UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
[ ] Transition Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 1998
Commission file number 1-10869
UNIQUE MOBILITY, INC.
(Exact name of registrant as specified in its charter)
Colorado 84-0579156
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
425 Corporate Circle Golden, Colorado 80401 (Address of
principal executive offices) (zip code)
(303) 278-2002
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
The number of shares outstanding (including shares held by affiliates) of the
registrant's common stock, par value $0.01 per share at November 10, 1998, was
15,972,612.
<PAGE>
PART I - FINANCIAL INFORMATION
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, March 31,
Assets 1998 1998
(unaudited)
Current assets:
Cash and cash equivalents $ 1,513,037 7,005,533
Accounts receivable (note 10) 2,389,636 1,105,466
Costs and estimated earnings in excess
of billings on uncompleted contracts
(note 3) 514,024 454,738
Inventories (note 4) 2,467,052 253,917
Prepaid expenses 111,589 158,764
Other 118,970 18,361
Total current assets 7,114,308 8,996,779
Property and equipment, at cost (note 7):
Land 444,480 444,480
Building 2,586,878 1,511,635
Molds 102,113 102,113
Transportation equipment 218,335 209,920
Machinery and equipment 8,246,007 5,605,326
11,597,813 7,873,474
Less accumulated depreciation (2,810,492) (2,186,805)
Net property and equipment 8,787,321 5,686,669
Investment in Taiwan joint venture (note 5) 1,744,584 2,044,393
Investment in EV Global 1,000,000 1,000,000
Patent and trademark costs, net of
accumulated amortization of $73,637
and $63,542 627,889 575,985
Goodwill, net of accumulated amortization
of $157,088 and $16,215 6,386,176 1,280,872
Other assets 25,402 853
$ 25,685,680 19,585,551
(Continued)
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
September 30, March 31,
Liabilities and Stockholders' Equity 1998 1998
(unaudited)
Current liabilities:
Accounts payable $ 2,541,169 472,148
Other current liabilities (note 6) 599,318 794,000
Current portion of long-term
debt (note 7) 581,131 163,554
Revolving line-of-credit (note 7) 453,000 -
Current income tax payable 156,005 -
Billings in excess of costs and
estimated earnings on uncompleted
contracts (note 3) 181,925 450
Total current liabilities 4,512,548 1,430,152
Long-term debt, less current portion
(note 7) 2,933,563 1,029,924
Total liabilities 7,446,111 2,460,076
Minority interest in consolidated
subsidiary 396,663 394,343
Stockholders' equity (note 9):
Common stock, $.01 par value, 50,000,000
shares authorized; 15,972,344 and
15,394,621 shares issued 159,723 153,946
Additional paid-in capital 42,483,886 38,852,446
Accumulated deficit (24,163,780) (21,798,724)
Notes receivable from officers (116,924) (56,056)
Accumulated comprehensive loss (note 14) (519,999) (420,480)
Total stockholders' equity 17,842,906 16,731,132
Commitments (note 11)
$ 25,685,680 19,585,551
See accompanying notes to consolidated financial statements.
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited)
Quarter Ended September 30, Six Months Ended September 30,
1998 1997 1998 1997
Revenue:
Contract services
(notes 10 and 12) $ 445,994 673,759 745,328 1,703,370
Product sales 2,941,800 118,870 5,495,247 346,421
3,387,794 792,629 6,240,575 2,049,791
Operating costs and expenses:
Costs of contract
services 437,279 708,279 698,070 1,578,270
Costs of product sales 2,975,567 98,356 5,150,517 266,138
Research and development 173,274 167,899 450,722 256,737
General and administrative 884,931 369,320 1,732,136 692,116
Depreciation and
amortization 144,340 52,869 265,627 104,593
4,615,391 1,396,723 8,297,072 2,897,854
Operating loss (1,227,597) (604,094) (2,056,497) (848,063)
Other income (expense):
Interest income 27,282 46,296 80,585 97,969
Interest expense (101,628) (17,735) (155,250) (41,814)
Equity in loss of
Taiwan joint
venture (note 5) (105,869) (16,905) (200,289) (31,433)
Minority interest
share of earnings
of consolidated
subsidiary (17,381) (16,671) (35,994) (33,119)
Other 2,389 10 2,389 2,012
(195,207) (5,005) (308,559) (6,385)
Net loss $ (1,422,804) (609,099) (2,365,056) (854,448)
Net loss per
common share
basic and diluted $ (.09) (.04) (.15) (.06)
Weighted average number
of shares of common stock
outstanding (note 8) 15,925,669 13,701,823 15,834,864 13,393,582
See accompanying notes to consolidated financial statements.
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
Six Months Ended September 30,
1998 1997
Cash flows used by operating activities:
Net loss $(2,365,056) (854,448)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 808,013 180,243
Minority interest share of earnings of
consolidated subsidiary 35,994 33,119
Noncash compensation expense for common stock
issued for services 19,000 38,520
Equity in loss of Taiwan joint venture 200,289 31,433
Loss (gain) on sale of property and equipment (2,900) 23,100
Change in operating assets and liabilities:
Accounts receivable and costs and estimated
earnings in excess of billings on
uncompleted contracts 103,559 (481,789)
Inventories (1,123,596) 72,044
Prepaid expenses and other assets 83,940 (23,083)
Accounts payable and other current liabilities 606,655 (120,065)
Billings in excess of costs and estimated
earnings on uncompleted contracts 181,475 (625,056)
Net cash used by operating activities (1,452,627) (1,725,982)
Cash used by investing activities:
Cash paid for acquisition of subsidiary, net (3,848,640) -
Acquisition of property and equipment (2,458,251) (197,464)
Proceeds from sale of assets 2,900 -
Increase in patent and trademark costs (62,000) (113,754)
Investment in Taiwan joint venture - (1,345,285)
Net cash used by investing activities $(6,365,991) (1,656,503)
(Continued)
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
(unaudited)
Six Months Ended September 30,
1998 1997
Cash provided by financing activities:
Proceeds from borrowings $ 4,061,635 -
Repayment of debt (3,011,877) (21,964)
Proceeds from sales of common stock, net 956,329 -
Repayment of notes receivable from officers 8,308 574
Issuance of common stock upon exercise of
employee and non-employee options 148,177 749,913
Issuance of common stock under employee stock
purchase plan 3,849 19,294
Issuance of common stock upon exercise of warrants 193,375 460,000
Distributions paid to holders of minority interest (33,674) (33,674)
Net cash provided by financing
activities 2,326,122 1,174,143
Decrease in cash and cash equivalents (5,492,496)(2,208,342)
Cash and cash equivalents at beginning of period 7,005,533 5,713,557
Cash and cash equivalents at end of period $ 1,513,037 3,505,215
Interest paid in cash during the period $ 136,122 74,939
Non-cash investing and financing transactions:
Cumulative translation adjustments of $99,519 and $97,989 were recorded for the
six months ended September 30, 1998 and 1997, respectively (see note 14).
In April 1998, the Company purchased all of the outstanding stock of Franklin
Manufacturing Company for $4,000,000 cash and 286,282 shares of the Company's
common stock.
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.
In July and August 1997, warrant holders exercised warrants to acquire 395,000
shares of common stock on a cashless exchange basis resulting in the issuance of
307,122 shares of common stock based upon the fair market value of the common
stock on the dates of exchange of $6.75, $7.13 and $7.25 per share.
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 six months ended September 30, 1998, the
Company issued 15,870 shares of common stock for options exercised for an
aggregate exercise price of $15,870, for which the Company received 2,308 shares
of common stock as payment for the exercise price. The shares received were
recorded at cost as treasury stock and were subsequently retired.
(Continued)
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
(unaudited)
In accordance with the provisions of the Company's stock option plans, the
Company 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. For the six months ended September 30, 1998, the Company
issued 71,900 shares of common stock for an aggregate exercise price of $69,176
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
(unaudited)
(1) The accompanying consolidated financial statements are unaudited; however,
in the opinion of management, all adjustments which were solely of a
normal recurring nature, necessary to a fair presentation of the results
for the interim period, have been made. The results for the interim period
are not necessarily indicative of results to be expected for the fiscal
year.
(2) Certain financial statement amounts have been reclassified for comparative
purposes.
(3) The estimated period to complete contracts in process ranged from one to
six months at September 30, 1998, and from one to nine months at September
30, 1997. The Company expects to collect substantially all related
accounts receivable and costs and estimated earnings in excess of billings
on uncompleted contracts within eight months. Contracts in process consist
of the following:
September 30, 1998 March 31, 1998
(unaudited)
Costs incurred on uncompleted
contracts $ 1,606,481 1,724,552
Estimated earnings 565,959 515,782
2,172,440 2,240,334
Less billings to date (1,840,341) (1,786,046)
$ 332,099 454,288
Included in the accompanying balance sheets as follows:
Costs and estimated earnings
in excess of billings on
uncompleted contracts $ 514,024 454,738
Billings in excess of costs
and estimated earnings on
uncompleted contracts (181,925) (450)
$ 332,099 454,288
(4) Inventories consist of:
September 30, 1998 March 31, 1998
(unaudited)
Raw materials $ 1,936,199 76,377
Work in process 479,823 159,825
Finished products 51,030 17,715
$ 2,467,052 253,917
(5) 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.
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
The Company owns a 38 1/4% interest in Taiwan UQM and its investment is
accounted for under the equity method.
Summarized unaudited financial information for Taiwan UQM is as follows:
June 30, December 31,
Financial Position 1998 1997
Current assets $ 182,819 341,178
Noncurrent assets-land, property
and equipment 6,293,799 6,474,301
Total assets 6,476,618 6,815,479
Current liabilities 292,101 1,470,684
Noncurrent liabilities 1,623,513 -
Stockholders' equity 4,561,004 5,344,795
Total liabilities and equity $ 6,476,618 6,815,479
Quarter Ended Six Months Ended
June June June 30, June 30,
Results of Operations 1998 1997 1998 1997
Revenue $ 4,656 65,408 4,656 65,408
Expenses (281,438) (108,756) (528,285) (146,005)
Net loss $(276,782) (43,348) (523,629) (80,597)
(6) Other current liabilities consist of:
September 30, March 31,
1998 1998
(unaudited)
Accrued interest $ 23,276 5,692
Accrued loss reserves 27,750 22,678
Accrued legal and accounting fees 44,307 55,376
Accrued payroll, consulting, personal
property taxes and real estate taxes 288,955 158,604
Accrued machinery and equipment purchases 116,346 402,834
Unearned revenue 965 65,037
Other 97,719 83,779
$ 599,318 794,000
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
(7) Long-term debt consists of:
September 30, March 31,
1998 1998
(unaudited)
Note payable to bank, payable in monthly
installments with interest at 8.65%;
matures July 2003; secured by land and
building $ 917,938 -
Note payable to bank, payable in monthly
installments with interest at 9.1%; matures
October 2007; secured by land and building 702,257 726,202
Note payable to bank, payable in monthly
installments with interest at 10.05%;
matures November 2001; secured by equipment - 467,276
Note payable to bank, payable in monthly
Installments with interest at 8.50%; matures
October 2001; secured by equipment 437,960 -
Note payable to bank, payable in monthly
installments with interest at 8.5%; matures
April 2005; secured by equipment 416,630 -
Note payable to bank, payable in monthly
installments with interest at 8.5%; matures
May 2005; secured by equipment 131,098 -
Note payable to bank, payable in monthly
installments with interest at 8.125%;
matures July 2001; secured by accounts
receivable, inventory and equipment 885,417 -
Capital lease obligation 23,394 -
Total long-term debt 3,514,694 1,193,478
Less current portion 581,131 163,554
Long-term debt, less current portion $ 2,933,563 1,029,924
The Company's has two lines of credit of $.75 million and $2.5 million
expiring in June 1999 and August 1999, respectively. Both lines have
various covenants which limit the Company's ability to dispose of assets,
merge with another entity, and pledge trade receivables and inventories as
collateral. The Company is also required to maintain certain financial
ratios as defined in the agreements. The weighted average rate of interest
on these lines as of September 30, 1998 was prime less .5% or 8.0%.
(8) Net loss per common share amounts are based on the weighted average number
of common shares outstanding during the quarter and six months ended
September 30, 1998 and 1997. Outstanding common stock options and warrants
were not included in the computation because the effect of such inclusion
would be antidilutive.
(9) 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
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
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, 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
Granted 150,000 7.94
Exercised (131,452) 1.77
Forfeited (26,983) 7.91
Outstanding at September 30, 1998 2,819,917 $ 5.62
Exercisable at September 30, 1998 1,658,193 $ 5.21
The following table presents summarized information about stock options
outstanding at September 30, 1998:
Options Outstanding Options Exercisable
Weighted Weighted Weighted
Number Average Average Number Average
Range of Outstanding Remaining Exercise Exercisable Exercise
Exercise Prices at 9/30/98 Contractual Life Price at 9/30/98 Price
$0.50 - 1.00 27,347 2.2 years $0.72 27,347 $0.72
$2.25 - 3.31 602,292 7.6 years $3.09 283,431 $2.85
$3.50 - 5.00 779,368 6.2 years $4.05 641,733 $4.03
$5.38 - 8.31 1,410,910 7.5 years $7.66 705,682 $7.41
$0.50 - 8.31 2,819,917 7.3 years $5.62 1,658,193 $5.21
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
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 500,000 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, 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
Granted 18,392 5.06
Outstanding at September 30, 1998 207,725 $ 5.79
Exercisable at September 30, 1998 120,000 $ 5.64
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 9/30/98 Contractual Life Price at 9/30/98 Price
$4.38 - 6.00 111,725 6.9 years $4.89 66,667 $4.86
$6.25 - 7.13 96,000 8.0 years $6.84 53,333 $6.60
207,725 7.5 years $5.79 120,000 $5.64
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 APBO25.
The Company accounts for stock options granted to employees of the Company
under the intrinsic value method. Stock options granted to non-employees
under the Company's 1992 Stock Option Plan and directors under the
Non-employee Director 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
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
option grants to employees, net loss and net loss per common share would
have been the pro forma amounts indicated in the following table:
Quarter Ended September 30, Six Months Ended September 30,
1998 1997 1998 1997
Net loss - as
reported $ (1,422,804) (609,099) (2,365,056) (854,448)
Compensation expense -
Current period option
grants (50,094) (42,750) (100,189) (64,667)
Compensation expense -
prior period option
grants (334,752) (154,914) (669,505) (309,827)
Net loss - pro forma $ (1,807,650) (806,763) (3,134,750) (1,228,942)
Net loss per common
share - as reported $ (.09) (.04) (.15) (.06)
Net loss per common
share - pro forma $ (.11) (.06) (.20) (.09)
The fair value of stock options granted was calculated using the Black
Scholes option pricing model based on the following weighted average
assumptions:
Quarter Ended September 30,Six Months Ended September 30,
1998 1997 1998 1997
Expected volatility - 48.9% 48.5% 48.9%
Expected dividend yield- 0.0% 0.0% 0.0%
Risk free interest rate- 6.2% 5.8% 6.2%
Expected life of option
granted - 6 years 6 years 6 years
Fair value of options
granted as computed
under the Black Scholes
option pricing model- $3.75 per $4.26 per $3.70 per
share share share
Pro forma net loss reflects only the fair value compensation expense of
options granted since November 1, 1995. 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:
Pro Forma
Compensation
Expense__
1999 $1,539,386
2000 $1,250,560
2001 $ 200,377
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
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. No warrants were outstanding at September 30, 1998.
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 September 30, 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, 38,100 shares of the Company's common stock at $5.00 per
share and 50,000 shares at $4.25 per share. The exercise price of the
warrants was set at the market price of the common stock on 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. During June 1998, warrants to acquire
38,100 shares of the Company's common stock in cash at $5.00 per share
were exercised resulting in proceeds to the Company of $190,500. Warrants
to acquire 50,000 shares at $4.75 per share and 45,000 shares at $4.25 per
share remain outstanding as of September 30, 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.
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
In 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
September 30, 1998.
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 remain outstanding as of September
30, 1998.
(10) The Company has historically derived significant revenue from contract
services from a few key customers. The customers from which this revenue
has been derived and the percentage of total revenue is summarized as
follows:
Quarter Ended Six Months Ended
September 30, September 30,
1998 1997 1998 1997_
Customer:
Deere & Company $ - 117,903 - 207,194
Kia Motors Corporation - 87,905 - 512,786
Houston Metropolitan
Transit Authority 216,261 161,124 324,940 246,878
Siemens Electromechanical
Components 618,502 - 1,162,261 -
Methode Electronics 347,722 - 428,540 -
$ 1,182,485 366,932 1,915,741 966,858
Percentage of revenue 35% 46% 31% 47%
These customers, in total, also represented 29% and 4% of total accounts
receivable at September 30, 1998 and 1997, respectively.
Contract services revenue derived from contracts with agencies of the U.S.
Government and from sub-contracts with U.S. Government prime contractors,
certain portions of which are included in revenue from other key customers
above, totaled $217,007 and $280,320 for the quarter ended September 30,
1998 and 1997, respectively, and $332,963 and $413,941 for the six months
ended September 30, 1998 and 1997, respectively.
(11) The Company has entered into employment agreements with three of its
officers which expire December 31, 1999 and with one officer which expires
March 31, 2001. The aggregate annual future compensation under these
agreements through the expiration date is $937,582.
(12) Segments
The Company has three reportable segments: technology, mechanical products
and electronic 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
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
prototype components. The mechanical products segment encompasses the
manufacture and sale of permanent magnet motors, precision gears, gear
assemblies and related mechanical products. The electronic products
segment encompasses the manufacture and sale of wire harness assemblies,
electronic circuit board assemblies and electronic products.
During the quarter and six months ended September 30, 1998, intersegment
sales or transfers were immaterial.
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 quarter ended September 30,
1998:
Mechanical Electronic
Technology Products Products Total
Revenue $ 493,795 537,849 2,356,150 3,387,794
Interest income 19,601 7,681 - 27,282
Interest expense (17,571) (47,233) (36,824) (101,628)
Depreciation and
amortization (100,338) (185,448) (65,817) (351,603)
Goodwill amortization - (14,308) (66,210) (80,518)
Equity in loss of
Taiwan joint venture (105,869) - - (105,869)
Segment loss (856,280) (418,138) (148,386) (1,422,804)
Segment assets 7,830,670 8,136,627 9,718,383 25,685,680
Expenditures for
segment assets $ (129,438) (504,269) (138,002) (771,709)
The following table summarizes significant financial statement information
for each of the reportable segments for the six months ended September 30,
1998:
Mechanical Electronic
Technology Products Products Total
Revenue $ 1,139,685 1,203,246 3,897,644 6,240,575
Interest income 59,207 21,378 - 80,585
Interest expense (32,949) (69,770) (52,531) (155,250)
Depreciation and
amortization (200,033) (357,411) (109,696) (667,140)
Goodwill amortization - (30,523) (110,350) (140,873)
Equity in loss of
Taiwan joint venture (200,289) - - (200,289)
Segment loss (1,485,860) (668,730) (210,466) (2,365,056)
Segment assets 7,830,670 8,136,627 9,718,383 25,685,680
Expenditures for
segment assets $ (294,858) (2,025,391) (138,002) (2,458,251)
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
In determining the foregoing segments, the Company has allocated corporate
overhead and expenses and intangible assets, including goodwill, to the
appropriate segment.
(13) Reporting Comprehensive Income (Loss)
Financial Accounting Standards Board Statement of Financial Accounting
Standards (SFAS) No. 130, "Reporting Comprehensive Income," requires all
items that are required to be recognized under accounting standards as
components of comprehensive income to be reported in a financial statement
that is displayed with the same prominence as other financial statements.
The following table summarizes the Company's comprehensive loss for the
six months ended September 30, 1998 and 1997:
Quarter Ended September 30, Six Months Ended September 30,
1998 1997 1998 1997
Net loss (1,422,804) (609,099) (2,365,056) (854,448)
Translation loss (98,723) (25,661) (99,519) (97,989)
Income tax effect - - - -
Comprehensive
loss (1,521,527) (634,760) $ (2,464,575) (952,437)
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Report contains forward-looking statements that involve risks and
uncertainties. 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.
Financial Condition
The Company's financial condition remained strong throughout the quarter ended
September 30, 1998, despite a net loss of $1,422,804. Cash used by operations,
before changes in operating assets and liabilities, was $857,933 and $1,301,760
for the quarter and six months ended September 30, 1998, respectively. Working
capital (the excess of current assets over current liabilities) declined to
$2,601,760 at September 30, 1998, from $7,566,627 at March 31, 1998.
Accounts receivable rose $1,284,170 to $2,389,636 at September 30, 1998. The
increase is primarily attributable to the consolidation of the trade accounts
receivable of the Company's new manufacturing subsidiary, Franklin Manufacturing
Company ("Franklin"), which accounted for substantially all of the increase.
Costs and estimated earnings on uncompleted contracts increased $59,286 to
$514,024 at September 30, 1998, from the fiscal 1998 year end level of $454,738.
The increase was due to work performed on funded programs containing milestone
billing arrangements. Estimated earnings on contracts in process rose to
$565,959 at September 30, 1998, on costs incurred on contracts in process of
$1,606,481 compared to estimated earnings on contracts in process of $515,782 on
costs incurred on contracts in process of $1,724,552 at March 31, 1998. The
increase reflects improved margins on contracts in process resulting from
greater labor content and a reduction in anticipated costs.
Raw materials, work in process and finished products inventories increased by
$1,859,822, $319,998 and $33,315, respectively, to $1,936,199, $479,823 and
$51,030, respectively, at September 30, 1998. Raw materials inventories rose
primarily as a result of the consolidation of Franklin's inventory. Work in
process and finished products inventories rose due to production of motors and
associated controls pursuant to existing customer orders.
In April 1998, the Company acquired all of the outstanding common stock of
Franklin for $6,247,316 plus the assumption of then existing debt of $3,148,146.
The purchase price consisted of a cash payment of $4,000,000 and the issuance of
286,282 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 adjust the
recorded value of the tangible and identified intangible assets acquired to
their fair market value, with any excess then recorded as goodwill. In the case
of Franklin, the excess of the purchase price over the net assets acquired
resulted in an increase in the recorded value of property and equipment in the
amount of $950,400, with the excess of $5,296,916 being recorded as goodwill.
<PAGE>
The Company invested $2,458,251 for the acquisition of property and equipment
during the six months ended September 30, 1998, compared to $197,464 for the six
months ended September 30, 1997. The increase in capital expenditures is
attributable to the construction of a manufacturing plant and the purchase of
manufacturing equipment by the mechanical products segment of $1,144,518 and
$880,873 respectively; the purchase of manufacturing equipment and tooling by
the electronic products segment of $138,002 and equipment purchases of $294,858
by the technology segment.
Investment in the Taiwan joint venture declined to $1,744,584 at September 30,
1998, from $2,044,393 at the beginning of the fiscal year. The decrease is
attributable to the Company's proportionate share of operating losses which was
$200,289 for the first half and foreign currency translation adjustments which
amounted to $99,519.
Goodwill, net of accumulated amortization, rose to $6,386,176 at September 30,
1998, from $1,280,872 at March 31, 1998, due to the acquisition of Franklin.
Accounts payable rose to $2,541,169 at September 30, 1998, from $472,148 at
March 31, 1998. The increase is primarily attributable to the consolidation of
Franklin's accounts payable, ($1,151,886), and higher accounts payable at
Aerocom resulting from increased product shipments, ($925,464).
Revolving line-of-credit rose to $453,000 at September 30, 1998 due to the
consolidation of Franklin's revolving line-of-credit.
Other current liabilities decreased to $599,318 at the end of the first half
from $794,000 at March 31, 1998. The decrease is primarily attributable to a
decline in the level of manufacturing equipment purchase commitments.
Current portion of long-term debt rose $417,577 to $581,131 at September 30,
1998. The increase is due to current principal maturities on manufacturing
equipment loans by Aerocom and the consolidation of the current principal
maturities of the debt of Franklin.
Long-term debt rose to $2,933,563 at September 30, 1998, due to term borrowings
by Aerocom which amounted to $1,522,210, and the consolidation of Franklin's
long-term debt which amounted to $596,311.
Common stock and additional paid-in capital increased to $159,723 and
$42,483,886 at September 30, 1998, respectively, compared to $153,946 and
$38,852,446 at March 31, 1998. The increases were due to the sale of common
stock to investors in the amount of $956,329; proceeds received upon the
exercise of warrants of $193,375; sales of common stock to employees and
consultants through the Company's benefit plans and the exercise of options of
$152,026; and the issuance of common stock for the acquisition of Franklin of
$2,247,314.
Results of Operations
Operations for the quarter ended September 30, 1998, resulted in a net loss of
$1,422,804 or $.09 per share compared to a net loss of $609,099 or $0.04 per
share for the quarter ended September 30, 1997. Operations for the six months
ended September 30, 1998, resulted in a net loss of $2,365,056 or $0.15 per
share compared to a net loss of $854,448 or $0.06 per share for the six months
ended September 30, 1997.
Operations for the quarter and six months ended September 30, 1998, were
adversely impacted by the strike against General Motors, to whom Franklin is a
Tier 2 supplier, and the relocation and setup of the Company's mechanical
products manufacturing operations. These two events occurred principally during
the second quarter.
<PAGE>
Despite the impact of the foregoing events, product sales revenue for the
quarter ended September 30, 1998, rose over twenty four-fold to $2,941,800
compared to $118,870 for the comparable quarter last year and was 15 percent
above first quarter product sales of $2,553,447. For the six months ended
September 30, 1998, product sales revenue rose over fifteen-fold to $5,495,247
from $346,421 for the comparable period last year.
The increase in product sales is primarily due to the acquisition of Franklin
which generated revenue of $2,356,150 and $3,897,644 for the second quarter and
first half, respectively, and Aerocom which generated revenue of $529,776 and
$1,108,456 during the second quarter and first half, respectively.
Contract services revenue declined $227,765 or 34 percent to $445,994 during the
second quarter and $958,042 or 56 percent to $745,328 for the first half. The
decrease in contract services revenue is attributable to a shift in focus from
customer sponsored research programs to commercial product development
activities.
Gross profit margins on contract service revenue for the second quarter and
first half were two percent and six percent, respectively, compared to a
negative margin of five percent for the comparable quarter last year, and a
positive margin of seven percent for the comparable six month period last year.
The decline is attributable to increased levels of cost overruns on development
programs during the second quarter this year compared to the comparable period,
last year.
Gross profit margins on product sales during the second quarter and first half
were negative one percent and six percent. The lower than expected margins are
attributable to the impact of fixed overhead cost allocations over lower
production levels for the mechanical and electronic products segments during the
quarter and first half.
Research and development expenditures during the second quarter and first half
rose to $173,274 and $450,722, respectively. The increase is generally
attributable to internally-funded development activities and development
expenditures on the product launch for Invacare Corporation.
General and administrative expense for the second quarter rose to $884,931
compared to $369,320 for the comparable quarter last year. The increase is
attributable to the consolidation of the general and administrative expenses of
Aerocom and Franklin which amounted to $367,655 and higher business development
and legal expenses. General and administrative expenses for the six months ended
September 30, 1998, rose to $1,732,136 compared to $692,116 for the comparable
period last year. The increase is attributable to the consolidation of the
general and administrative expenses of Franklin and Aerocom, and higher levels
of business development, legal, accounting and acquisition costs.
Depreciation and amortization expense rose to $144,340 and $265,627 for the
second quarter and first half, respectively, due primarily to amortization of
goodwill arising from the acquisition of Franklin and Aerocom.
Interest expense rose to $101,628 and $155,250 for the quarter and six months
ended September 30, 1998, due to the consolidation of interest expense of
Franklin and Aerocom and increased levels of borrowing on revolving credit
facilities and term equipment lines during the period.
Equity in loss of the Taiwan joint venture rose to $105,869 and $200,289 for the
second quarter and first half, respectively, compared to $16,905 and $31,433,
respectively, for the comparable periods last year. The increase is due to
expanded staffing and operations at Taiwan UQM coincident with the launch of
manufacturing operations.
<PAGE>
Liquidity and Capital Resources
The Company's cash balances and liquidity throughout the quarter and six months
ended September 30, 1998, were adequate to meet operating needs. Net cash used
by operating activities was $543,421 and $1,452,627 for the quarter and six
months ended September 30, 1998. Cash requirements throughout the period were
funded primarily through the sale of common stock, cash received upon the
exercise of outstanding common stock warrants and options, and borrowings on the
Company's bank facilities.
During the first half, the Company completed the construction of a 25,000 square
foot manufacturing plant in Frederick, Colorado. The plant is situated on two
acres of land and the Company holds an option to acquire an adjacent two acre
parcel to accommodate future expansion.
Construction cost of the plant, including land acquisition costs, was $1.25
million. Construction financing was provided from existing cash balances prior
to obtaining secured mortgage financing during the second quarter in the amount
of $0.9 million. The Company expended an additional $0.6 million during the
first half for manufacturing equipment which was funded principally through
borrowings on the Company's long-term equipment credit line. These investments
are intended to increase manufacturing capability, both in manufacturing
processes and throughput capacity. In addition to borrowings for capital
expenditures during the quarter, the Company refinanced approximately $0.5
million of equipment loans.
Also, during the first half, the Company completed the acquisition of all 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. Subsequent to the acquisition, Franklin
completed a loan facility with a commercial bank to accommodate future growth.
The loan facility consists of a revolving line-of-credit of $2.5 million, a term
loan of $0.8 million and a term equipment facility for future purchases of
manufacturing equipment in the amount of $1.25 million
The Company met capital calls from Taiwan UQM in the aggregate of $1.4 million
in fiscal 1996 and 1997. Taiwan UQM reported a net loss of approximately $0.6
million last year and $0.5 million during the six months ended June 30, 1998.
Further losses or capital investment by Taiwan UQM could result in additional
capital calls which the Company would be required to fund or suffer a dilution
of its ownership interest.
During the second half, the Company expects to invest greater amounts of capital
to launch expanded gear grinding and assembly operations and the manufacture of
motors for Invacare. Capital is necessary to fund the expected growth in
inventories and accounts receivable. The Company expects to fund this working
capital requirement through a combination of existing cash resources and
short-term bank lines-of-credit. Although the Company has not, as yet, arranged
for expanded bank lines-of-credit, Management believes such credit lines are
readily available on terms acceptable to the Company. However, there can be no
assurance that such financing can be obtained.
During the first half, the Company experienced larger than anticipated operating
losses due to the impact of the strike against General Motors. Production levels
in the Company's electronic products segment were adversely impacted, not only
during the period of the strike, but throughout the entire second quarter. At
October 31, 1998, production levels for the General Motors had returned to
approximately 85 percent of pre-strike levels.
Although, the Company believes it has cash resources and borrowing capacity
sufficient to fund its operations for a period of at least one year, the impact
<PAGE>
of an unexpected and extended economic event in one of the key markets served by
the Company or by a significant customer of the Company, could cause the Company
to experience liquidity problems.
For the longer-term, the Company expects to continue its strategy of growing its
business through the expansion of its product line of motors and controllers;
increased production orders from new and existing customers for gear and
electronic assemblies; the development of new products for manufacture;
strategic alliances to accelerate the commercialization process; and 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.
Year 2000 Issues
The Year 2000 presents issues because many computer hardware and software
systems use only the last two digits to refer to a calendar year. Consequently,
these systems may fail to process dates correctly after December 31, 1999, which
may cause systems failures.
State of Readiness
The Company has conducted numerous internal discussions over the last eighteen
months amongst its management and technical staff to informally assess the
extent of the Year 2000 Issue on the Company's operations. In September, 1998
the Company adopted a formal project to evaluate all of the Company's systems
for Year 2000 compliance. The project is being monitored and supervised by the
Company's Chief Operating Officer. The evaluation of all hardware and software
systems is expected to be completed by January 31, 1999. Those hardware and
software systems which are not compliant, if any, are expected to be repaired or
replaced prior to June 30, 1999.
The Company's electronics manufacturing operations are reliant upon an operating
software system ("System"). The System was evaluated and found not to be Year
2000 compliant. The software vendor corrected the software deficiencies in the
System in August 1998, and the system is now Year 2000 compliant.
As part of the Company's Year 2000 compliance evaluation, the Company expects to
contact key suppliers and customers beginning in the fourth calendar quarter of
1998 to determine the extent to which the Company is vulnerable to third parties
failures to remediate their Year 2000 compliance issues. However, we cannot
guarantee or assure you that the systems of other companies that we rely on,
such as suppliers of raw materials, electricity providers and other similar
suppliers, or the customers who buy products from us, will effectively address
their Year 2000 issues. In the event these suppliers and customers experience a
disruption in their operations or cease operations indefinitely as a result of
not addressing their Year 2000 issues, our operations could be significantly
impacted including the temporary or permanent cessation of operations.
Costs to Address the Year 2000 Issue
The total cost to address the Year 2000 issue, including the cost of Company
personnel and outside vendors and consultants is expected to be less than
$50,000. To date the Company has spent less than $5,000 to evaluate and address
the Year 2000 Issue.
<PAGE>
Risks Associated with the Company's Year 2000 Issues
The Company believes that by modifying its MRP system as described above, its
information systems will be prepared to operate normally subsequent to December
31, 1999. However, if the modifications currently underway are not completed on
a timely basis or are not correctly implemented, the Year 2000 could impact the
ability of the Company to manufacture product, procure and manage materials, and
administer other functions and processes necessary to operate the business
effectively, any of which could have a materially adverse effect on the
Company's business, financial condition and results of operations.
The Company utilizes a number of suppliers both large and small to provide raw
materials and components for its products. The failure of third party suppliers
to become Year 2000 compliant on a timely basis could create a need for the
Company to change suppliers or otherwise impair the sourcing of raw materials,
components or services to the Company, any of which could have a material effect
on the Company's business, financial condition and results of operations.
Likewise, the failure of the Company's customers to become Year 2000 compliant,
could cause a disruption or termination of their operations which could result
in a reduction or the elimination of orders to purchase goods and services from
the Company. Either of the foregoing occurrences could have a material effect on
the Company's business, financial condition and results of operations.
Contingency Plan
The Company does not currently have a contingency plan if Year 2000 issues are
not resolved or go undetected.
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of the Shareholders of Unique Mobility, Inc. was held on
August 19, 1997. The following is a summary of the matters submitted to a
vote of security holders and the results of the voting thereon:
Proposal 1:Election of Directors
Withhold
For Authority
Ray A. Geddes 12,012,976 410,484
Lee A. Iacocca 12,383,289 40,171
Frank Hodsoll 11,908,801 514,659
William G. Rankin 12,383,176 40,284
H. J. Young 11,963,858 459,602
J. B. Richey 12,323,789 99,671
Michael G. Franklin 12,383,176 40,284
Proposal 2:Proposal to ratify the appointment of KPMG Peat Marwick LLP as
the Independent Auditors of the Company.
For Against Abstain
12,268,942 115,846 38,672
Proposal 3:Proposal to amend the Stock Option Plan for Non-Employee
Directors to increase the number of shares available for grant from
250,000 to 500,000.
For Against Abstain
10,891,970 1,404,783 126,707
Total votable shares: 15,914,852
Total shares represented in person and by proxy: 12,423,460
Percentage of votable shares voted: 78.06%
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
27 Financial Data Schedule
(b) Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Unique Mobility, Inc.
Registrant
Date: November 16, 1998 By: /s/Donald A. French
Donald A. French
Treasurer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE CONSOLIDATED
BALANCE SHEETS OF UNIQUE MOBILITY, INC. AND CONSOLIDATED SUBSIDIARIES AS OF
SEPTEMBER 30, 1998, AND THE CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE PERIOD
ENDED SEPTEMBER 30, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<CASH> 1,513,037
<SECURITIES> 0
<RECEIVABLES> 2,389,636
<ALLOWANCES> 0
<INVENTORY> 2,981,076
<CURRENT-ASSETS> 7,114,308
<PP&E> 11,597,813
<DEPRECIATION> 2,810,492
<TOTAL-ASSETS> 25,685,680
<CURRENT-LIABILITIES> 4,512,548
<BONDS> 2,933,563
0
0
<COMMON> 42,643,609
<OTHER-SE> (24,800,703)
<TOTAL-LIABILITY-AND-EQUITY> 25,685,680
<SALES> 2,941,800
<TOTAL-REVENUES> 3,387,794
<CGS> 3,412,846
<TOTAL-COSTS> 4,615,391
<OTHER-EXPENSES> (93,579)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 101,628
<INCOME-PRETAX> (1,422,804)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,422,804)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,422,804)
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
