (1,786,046) (4,117,033)
$ 454,288 (467,922)
Included in the accompanying balance
sheets as follows:
Costs and estimated earnings
in excess of billings on
uncompleted contracts ........ $ 454,738 191,885
Billings in excess of costs and
estimated earnings on
uncompleted contracts ........ (450) (659,807)
$ 454,288 (467,922)
(4) Inventories
Inventories at March 31, 1998, and 1997 consists of:
March 31, March 31,
1998 1997
Raw materials ... $ 76,377 283,155
Work in process . 159,825 69,460
Finished products 17,715 72,776
$253,917 425,391
(5) Limited Liability Company
In September 1992, the Company and a private investor formed a Colorado
limited liability company to acquire, own and maintain a 40,000 square-foot
facility in Golden, Colorado, and the surrounding land. This facility
serves as the Company's corporate headquarters. Ownership in this limited
liability company is divided equally between the Company and the private
investor. However, the Company is deemed to have a controlling interest in
the limited liability company by virtue of the operating agreement which
authorizes the Company to make all decisions with respect to the business
of the limited liability company, subject only to certain protective rights
of the private investor, and by virtue of the lease agreement with the
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
limited liability company covering the entire facility. The limited
liability company is, therefore, accounted for as a consolidated
subsidiary. Minority interest in consolidated subsidiary represents the
private investor's allocable portion of the equity of the consolidated
subsidiary.
(6) Investment in Taiwan Joint Venture
On January 29, 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 Company, Ltd., a company
organized under the laws of the Republic of China ("Taiwan UQM"). Taiwan
UQM was incorporated in April 1995.
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. Therefore, the
note payable remained outstanding at March 31, 1997.
During the current fiscal year an investment was made in Taiwan UQM by
employees of Taiwan UQM diluting the Company's investment to 38 1/4%.
Summarized unaudited financial information for Taiwan UQM is as follows:
December 31, December 31,
Financial Position 1997 1996
Current assets .................... $ 341,178 889,881
Noncurrent assets-land, property
and equipment ................... 6,474,301 4,542,142
Total assets ............... 6,815,479 5,432,023
Current liabilities ............... 1,470,684 607,453
Noncurrent liabilities ............ -- --
Stockholders' equity .............. 5,344,795 4,824,570
Total liabilities and equity $ 6,815,479 5,432,023
Year Two Months Year
Ended Ended Ended
December 31, December 31, October 31,
Results of Operations 1997 1996 1996
Revenue $ 663 10,123 --
Expenses (597,278) (56,403) (128,214)
Net loss $(596,615) (46,280) (128,214)
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(7) Investment in EV Global
In June of 1997, the Company entered into a strategic relationship with EV
Global Motors Company (EVG) to develop and market light electric
transportation products. EVG purchased 1,151,925 shares of the Company's
common stock in a private transaction from Alcan Aluminum Limited and
purchased warrants to acquire an additional 350,000 shares of common stock
from other sources. Separately, the Company and EVG entered into a stock
purchase agreement whereby the Company agreed to purchase 400,000 shares of
EVG common stock in exchange for 200,000 shares of the Company's common
stock which was valued at $1,000,000.
(8) Other Current Liabilities
Other current liabilities at March 31, 1998 and 1997, consists of:
March 31, March 31,
1998 1997
Accrued interest ................ $ 5,692 39,218
Accrued loss reserves ........... 22,678 8,120
Accrued legal and accounting fees 55,376 37,171
Accrued payroll, consulting,
personal property
taxes and real estate taxes ... 158,604 99,997
Accrued material purchases ...... 82,357 --
Accrued machinery and equipment
purchases .................... 402,834 --
Unearned revenue ................ 65,037 --
Refund of overpayment ........... -- 250,005
Other ........................... 83,779 24,712
$876,357 459,223
(9) Long-term Debt
Long-term debt at March 31, 1998 and 1997, consists of:
<TABLE>
<CAPTION>
March 31, March 31,
1998 1997
<S> <C> <C>
Note payable to bank, payable in monthly install-
ments with interest at 9.1%; matures October 2007;
secured by land and building with a net book value
of $1,530,041 ..................................... $ 726,202 771,398
Note payable to bank, payable in monthly installments
with interest at 10.05%; matures November 2001; see
note 20 ........................................... 467,276 --
Total long-term debt ...................... 1,193,478 771,398
Less current portion ............................. 163,554 45,180
Long-term debt, less current portion ...... $1,029,924 726,218
</TABLE>
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The annual aggregate maturities of long-term debt for each of the next five
fiscal years and thereafter are as follows:
1999 $ 163,554
2000 179,278
2001 197,660
2002 155,388
2003 71,536
Thereafter 426,062
$ 1,193,478
(10) Income Taxes
Income tax expense (benefit) attributable to income (loss) from continuing
operations differed from the amounts computed by applying the U.S. federal
income tax rate of 34% as a result of the following:
Five Months
Year Ended Ended
March 31, March 31, Year Ended October 31,
1998 1997 1996 1995
Computed "expected" tax
benefit $(1,110,562) (408,369) (987,613) (452,347)
Increase (decrease) in
taxes resulting from:
Increase in
valuation
allowance for
net deferred
tax assets 1,015,804 407,443 985,132 450,383
Other, net 94,758 926 2,481 1,964
Income tax benefit $ - - - -
The tax effects of temporary differences that give rise to significant
portions of the net deferred tax asset are presented below:
March 31, March 31,
1998 1997
Deferred tax assets:
Research and development
credit carryforwards $ 74,864 61,188
Net operating loss
carryforwards 6,730,804 5,728,676
Total deferred
tax assets 6,805,668 5,789,864
Less valuation allowance 6,805,668 5,789,864
Deferred tax assets,
net of valuation
allowance $ -- --
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
As of March 31, 1998, the Company had net operating loss carryforwards
(NOL) of approximately $22.1 million for U.S. income tax purposes which
expire in varying amounts through 2013. Approximately $2.1 million of the
net operating loss carryforwards are attributable to stock options, the
benefit of which will be credited to additional paid-in capital if
realized. However, due to the provisions of Section 382 of the Internal
Revenue Code, the utilization of a portion of these NOLs is limited. At
October 21, 1991, the Company experienced an ownership change for purposes
of Section 382 subjecting approximately $2.8 million in NOLs to an annual
usage limitation of approximately $0.9 million. The amount of this annual
limitation is sufficient to allow for the utilization of the entire amount
of these NOLs prior to expiration should sufficient taxable income be
generated.
Future ownership changes under Section 382 could occur that would result in
an additional Section 382 limitation which would further restrict the use
of NOLs. In addition, the Section 382 limitation could be reduced to zero
if the Company fails to satisfy the continuity of business enterprise
requirement for the two-year period following an ownership change.
(11) Stockholders' Equity
During the year ended October 31, 1995, the Company completed three private
placements of common stock with institutions outside of the United States.
In total, 581,111 shares of common stock were privately placed at $3.60 per
share.
During the year ended October 31, 1996, the Company completed several
private placements of common stock with institutional and private investors
outside of the United States. In total 928,676 shares were placed at
between $3.30 and $4.75 per share. In addition, 129,032 shares of common
stock were sold to Invacare Corporation in a private placement, at $3.88
per share.
During the five months ended March 31, 1997, the Company completed one
private placement of common stock with institutional and private investors
outside of the United States. In total 1,289,288 shares of common stock
were privately placed at $3.50 per share.
During the year ended March 31, 1998, the Company completed one private
placement with institutional and private investors of 750,000 units
consisting of one share of the Company's common stock and one warrant at a
price of $8.00 per unit. Each warrant is exercisable into one share of the
Company's common stock at $8.00 per share and expires two years from the
date of issuance. Of the 750,000 units that were privately placed, 626,875
were issued in March 1998 and the remaining 123,125 were issued in April
1998.
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(12) Common Stock Options and Warrants
Incentive and Non-Qualified Option Plans
The Company has reserved 5,104,000 shares of common stock for key
employees, consultants and key suppliers 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 options that may be granted to any
eligible employee during the term of the 1982 and 1992 plans is 1,000,000
options. 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:
Shares Under Weighted-Average
Option Exercise Price
Outstanding at October 31, 1994 1,914,533 $ 5.02
Granted ....................... 100,000 5.00
Exercised ..................... (64,786) 1.55
Forfeited ..................... (97,515) 5.38
Outstanding at October 31, 1995 1,852,232 5.12
Granted ....................... 590,000 4.15
Exercised ..................... (100,542) 1.53
Forfeited ..................... (315,978) 5.63
Outstanding at October 31, 1996 2,025,712 4.94
Granted ....................... 500,000 3.31
Exercised ..................... (40,105) 1.57
Expired ....................... (30,000) 5.00
Forfeited ..................... (4,151) 3.31
Outstanding at March 31,1997 .. 2,451,456 4.66
Granted ....................... 601,000 7.88
Exercised ..................... (210,332) 4.75
Forfeited ..................... (13,772) 4.80
Outstanding at March 31, 1998 . 2,828,352 $ 5.34
Exercisable at March 31, 1998 . 1,781,046 $ 4.97
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The following table presents summarized information about stock options
outstanding at March 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
Weighted Weighted Weighted
Number Average Average Number Average
Range of Outstanding Remaining Exercise Exercisable Exercise
Exercise Prices at 12/31/97 Contractual Life Price at 12/31/97 Price
<S> <C> <C> <C> <C> <C> <C>
$0.50 - 1.00 112,117 1.5 years $0.79 112,117 $0.79
$2.25 - 3.31 623,256 8.0 years $3.08 297,085 $2.83
$3.50 - 5.00 805,086 6.6 years $4.05 666,162 $4.03
$5.38 - 8.13 1,287,893 7.8 years $7.64 705,682 $7.41
$0.50 - 8.13 2,828,352 7.5 years $5.34 1,781,046 $4.97
</TABLE>
Non-Employee Director Stock Option Plan
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:
Weighted
Shares Under Average
Option Exercise Price
Outstanding at October 31, 1994 48,000 $ 5.96
Granted 61,333 5.10
Outstanding at October 31, 1995 109,333 5.48
Granted 32,000 4.38
Outstanding at October 31, 1996
and March 31, 1997 141,333 5.23
Granted 64,000 7.13
Exercised (16,000) 5.38
Outstanding at March 31, 1998 189,333 $ 5.86
Exercisable at March 31, 1998 98,666 $ 5.31
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The following table presents summarized information about stock options
outstanding for non-employee directors:
Options Outstanding Options Exercisable
Weighted Weighted Weighted
Number Average Average Number Average
Range of Outstanding Remaining Exercise Exercisable Exercise
Exercise Prices at 12/31/97 Contractual Life Price at 12/31/97 Price
$4.38 - 6.00 93,333 7.3 years $4.85 66,666 $4.86
$6.25 - 7.13 96,000 8.3 years $6.84 32,000 $6.25
189,333 7.8 years $5.86 98,666 $5.31
Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation ("SFAS 123") defines a fair value method of
accounting for employee stock options and similar equity instruments. SFAS
123 permits an entity to choose to recognize compensation expense by
adopting the new fair value method of accounting or continue to measure
compensation costs using the intrinsic value methods prescribed by APB25.
The Company accounts for stock options granted to employees and directors
of the Company under the intrinsic value method. Stock options granted to
non-employees under the Company's 1992 Stock Option Plan are accounted for
under the fair value method. Had the Company reported compensation costs as
determined by the fair value method of accounting for option grants to
employees and directors, net loss and net loss per common share would have
been the pro forma amounts indicated in the following table:
Five Months
Year Ended Ended Year Ended
March 31, 1998 March 31, 1997 October 31, 1996
Net loss - as reported ....... $(3,266,360) (1,201,085) (2,904,743)
Compensation expense - current
period option grants ....... (821,800) (116,847) (339,221)
Compensation expense - prior
period option grants ....... (619,654) (145,042) -
Net loss - pro forma ......... (4,707,814) (1,462,974) (3,243,964)
Net loss per common share -
as reported ................ $ (.23) (.12) (.26)
Net loss per common share -
pro forma ................. $ (.34) (.14) (.29)
The fair value of stock options granted was calculated using the Black
Scholes option pricing model based on the following weighted average
assumptions:
Five Months
Year Ended Ended Year Ended
March 31, 1998 March 31, 1997 October 31, 1996
Expected volatility 48.1% 47.6% 49.1%
Expected dividend yield 0.0% 0.0% 0.0%
Risk free interest rate 5.7% 6.4% 5.6%
Expected life of option
granted 6 years 6 years 6 years
Fair value of options
granted as computed under
the Black Scholes option
pricing models $4.15 per share $1.79 per share $2.22 per share
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Pro forma net loss reflects only the fair value compensation expense of
options granted since November 1, 1995. Therefore, the full impact of
calculating compensation cost for stock options under SFAS 123 is not
reflected in the pro forma net loss amounts presented above because
compensation cost is reflected over the option vesting periods (ranging
from 1 to 3 years) and compensation cost for options granted prior to
November 1, 1995, is not considered. Future pro forma compensation cost by
fiscal year, assuming no additional grants by the Company to employees and
directors, is as follows:
Fiscal Year Pro Forma
Ended Compensation
March 31, Expense
1999 $1,274,212
2000 $ 985,386
Warrants
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. On March 19, 1998, warrants to acquire 80,000 shares of the
Company's common stock were exercised resulting in cash proceeds to the
Company of $480,000. Warrants to acquire 220,000 shares of the Company's
common stock remain outstanding at March 31, 1998.
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
In connection with the 1995 common stock issuance, the placement agent was
issued warrants expiring July, 1998, to acquire 150,000 shares of the
Compan's common stock at $5.75 per share. During September and
December 1997, and February 1998, warrants to acquire 120,000 shares of the
Company's common stock were exercised, resulting in cash proceeds to the
Company of $690,000. Warrants to acquire 30,000 shares of the Company's
common stock remain outstanding as of March 31, 1998.
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, being the market price of the common stock of the
Company at the date of each respective grant. The warrants expire three
years from the date of issuance. During October 1997, warrants to acquire
5,000 shares of the Company's common stock at $4.25 per share were
exercised resulting in cash proceeds to the Company of $21,250. Warrants to
acquire 50,000 shares at $4.75 per share, 38,100 shares at $5.00 per share
and 45,000 shares at $4.25 per share remain outstanding as of March 31,
1998.
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. During the fiscal year ended
March 31, 1998, warrants to acquire 151,750 shares of the Company's common
stock at $3.50 per share were exercised, resulting in cash proceeds to the
Company of $531,125. During December 1997, warrants to acquire 50,000
shares of the Company's common stock at $4.20 per share were exercised,
resulting in cash proceeds to the Company of $210,000. Warrants to acquire
73,875 shares of the Company's common stock at $3.50 per share remain
outstanding as of March 31, 1998.
As discussed in Note 11, the Company completed a private placement in 1998
of 750,000 units consisting of one common share and one warrant. Of the
750,000 units privately placed, 626,875 were issued in March 1998 and the
remaining 123,125 were issued in April 1998. Also in connection with the
1998 private placement, the placement agents were issued warrants in
March 1998, to acquire 176,588 shares of the Company's common stock at an
exercise price of $8.00 per share. The warrants expire two years from the
date of issuance. All of the warrants issued prior to March 31, 1998 remain
outstanding as of that date.
(13) Alcan Royalty Agreement
During 1994, the Company and Alcan Aluminum Limited ("Alcan") executed an
agreement in which Alcan assigned to the Company all of its rights, title
and interests in certain motor technology developed under a program funded
by Alcan. This agreement further provides that the Company shall pay to
Alcan royalties of one-half of one percent on revenue derived from the
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
manufacture and sale of products or processes embodying the related
technology. For the year ended March 31, 1998, the five months ended March
31, 1997, and for the years ended October 31, 1996 and 1995, the Company
recorded royalty expense of $14,999, $4,077, $9,497 and $23,423,
respectively, under this agreement.
(14) Significant Customers
The Company has historically derived significant contract services revenue
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:
Five Months Year Ended
Year Ended Ended October 31,
March 31, 1998 March 31, 1997 1996 1995
Customer A $ - 162,500 - -
B 707,771 113,229 - -
C 182,651 176,749 - -
D - - 378,640 1,720,347
E - - 202,343 880,420
F - - 194,600 -
G - - 135,950 -
H - - - 657,330
I 385,950 - - -
J 571,924 - - -
K 173,130 - - -
L 218,435 - - -
$ 2,239,861 452,478 911,533 3,258,097
Percentage of
contract services
revenue 80% 65% 63% 81%
These customers, in total, also represented 15% and 49% of total accounts
receivable at March 31, 1998 and 1997, respectively, and the majority of
costs and estimated earnings in excess of billings on uncompleted
contracts.
During the year ended March 31, 1998, the Company derived significant
product sales revenue from three customers. Revenue derived was as
follows: customer M - $122,263; customer N - $75,858; and
customer O - $188,129. These three customers accounted for 30% of the
product sales revenue.
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 $846,740 for the year ended March 31, 1998, $78,532 for the
five months ended March 31, 1997, and $800,208 and $2,478,350 for the years
ended October 31, 1996 and 1995, respectively.
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(15) Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
Cash and cash equivalents, certificates of deposit, accounts receivable,
notes payable to joint venture participant, and accounts payable:
The carrying amounts approximate fair value because of the short maturity
of these instruments.
Long-term debt:
The carrying amount of the Company's long-term debt approximates fair value
since the interest rate on this debt represents the current market rate for
similar financing available to the Company providing comparable security to
the lender.
(16) Employee Benefit Plans
401(k) Plan
The Company has established a 401(k) Savings Plan (the Plan) under which
eligible employees may contribute up to 15% of their compensation. At the
direction of the participants, contributions are invested in several
investment options offered by the Plan. The Company matches participant
contributions on a dollar-for-dollar basis on the participant's
contributions up to 5 percent of the participant's salary and 25% of
participant contributions in excess of this limit, subject to certain
limitations. These contributions vest ratably over a three-year period.
Matching contributions to the Plan by the Company were $100,212, $39,535,
$90,935 and $98,441 for the year ended March 31, 1998, the five months
ended March 31, 1997, and for the years ended October 31, 1996 and 1995,
respectively.
Stock Purchase Plan
The Company has established a Stock Purchase Plan which allows eligible
employees to purchase, through payroll deductions, shares of the Company's
common stock at 85% of the fair market value at specified dates. The
Company has reserved 200,000 shares of common stock for issuance under the
Stock Purchase Plan. During the year ended March 31, 1998, the Company
issued 7,523 shares of common stock under the Stock Purchase Plan. During
the five months ended March 31, 1997, the Company did not issue any shares
under the Stock Purchase Plan. During the years ended October 31, 1996 and
1995, the Company issued 6,668 shares and 511 shares of common stock,
respectively, under the Stock Purchase Plan.
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(17) Segments
Commencing in the current fiscal year, the Company has two reportable
segments: technology and mechanical products. The technology segment
encompasses the Company's technology-based operations including core
research to advance its technology, application engineering and product
development and job shop production of prototype components. The mechanical
products segment encompasses the manufacture and sale of permanent magnet
motors, precision gears, gear assemblies and related mechanical products.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies at note 1. During the year
ended March 31, 1998, there were no intersegment sales or transfers.
The Company's reportable segments are strategic business units that offer
different products and services. They are managed separately because each
business requires different business strategies.
The following table summarizes significant financial statement information
for each of the reportable segments for the year ended March 31, 1998:
Mechanical
Technology Products Totals
Revenue $ 3,489,586 575,146 4,064,732
Interest income 155,480 35,706 191,186
Interest expense (75,473) (20,600) (96,073)
Depreciation and amortization (383,137) (145,943) (529,080)
Goodwill amortization - (16,215) (16,215)
Equity in loss of Taiwan
joint venture (246,648) - (246,648)
Segment loss (3,243,204) (23,156) (3,266,360)
Segment assets 12,757,776 6,827,775 19,585,551
Expenditures for
segment assets $ (278,568) (535,405) (813,973)
In determining the foregoing segments, the Company has allocated corporate
overhead and expenses and intangible assets, including goodwill, to the
appropriate segment. Prior to the current fiscal year, the Company's
financial statement information related to the technology segment.
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(18) Transition Period Comparative Financial Information (Unaudited)
The following table sets forth certain unaudited statement of operations
data for the five months ended March 31, 1996:
Revenue:
Contract services $ 331,761
Product sales 216,325
548,086
Operating costs and expenses:
Costs of contract services 376,614
Costs of product sales 228,080
Research and development 632,101
General and administrative 624,996
1,861,791
Operating loss (1,313,705)
Other income (expense):
Interest income 46,214
Interest expense (91,780)
Equity in loss of Taiwan joint
venture (16,682)
Minority interest share of earnings
of consolidated subsidiary (28,588)
Other 37,280
(53,556)
Net loss $ (1,367,261)
Net loss per common share $ (.13)
Weighted average number of shares
of common stock outstanding 10,708,645
(19) Commitments
The Company has entered into various contracts to purchase vacant land and
construct a new manufacturing facility in Frederick, Colorado. Vacant land
was purchased under contract for $108,900 and the Company has an option to
purchase an adjoining block of land for $72,600.
The construction contract provides for the erection of a 25,000 square foot
manufacturing facility at a cost not to exceed $850,000 adjusted for change
orders. As of year-end, the Company had paid $73,545 in progress payments
in relation to this contract. The facility was completed in June 1998.
These commitments will be met through additional financing from third party
institutions that were arranged subsequent to year end.
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(20) Subsequent Events
Acquisition of Franklin
On April 30, 1998, the Company acquired all of the outstanding common stock
of Franklin Manufacturing Company (Franklin) for cash and shares of the
Company's common stock totaling approximately $6,247,316. The allocation of
the purchase price based on preliminary estimates of fair value which may
be subject to adjustment, is as follows:
Assets purchased:
Cash $ 151,360
Accounts receivable 1,426,995
Inventories 1,089,539
Property, plant and equipment 877,199
Goodwill 5,296,916
Related asset acquisition 422,250
Other 131,203
9,395,462
Debt and other liabilities assumed (3,148,146)
Purchase price $ 6,247,316
The acquisition has been accounted for using the purchase method of
accounting. The unaudited pro forma revenue, net loss and loss per common
share for year ended March 31, 1998 and 1997 respectively, assuming the
acquisition occurred on April 1, 1996 is as follows:
Year Ended Year Ended
March 31, 1998 March 31, 1997
Revenue $ 15,366,148 $ 10,717,010
Net loss (3,167,509) (2,437,238)
Basic and diluted loss $ (.22) $(.21)
per common share
The pro forma information does not necessarily represent the results that
would have occurred if the acquisition had been consummated on April 1,
1996, nor are they necessarily indicative of the results of future
operations.
In conjunction with the closing of the acquisition, the Company refinanced
Franklin's existing long-term debt totaling approximately $1.7 million with
Commerce Bank. The Company is a guarantor on the new financing arrangement.
The annual aggregate maturities of the refinanced long-term debt is as
follows: 1999 - $424,250; 2000 - $1,168,009; and 2001 - $101,236.
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
New Financing
Subsequent to the end of the fiscal year, the Company refinanced Aerocom's
existing long-term debt totaling approximately $467,000. The new financing
arrangement includes a $750,000 revolving line of credit, a $2 million term
equipment financing line of credit and a $900,000 mortgage loan on the
Company's new building in Frederick, Colorado. As of May 22, 1998, a total
of approximately $900,000 has been drawn against the equipment financing
line of credit.
<PAGE>
Corporate Information
Auditors:
KPMG Peat Marwick LLP
Denver, CO
Legal Counsel:
Holme Roberts & Owen
Denver, CO
Transfer Agent:
American Securities Transfer
Lakewood, CO
303-234-5300
Investor Relations:
For copies of the Company's annual and quarterly reports on Form 10-K and 10-Q,
at no cost, or for additional information, please contact: Director-Investor
Relations Telephone: 303-278-2002 Fax: 303-278-7007 or visit our Web site at:
http://www.uqm.com
Annual Meeting:
Monday, September 14, 1998
10:00 a.m. Eastern Daylight Time
American Stock Exchange
86 Trinity Place
New York, NY 10006-1881
Stock Listings:
Unique Mobility, Inc. common stock is listed on the American, Boston, Pacific,
Chicago, Frankfurt and Berlin Stock Exchanges, under the ticker symbol: UQM
<PAGE>
Board of Directors
Ray A. Geddes
Chairman of the Board and Chief Executive Officer
Frank Hodsoll
Principal, Hodsoll & Associates
William G. Rankin
President and Chief Operating Officer
Lee A. Iacocca
Chairman and Chief Executive Officer, EV Global Motors Co.
J. B. Richey
Sr. Vice President- Total Quality Management, Invacare Corporation
H. J. Young
Senior Counselor, Kearns & West
Michael Franklin
Vice President - Electronics Manufacturing
Executive Officers
Ray A. Geddes
Chairman of the Board and Chief Executive Officer
William G. Rankin
President and Chief Operating Officer
Donald A. French
Treasurer and Chief Financial Officer
Michael Franklin
Vice President, Electronics Manufacturing
Photos: Photographs of each executive officer (four pictures)
This report may contain forward-looking statements that involve risks and
uncertainties. These statements may differ materially from actual future events
or results. Readers are referred to the Risk Factor section of the Registration
Statement on Form S-3 (File No. 333-52861) filed by the Company with the SEC,
which identified important risk factors that could cause actual results to
differ from those contained in the forward-looking statements, including the
Company's history of operating losses, its ability to obtain additional
financing, competition, the Company's ability to integrate acquired businesses
into existing operation, the Company's ability to protect its proprietary
information, and the Company's limited experience in manufacturing processes and
procedures and marketing and distribution. 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.
<PAGE>
(Back cover)
Unique Mobility, Inc.
425 Corporate Circle Golden, Colorado 80401 U.S.A.
303/278-2002 www.uqm.com
