UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL 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 Year Ended March 31, 1999
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)
Registrant's telephone number, including area code: (303) 278-2002
Securities registered pursuant to Section 12(b) of the Act:
Common stock, $.01 par value
Name of each exchange on which registered:
American Stock Exchange
Boston Stock Exchange
Pacific Stock Exchange
Chicago Stock Exchange
Frankfurt Stock Exchange
Berlin Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Common stock, $.01 par value
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 .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
The aggregate market value of the voting stock held by nonaffiliates of the
registrant (14,852,062 shares) computed by reference to the closing price of
such stock on the American Stock Exchange, as of June 14, 1999:
$70,547,295
The number of shares outstanding (including shares held by affiliates) of each
of the registrant's classes of common stock, as of June 14, 1999:
16,568,522 shares of the
registrant's common stock,
$.01 par value.
DOCUMENTS INCORPORATED BY REFERENCE In Part III certain information is
incorporated by reference from the Company's definitive Proxy Statement for the
August 11, 1999 Annual Meeting of Shareholders.
<PAGE>
ITEM 1. BUSINESS
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 Factors section of the Registration
Statement on Form S-3 (File No. 333-78525) filed by the Company with the SEC,
which identifies important risk factors that could cause actual results to
differ from those contained in the forward-looking statements, including the
Company's ability to obtain additional financing, the Company's ability to
integrate acquired businesses into existing operations, potential impacts from
Year 2000 issues and the possibility that product liability insurance may become
unavailable. 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.
General
Unique Mobility, Inc. ("Unique" or the "Company") was incorporated in 1967. The
Company's $0.01 par value common stock trades on the American, Boston, Chicago,
Pacific, Frankfurt and Berlin stock exchanges under the symbol "UQM".
Historically, the Company's revenue has been derived from contract research and
development services performed for strategic partners and clients and the
limited production and sale of power dense, energy efficient propulsion systems.
Sponsored research and development activities have supplemented internally
funded product development programs.
Over the last fifteen months the Company's operations have expanded to encompass
three business segments, technology, mechanical products and electronic
products. The Company has three principal operating units: Unique Mobility,
Inc., located in Golden, Colorado, which operates as the corporate headquarters
and engineering and product development center; wholly owned subsidiary Unique
Power Products, Inc. ("Unique Power"), located in Frederick, Colorado, which
manufactures permanent magnet electric motors, precision gears and gear
assemblies; and wholly owned subsidiary Franklin Manufacturing Company
("Franklin"), located in St Charles, Missouri which manufactures printed circuit
board assemblies, cable harness assemblies and complete electronic boxes. In
addition, the Company holds a 38.25 percent ownership interest in Taiwan UQM
Electric Co., Ltd. ("Taiwan UQM"), a joint venture with Kwang Yang Motor
Company, Ltd. ("KYMCO") and Turn-Luckily Technology Co., Ltd. Taiwan UQM,
located in Taipei, Taiwan, is a licensee of the Company and manufacturer of
starter motors and alternators for gasoline scooters and electric propulsion
systems for an all electric scooter. The Company also holds a 33 percent
ownership interest in Unique Mobility Europa Gmbh ("Unique Europa"), a recently
formed joint venture with EV Global Motors Company, Energy Conversion Devices
and Haco Trading, Ltd. Unique Europa, located in Mittweida, Germany, is seeking
funding to develop and manufacture a battery-electric, hybrid-electric and fuel
cell-electric two-passenger cargo van and a six-passenger commuter vehicle.
The Company's objective is to leverage its technology base and name recognition
to develop, manufacture and market products in a number of high potential niche
markets in the near term, and automotive mass markets in the longer term.
Fundamental to this strategy is the creation of manufacturing capability for
products developed by the Company.
Coincident with the objective of establishing manufacturing capability, the
Company acquired Aerocom Industries, Inc. ("Aerocom"), a Boulder, Colorado based
manufacturer of precision gears and gear assemblies for cash and shares of the
<PAGE>
Company's common stock totaling $3,377,020. Following the acquisition, the
Company relocated Aerocom's operations to a newly constructed 25,000 square foot
manufacturing facility in Frederick, Colorado and merged its operations with
those of Unique Power, which had been incorporated in January 1997 to launch the
Company's manufacturing operations for permanent magnet electric motors. During
fiscal 1999 Unique Power invested $1.2 million for new equipment to expand its
gear manufacturing capability and capacity. Unique Power's product shipments
commenced during the fourth quarter pursuant to a supply agreement with Invacare
Corporation for the supply of a newly developed gearless brushless direct drive
wheelchair motor. Product shipments of wheelchair motors, in accordance with the
customers planned product introduction schedule, are expected to achieve full
run rate in the first half of fiscal 2000. For the fiscal year ended March 31,
1999 Unique Power operations generated revenue of $3,532,871, or 22.4 percent of
consolidated revenue, and resulted in a net loss of $1,205,556. Earnings before
interest, taxes, depreciation and amortization (EBITDA) was a negative $174,155.
Unique Power's fiscal 1999 revenue and operating results were negatively
impacted by the economic downturn in the agricultural sector which reduced
orders from a significant customer, Funk Manufacturing, a subsidiary of Deere &
Co. Nevertheless, revenue from gearing operations nearly doubled over Aerocom's
preacquisition annual sales level.
In April 1998 the Company acquired Franklin, a St. Charles, Missouri based
manufacturer of printed circuit board assemblies, cable harness assemblies and
complete electronic boxes, for cash and shares of the Company's common stock
amounting to $6,247,316. Franklin serves the automotive, industrial, computer
and telecommunications market. During fiscal 1999 Franklin invested $1.6 million
to expand its production and testing capability. Two new surface mount
production lines were installed. The new lines increased Franklin's capacity
nearly three-fold from 37,000 components per hour to 110,000 components per
hour. During the first half of fiscal 1999 Franklin's revenues and operations
were adversely impacted by the United Auto Workers extended strike against
General Motors Corporation. Revenue for the eleven months following its
acquisition and ending March 31, 1999 was $10,129,729. Operations for the eleven
month period resulted in net earnings of $97,928. EBITDA for the eleven month
period ended March 31, 1999 was $763,117.
The technology segment of the Company encompasses the operations of the
Engineering and Product Development Center and the corporate headquarters staff
and senior executives. The Company's Engineering and Product Development Center
and corporate headquarters is located in Golden, Colorado in a 40,000 square
foot building equipped with research and development laboratories and prototype
build and test facilities for electric motors, electronic controls, software,
and vehicle integration activities. During fiscal 1999, the technology segment
generated revenue of $2,135,818 consisting of $1,517,960 of contract services
revenue and $617,858 from the sale of prototype products. Operating losses for
the technology segment amounted to $2,646,442 compared to $3,243,204 last year.
The costs associated with the operation of the corporate headquarters, including
the salaries of the executive officers and other costs attributable to the
consolidated company generally are absorbed by the technology segment and are
not allocated to the mechanical products or electronic products segments.
Technology
The Company's technology base includes a number of proprietary technologies and
patents relating to brushless permanent magnet motors, generators and electronic
controls, together with software code and computer area network design utilized
to manage individual components and the flow of energy between components in a
system. During fiscal 1999 the Company filed two additional patent applications
covering the packaging of an electromechanical brake inside a motor and a high
<PAGE>
accuracy method of detecting motor rotor position using low cost electronic
parts. Both of these patent applications remain pending.
Attributes of the Company's permanent magnet motor technology include high
operating efficiencies (>90%), packageability (small and lightweight) and
two-way operation as either a motor or generator. High pole count
configurations, together with a relatively large air-gap dimension, creates a
higher torque, lower speed motor than possible with more conventional
architectures. Typically, the Company's motors feature high copper utilization
(which minimizes energy loss); hollow construction (for the interior packaging
of other components such as gears and electromechanical brakes); good heat
rejection; lower iron content; and minimal mechanical losses.
Attributes of the Company's microprocessor-based controllers include four
quadrant control (forward/reverse and power in/power out), reduced switching
losses (which minimizes energy loss) and intelligent control. Patented circuitry
and software (Phase Advance Control) dynamically adjusts the phase angle of
current into the motor windings to increase base speed by a factor of three to
four times.
The Company's technology portfolio represents a cumulative investment of
approximately $40 million in the development of systems and components,
manufacturing processes and software. Approximately 60 percent of the investment
was funded by strategic partners and customers under research grants, "cost
share" contracts or sponsored application engineering programs.
Internally-funded research and development costs are expensed in the period they
are incurred. Income from sponsored development is recorded as contract services
revenue and the associated development costs are shown as cost of contract
services in the Company's financial statements. Internally-funded research and
development expenditures amounted to $667,989 for the fiscal year ended March
31, 1999, a decline of approximately 26 percent from the prior year level of
$902,407. The decline is attributable to lower levels of internally funded
development programs, including cost-share type sponsored development programs.
In recent years, the Company has focused the major portion of its research and
development activities on the development of commercial products as opposed to
basic research in the field. Management believes that the Company's future
growth is dependent, in part, on the continued advancement of its core
technology, the extension of its technological capabilities and its ability to
develop additional products. Accordingly, the Company expects to continue to
invest in research and development at approximately the same levels as in prior
years.
Competition
All of the markets that the Company competes in are highly competitive. The
markets served by the technology segment are additionally characterized by rapid
changes due to technological advances that can render existing technologies and
products obsolete.
The technology segment has developed advanced electric drive systems and
components which it hopes to market to vehicle OEM's throughout the world for
use in electric and hybrid electric vehicles. At present, the market for such
systems is not significant, although various legislative mandates and incentives
are expected to accelerate the development of a market for vehicles propelled by
such systems. There are numerous companies developing products that do or soon
<PAGE>
will compete with the Company's drive systems. Some of these companies possess
significantly greater financial, personnel and other resources than the Company,
including established supply arrangements and volume manufacturing operations.
The Company believes its principal competitors include Hitachi, Matsushita,
Siemens, Delphi, and Visteon.
The mechanical products segment competes primarily in the automotive, aerospace
and medical products industries. Each of these industries is extremely
competitive. The Company will face substantial competition on a continuing basis
from numerous competitors, many of whom possess longer operating histories,
significantly greater financial resources, marketing, distribution and
manufacturing capability. The Company believes its principal competitors include
Advanced DC, Emerson Electric, General Electric, Rockwell International, Baldor,
ABB, Fairfield Manufacturing, Precision Gear and Fairlane Gear.
The electronic products segment competes primarily in the automotive,
telecommunications, medical and industrial markets. Each of these markets is
extremely competitive. The Company will face substantial competition on a
continuing basis from numerous competitors, many of whom possess longer
operating histories, significantly greater financial resources, marketing,
distribution and manufacturing capability. The Company believes its principal
competitors include Jabil Circuit, Plexus, EFTC Corporation, Flextronics
International and Baldwin.
Patents and Trademarks
The Company filed a motor patent application with the U.S. Patent Office in
December 1985, and similar applications were prosecuted in many other countries
throughout the world. As a result of the original U.S. Application, U.S. Patent
No. 5,009,944 was issued on April 2, 1991 containing one independent claim and
three dependent claims. A Continuing Application of the 1985 application was
filed in October 1990 to pursue subject matter that was not allowed in the
original U.S. Patent. As a result, U.S. Patent 5,311,092 was issued on
May 10, 1994 with four independent claims and one dependent claim. Of the
foreign applications, a patent has been issued and validated in twelve member
countries of the European Patent Office (EPO), and an opposition thereto has
been resolved. In addition, corresponding patents have issued in Australia,
Brazil, Canada, India, Ireland, Israel, Japan, South Korea, Mexico, New Zealand,
South Africa and Taiwan. Four other foreign applications remain pending, three
of which have been indicated to be allowable.
In August 1989, the Company filed a separate application with the U.S. Patent
Office to cover certain proprietary aspects of its electronic control circuitry.
Additional claims were added by means of a Continuation in Part patent
application (CIP) filed in May 1990. In April 1992, the Company was issued U.S.
Patent No. 5,107,151 as a result of the CIP Application. In August 1990, an
International Patent Application corresponding to the U.S. Application and the
Continuation in Part was filed under the provisions of the Patent Cooperation
Treaty (PCT) which includes the EPO, Japan and South Korea, among others.
National applications were also filed in eight additional countries including
India, Taiwan and Israel; patents have been granted in Mexico, Taiwan, India and
Israel. Applications remain pending in Japan and South Korea but the EPO
Application has been withdrawn.
In March 1990, a Continuing Application was filed to claim the method of
constructing the motor as disclosed in U.S. Patent No. 5,004,944. The Continuing
Application resulted in U.S. Patent No. 5,319,844 issued June 14, 1994. In March
<PAGE>
1991, the Company filed an International Patent Application corresponding to the
U.S. Application; as a result a patent has been granted in Australia, Japan and
Russia. Five applications are pending in foreign countries and one pending
application in the European Patent Office (EPO) which designates the European
group of countries.
In September 1992, the Company filed a separate application with the U.S. Patent
Office titled "Stator and Method of Constructing Same for High Power Density
Electric Motors and Generators" which has resulted in issuance of U.S. Patent
No. 5,382,859 in January, 1995. This patent embodies the Company's recent
enhancement to its motor technology which utilizes a segmented iron powder
stator ring developed specifically for brushless permanent magnet stator cores.
A Divisional U.S. Patent Application was filed to pursue a second invention
disclosed in the original application; that divisional application has resulted
in U.S. Patent No. 5,592,731 issued January 14, 1997. Patent Applications in
Canada, Japan and Korea are pending as a result of a counterpart PCT
International Patent Application; the European application has been patented and
validated in Austria, France, Germany, Ireland, Italy, Switzerland and the
United Kingdom.
In July 1994, the company filed an application in the U.S. Patent Office titled
"Brushless DC Motor Using Phase Timing Advance" which embodies a low cost method
of controlling the drive current to a motor to achieve operating characteristics
ideal for vehicle traction drives. This application has resulted in U.S. Patent
No. 5,677,605 of October 14, 1997. In June 1995, a counterpart PCT International
Patent Application was filed. Applications have been filed in Canada, China,
Finland, Hong Kong, Japan, Korea, Mexico, Norway and Europe.
In December 1997, the Company filed a new patent application titled "Motor with
Internal Brake" in connection with its current developments in electric
wheelchair drives. In December 1998, a counterpart International Application
under the PCT was filed.
In July 1998, the Company filed a new U.S. patent application titled "Accurate
Rotor Position Sensor and Method Using Magnet Ring and Linear Output Hall Effect
Sensors."
The Company's future success depends, in part, on the diligent prosecution of
its issued and pending motor and electronic patents, as well as the filing and
prosecution of patents on future technological advances, if any. There can be no
assurance that the Company will possess the financial resources necessary to
prosecute and maintain existing applications or to pursue additional patents. If
the Company is not able to prosecute and maintain its existing patent
applications, they will lapse. There can be no assurance that the Company's
patents will not be circumvented, invalidated or infringed, or that the Company
will possess the financial resources to enforce its existing patents and patent
applications in the event of an infringement. Further, new technology may be
developed by third parties or may already exist unknown to the Company causing
the Company's proprietary technology to be obsolete.
The Company also intends to rely on the unpatented proprietary know-how it has
developed and now utilizes in its products. There can be no assurance that
others will not independently develop, acquire or obtain access to the Company's
technology. Although the Company protects its proprietary rights by executing
confidentiality agreements with its management, employees and others with access
to the Company's technology, these measures may not be adequate to protect the
Company from disclosure or misappropriation of its proprietary information.
<PAGE>
Backlog
The Company's technology segment had unperformed service contracts from
customers which will provide payments to the Company upon completion aggregating
approximately $476,264 and $1,315,310 at May 31, 1999 and 1998, respectively.
The technology segment also had an order backlog for prototype motors and
controls of approximately $696,602 and $516,512 at May 31, 1999 and 1998,
respectively. All such contracts are subject to amendment, modification or
cancellation. The Company expects to perform all unperformed service contracts
over the next twelve months.
The Company's mechanical products segment had an order backlog of approximately
$8.5 and $16.5 million at May 31, 1999 and 1998, respectively. The Company
expects to ship all backlog products within the next twenty-two months.
The Company's electronic products segment had an order backlog of approximately
$9.0 million at May 31, 1999. The Company expects to ship all backlog products
within the next twelve months.
Customers and Suppliers
The Company has one significant customer in its electronic products segment,
Siemens, which accounted for revenue of $3,108,929, or approximately 20 percent
of consolidated revenue.
Principal raw materials and components purchased by the Company include iron,
steel, electronic components, magnet material and copper wire. All of the above
items are available from several suppliers and the Company generally relies on
more than one supplier for each item.
U.S. Government Contracts
For the year ended March 31, 1999, $758,853, or approximately 5 percent of the
Company's consolidated revenue was derived from contracts with agencies of the
U.S. Government and from subcontracts with U.S. Government prime contractors.
For the year ended March 31, 1998, $846,740, or approximately 21 percent of
consolidated revenue was derived from contracts with agencies of the U.S.
Government and from subcontracts with U.S. Government prime contractors.
Some of the Company's business with the U.S. Government was performed on a cost
plus fixed fee basis. These contracts provide for reimbursement of costs, to the
extent allocable and allowable under applicable regulations, and payment of a
fee. Certain other contracts with the U.S. Government provide for the
reimbursement of costs on a 50 percent cost sharing basis based on not-to-exceed
billing rates negotiated between the Company and the U.S. Government. Other U.S.
Government business is performed under firm fixed price contracts. On
"cost-share" and "firm fixed price" contracts, the Company can incur an actual
loss in the performance thereof if incurred costs exceed the contract amount.
All U.S. Government contracts with the Company are subject to modification or
cancellation at the convenience of the Government.
<PAGE>
Employee and Labor Relations
As of May 31, 1999, the Company had 189 full-time employees. The Company has
entered into employment contracts with its four executive officers, three of
which expire in December, 1999 and one of which expires in April, 2001. None of
the Company's employees are covered by a collective bargaining agreement. The
Company's management believes that its relationship with its employees has been
generally satisfactory.
In addition to its full-time staff, the Company from time to time engages the
services of outside consultants and contract labor to meet peak workload or
specialized program requirements. The Company does not anticipate any difficulty
in locating additional qualified professional engineers, technicians and
production workers, if so required, to meet expanded research and development or
manufacturing operations.
<PAGE>
ITEM 2. PROPERTIES
The Company owns or leases its offices and manufacturing facilities and believes
these facilities to be well maintained, adequately insured and suitable for
their present and intended uses. Information concerning facilities of the
Company as of May 31, 1999, is set forth in the table below:
Ownership or
Square Expiration Date Renewal
Location Feet of Lease Option Use
Golden, Colorado 40,000 Own Yes manufacturing,
laboratories
and offices
Frederick, Colorado 25,000 Own - manufacturing
and offices
St. Charles, Missouri 31,000 March 2007 No manufacturing,
warehouse and
offices
ITEM 3. LEGAL PROCEEDINGS
There is no material litigation with respect to which the Company is a party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted for vote by security holders of the Company
during the quarter ended March 31, 1999.
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ITEM 5. MARKET PRICE OF COMMON STOCK
The Company's common stock trades on the American, Boston, Pacific, Chicago,
Frankfurt and Berlin Stock Exchanges. The high and low closing prices, by fiscal
quarter, as reported by the American Stock Exchange for the last two years are
as follows:
1999 High Low
Fourth Quarter $6.13 $4.25
Third Quarter $6.19 $4.39
Second Quarter $7.25 $4.39
First Quarter $8.31 $6.50
1998
Fourth Quarter $8.88 $7.44
Third Quarter $9.44 $6.94
Second Quarter $9.50 $5.81
First Quarter $7.25 $3.06
On June 14, 1999 the closing price of the Company's common stock, as reported on
the American Stock Exchange, was $4.75 per share and there were 961 holders of
record of the common stock.
The Company has not paid any cash dividends on its common stock since inception
and intends for the foreseeable future to retain any earnings to finance the
growth of its business. Future dividend policy will be determined by the Board
of Directors of the Company based upon consideration of the Company's earnings,
capital needs and other factors then relevant.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Unique Mobility, Inc.
Consolidated Selected Financial Data
Year Year Five Months
Ended Ended Ended
March 31, March 31, March 31, Year Ended October 31,
1999 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Contract Services
Revenue $ 1,517,960 2,790,496 700,132 1,436,484 4,031,951 1,643,203
Product Sales $ 14,280,458 1,274,236 152,016 611,213 701,700 708,917
Operating
Loss $ (3,144,592) (3,007,599) (1,120,900)(2,744,606)(1,134,338)(3,367,873)
Net Loss $ (3,754,070) (3,266,360) (1,201,085)(2,904,743)(1,330,433)(3,395,356)
Net Loss
Per Common Share $ (.24) (.23) (.12) (.26) (.13) (.35)
Total
Assets $ 27,206,578 19,585,551 12,370,699 8,712,649 7,626,178 5,903,551
Long-Term
Obligations $ 4,396,127 1,029,924 726,218 744,389 807,003 886,996
Cash Dividend
Declared
Per Common
Share $ -0- -0-- -0- -0- -0- -0-
</TABLE>
<PAGE>
ITEM 7. 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, 1999 and March 31, 1998 and results of
operations, changes in stockholders' equity and changes in cash flows for the
year ended March 31, 1999 and 1998, the five-month transition period ended March
31, 1997 and the fiscal year ended October 31, 1996.
Financial Condition
The Company's financial condition remained strong throughout fiscal 1999. During
the year the Company issued 123,125 shares of common stock in private offerings
resulting in net proceeds to the Company of $951,329, issued a total of 401,059
shares of common stock upon the exercise of stock options and warrants resulting
in net proceeds to the Company of $464,764. Interest-bearing recourse loans
granted to officers of the Company in conjunction with such exercises net of
repayments, was $454,063. The cash generated from these transactions, together
with cash balances on hand at the beginning of the fiscal year, were applied
principally to the acquisition of Franklin ($3,848,640), for the construction of
a manufacturing plant in Frederick, Colorado and the purchase of machinery and
equipment for the Frederick facility and the Company's other operating units
($4,399,114) and to fund operating losses and working capital requirements
($2,334,761). As a result, cash and cash equivalents declined to $1,537,453 at
March 31, 1999 from $7,005,533 at March 31, 1998 and shareholders' equity rose
to $17,116,124 at March 31, 1999 compared to $16,731,132 at March 31, 1998.
Working capital (the excess of current assets over current liabilities) declined
to $2,395,261 at March 31, 1999 from $7,566,627 at March 31, 1998, reflecting
the application of cash balances, in part, to the purchase of capital assets and
new subsidiaries.
Accounts receivable rose $1,496,528 to $2,601,994 at March 31, 1999 from
$1,105,466 at March 31, 1998. The increase is attributable to the acquisition of
Franklin and increased sales at Unique Power.
Costs and estimated earnings on uncompleted contracts decreased $281,281 to
$173,457 at March 31, 1999 from the fiscal 1998 year end level of $454,738. The
decrease was due to decreased levels of contract services in process and
improved billings and collections arrangements on such contracts. Estimated
earnings on contracts in process declined to $285,804 at March 31, 1999 on costs
incurred on contracts in process of $1,457,955 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 decrease is attributable to lower levels of
contract services revenue and reduced margins on contracts in process associated
with anticipated cost overruns.
Raw materials, work in process and finished products inventories rose by
$2,128,665, $292,828 and $112,584, respectively, to $2,205,042, $452,653 and
$130,299, respectively, at March 31, 1999 compared to $76,377, $159,825 and
$17,715, respectively, at the beginning of Fiscal 1999. The increase is
primarily attributable to the acquisition of Franklin and increased production
levels at Unique Power.
Other current assets rose to $340,658 at March 31, 1999 from $18,361 at March
31, 1998. The increase is due to the acquisition of Franklin and increased
levels of non-trade receivables.
<PAGE>
In April, 1998, the Company acquired all of the outstanding common stock of
Franklin for $6,247,316. The purchase price consisted of a net cash payment of
$3,848,640 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 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 Franklin resulted
in an increase in the recorded value of Franklin's tangible assets in the amount
of $655,183 with the excess of $5,383,811 being recorded as goodwill.
The Company invested $4,399,114 for the acquisition of property and equipment
during Fiscal 1999 compared to $703,562 in the prior fiscal year. The increase
in capital expenditures is primarily attributable to the construction of a
manufacturing plant in Frederick, Colorado to house Unique Power's operations,
the purchase of manufacturing equipment by Unique Power to expand their
manufacturing capabilities and the investment in two new production lines by
Franklin which increased their component placement capability nearly three-fold
to 110,000 components per hour.
Investment in Taiwan joint venture declined to $1,595,432 at fiscal 1999 year
end 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
amounted to $417,801 during Fiscal 1999 and foreign currency translation
adjustments which accounted for $31,159 of the decrease.
Patent and trademark costs, net of accumulated amortization, was $686,195 at
March 31, 1999 an increase of $110,210 from the fiscal 1998 year end level. The
increase is primarily attributable to increased legal fees, application fees and
other fees which amounted to $137,537 and $110,411 in fiscal 1999 and 1998,
respectively. Prior to June 1997, Alcan Aluminium Limited paid one-half of the
Company's qualifying patent prosecution costs. Subsequent to June 1997 the
Company has paid all such expenses, contributing, in part, to increased levels
of patent and trademark expenditures since that time.
Accounts payable rose to $2,244,144 at March 31, 1999 from $389,791 at the end
of fiscal 1998. The increase is primarily attributable to the acquisition of
Franklin and increased production levels at Unique Power.
Other current liabilities increased to $952,498 at fiscal 1999 year end, from
$876,357 at March 31, 1998. The increase is primarily attributable to the
acquisition of Franklin which was partially offset by the payment for equipment
purchases at Unique Power which had been accrued and unpaid at March 31, 1998.
The current portion of long-term debt rose $765,147 to $928,701 at March 31,
1999 from $163,554. The increase is due to the acquisition of Franklin, the
addition of the current portion of the mortgage financing on the newly
constructed manufacturing facility for Unique Power and the addition of the
current portion of the term equipment debt incurred by Unique Power for the
purchase of machinery and equipment.
Revolving line-of-credit rose to $1,100,000 at March 31, 1999 from zero at
March 31, 1998. The increase is attributable to the
acquisition of Franklin.
Billings in excess of costs and estimated earnings on uncompleted contracts rose
$68,943 from $450 at March 31, 1998 to $69,393 at March 31, 1999 due to the
achievement of billing milestones on certain development contracts prior to the
incurrence of planned costs to achieve the contractual milestone.
<PAGE>
Long-term debt rose $3,366,203 during fiscal 1999 due to the assumption of debt
upon the acquisition of Franklin, mortgage financing on the newly constructed
manufacturing facility for Unique Power and term equipment debt incurred by
Unique Power for the purchase of machinery and equipment.
Common stock and additional paid-in capital increased to $162,230 and
$43,412,390 at March 31, 1999, respectively, compared to $153,946 and
$38,852,446 at March 31, 1998. The increases were due to the sale of common
stock in private offerings which amounted to $951,329; proceeds received upon
the exercise of warrants of $298,375; sales of common stock to employees and
consultants through the Company's benefit plans and the exercise of options of
$166,389; the issuance of common stock for the acquisition of Franklin of
$2,247,312; and the issuance of common stock and options for services of
$110,482.
Notes receivable from officers rose $398,007 to $454,063 at March 31, 1999 from
$56,056 at March 31, 1998. The increase is attributable to new loans granted to
officers for the exercise of stock options of $794,341 during fiscal 1999 less
principal payments received against such notes during the year of $396,334.
Results of Operations
Operations for the year ended March 31, 1999, resulted in a net loss of
$3,754,070, or $0.24 per share, compared to a net loss of $3,266,360 or $0.23
per share for the year ended March 31, 1998, a net loss of $1,201,085 or $0.12
per share for the five-month transition period ended March 31, 1997 and a net
loss of $2,904,743 or $0.26 per share for the year ended October 31, 1996.
Revenue from contract services declined 46 percent to $1,517,960 during fiscal
1999 compared to $2,790,496 for the year ended March 31, 1998, $700,132 for the
five month transition period ended March 31, 1997 and $1,436,484 for the fiscal
year ended October 31, 1996, respectively. The decrease in contract services
revenue compared to the prior year and the annualized fiscal 1997 amount is
attributable to the Company's focus on executing sponsored development that
result in commercial production opportunities. The increase in contract services
revenue in fiscal 1999 over the fiscal 1996 level is attributable to increased
levels of sponsored development activities.
Product sales during fiscal 1999 rose over eleven fold to $14,280,458 compared
to $1,274,236 for the year ended March 31, 1998, and rose substantially from
product revenue for the five month transition period ended March 31, 1997 of
$152,016 and for the fiscal year ended October 31, 1996 of $611,213. The
increase is due, in part, to product sales by Unique Power resulting from
internal growth as well as a full year of the results of acquired gear
operations versus three months of operations last year. Increased revenue at
Unique Power accounted for $2,957,725 of the increase. Similarly, product sales
include the operations of Franklin for the eleven months following its
acquisition which account for $10,129,729 of the increase. Product sales by the
technology segment remained at approximately the same levels as in prior years.
Gross profit margins from all operations for fiscal 1999 decreased to 8.2
percent compared to a margin of 11.0 percent for fiscal 1998, a margin of 10.3
percent for the five-month transition period ended March 31, 1997 and a margin
of 15.1 percent for fiscal 1996, respectively. Gross profit on contract services
was 3.0 percent for fiscal 1999 compared to 5.6 percent for fiscal 1998, 9.8
percent for the five-month transition period ended March 31, 1997, and 18.6
percent for the fiscal year ended October 31, 1996, respectively. The decline in
gross profit margins during fiscal 1999 compared to all prior periods is
attributable to cost overruns on several development programs and lower average
<PAGE>
billing rates on certain high potential commercial development programs. Gross
profit on product sales in fiscal 1999 was 8.7 percent compared to 23.1 percent
in fiscal 1998, 12.9 percent for the five-month transition period ended March
31, 1997, and 6.7 percent for the fiscal year ended October 31, 1996,
respectively. The decrease in margins on product sales in fiscal 1999 is
primarily attributable to higher levels of depreciation charges on manufacturing
equipment arising from the acquisition of Aerocom and Franklin which are charged
to cost of product sales. Depreciation charged to cost of product sales amounted
to $1,117,397 in fiscal 1999.
Research and development expenditures in fiscal 1999 declined to $667,989
compared to $902,407 for fiscal 1998, $513,544 for the five month transition
period ended March 31, 1997 and $1,698,352 for year ended October 31, 1996. 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 1999 was $3,461,161 compared to
$2,121,340 for fiscal 1998, $695,263 for the five-month transition period ended
March 31, 1997 and $1,354,713 for fiscal 1996, respectively. The increase in
fiscal 1999 expenditures over all the prior periods presented is generally
attributable to the acquisition of Franklin. General and administrative expenses
for the technology segment which includes general corporate expenses decreased
nominally to $1,965,885 in fiscal 1999 compared to $2,005,417 last year.
Interest income for fiscal 1999 declined to $111,365 compared to $191,186 in
fiscal 1998, $54,802 for the five months ended March 31, 1997 and $113,582 in
fiscal 1996. The decrease is attributable to lower levels of cash throughout
fiscal 1999.
Interest expense rose to $338,396 during fiscal 1999 compared to $96,073 for
fiscal 1998, $84,704 for the five month transition period ended March 31, 1997
and $202,798 in fiscal 1996. The increase in fiscal 1999 is attributable to the
acquisition of Franklin,and higher levels of term debt at Unique Power and
Franklin arising from significant capital expenditures at each unit for facility
and equipment.
Equity in loss of Taiwan joint venture rose to $417,801 for the year ended March
31, 1999 compared to $246,648 for the year ended March 31, 1998, $24,121 for the
five-month transition period ended March 31, 1997 and $45,164 for the fiscal
year ended October 31, 1996. The increase is due to expanded staffing and
operations at Taiwan UQM and revenue growth from starter and alternator product
sales that has not met expectations.
Liquidity and Capital Resources
The Company's cash balances and liquidity throughout fiscal 1999 were adequate
to meet operating needs as a result of the Company's ability to raise capital
and borrow additional funds. Net cash used by operating activities was
$2,334,761 for the year ended March 31, 1999 a decrease of $1,344,311 from the
prior year level. Cash used in operations, before considering the effect of
changes in operating assets and liabilities was $1,336,241, a decrease of
$968,840 from the comparable amount last year. Cash requirements throughout the
period were funded primarily through the sale of common stock to investors, cash
received upon the exercise of outstanding common stock warrants and options and
borrowings on available bank facilities.
During fiscal 1999 Unique Power constructed 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. Subsequent to the end of the fiscal year
<PAGE>
Unique Power exercised its option to acquire the adjacent two acres.
Construction cost of the plant, including land acquisition costs, amounted to
$1,233,404 of which approximately $922,500 was financed through mortgage debt.
Coincident with this expansion, Unique Power invested $1,190,781 for
manufacturing equipment to increase the Company's gear manufacturing capability.
The equipment acquired was financed in its entirety through term equipment
loans. Unique Power has a line-of-credit facility with a commercial bank in the
amount of $750,000 which is scheduled for renewal in July, 1999. At March 31,
1999 no amount was drawn against this facility. All financing of the subsidiary
has been unconditionally guaranteed by Unique as the parent entity.
In April 1998, the Company acquired Franklin, 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. Subsequent to the acquisition, Franklin secured an increase in Franklin's
revolving line-of-credit with a commercial bank to accommodate future growth,
raising its available borrowing limit to $2.5 million. In addition, during the
fourth quarter of fiscal 1999 Franklin invested $1.5 million for manufacturing
equipment which improved its component placement capacity over three-fold to
110,000 components per hour. The equipment acquired was financed in its entirety
through term equipment loans. All financing of Franklin has been unconditionally
guaranteed by the Company
The Company met a capital call from Taiwan UQM of $1.4 million during the five
month transition period ended March 31, 1997. Taiwan UQM reported a net loss of
approximately $1.1 million for calendar 1998. Further losses or capital
investment by Taiwan UQM could result in additional capital calls by Taiwan UQM.
Capital calls by Taiwan UQM can be made only by unanimous vote of their Board of
Directors, of which the Company holds two seats. An additional capital call by
Taiwan UQM require the Company to either fund its proportionate share or suffer
a dilution of its ownership interest.
The Company believes that its existing cash balances and existing bank
lines-of-credit are sufficient to meet its operating capital requirements for at
least the next twelve months, exclusive of acquisition financing requirements.
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 over the next year.
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.
<PAGE>
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 was completed in December 1998. The Company believes that its critical
hardware and software systems are Year 2000 compliant with the exception of the
Company's voice mail system which will be replaced prior to December 31, 1999.
As part of the Company's Year 2000 compliance evaluation, the Company began
contacting key suppliers and customers during 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. The Company expects to
have contacted all key suppliers and customers by March 31, 1999. 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 $15,000 to evaluate and address
the Year 2000 Issue.
Risks Associated with the Company's Year 2000 Issues
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 order 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.
Quantitative and Qualitative Disclosures about Market Risk
Market risk is the potential loss arising from adverse changes in market rates
and prices, such as foreign currency exchange and interest rates. The Company
does not use financial instruments to any degree to manage these risks and does
not hold or issue financial instruments for trading purposes. Subsequently, all
of the Company's product sales, and related receivables are payable in U.S.
<PAGE>
dollars. The Company is subject to interest rate risk on its debt obligations
and notes receivable, all of which have fixed interest rates. Interest rates on
these instruments approximate current market rates as of March 31, 1999.
Effect of Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities ("FAS 133") which
was originally effective for fiscal quarters beginning after June 15, 1999. The
Financial Accounting Standards Board has delayed the effective date for FAS 133
to fiscal quarters beginning after June 15, 2000. FAS No. 133 requires companies
to record derivatives on the balance sheet as assets or liabilities, measured at
fair value. Gains or losses resulting from changes in the values of those
derivatives would be accounted for depending on the use of the derivative and
whether it qualifies under the standard for hedge accounting. The Company does
not anticipate a material impact on its financial condition or results of
operations as a result of implementing this standard.
<PAGE>
ITEM 8. Financial Statements
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, 1999 and 1998, and the related
consolidated statements of operations, stockholders' equity and comprehensive
income (loss), and cash flows for the years ended March 31, 1999 and 1998, the
five months ended March 31, 1997 and the year 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, 1999 and 1998 in Taiwan UQM Electric Co., Ltd.
was $1,595,432 and $2,044,393, respectively, and for the years ended March 31,
1999 and 1998 the Company recognized equity in the losses of Taiwan UQM Electric
Co., Ltd. of $(417,801) and $(246,648), respectively. 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 years ended March 31, 1999
and 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 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, 1999 and 1998, and the results of their operations
and their cash flows for the years ended March 31, 1999 and 1998, the five
months ended March 31, 1997 and the year ended October 31, 1996, in conformity
with generally accepted accounting principles.
/s/KPMG LLP
KPMG LLP
Denver, Colorado
June 4, 1999
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, March 31,
Assets 1999 1998
Current assets:
Cash and cash equivalents $ 1,537,453 7,005,533
Accounts receivable (note 14) 2,601,994 1,105,466
Costs and estimated earnings in excess
of billings on uncompleted contracts
(note 3) 173,457 454,738
Inventories (note 4) 2,787,994 253,917
Prepaid expenses 248,441 158,764
Other 340,658 18,361
Total current assets 7,689,997 8,996,779
Property and equipment, at cost:
Land (notes 5 and 9) 444,480 444,480
Building (notes 5 and 9) 2,675,763 1,511,635
Molds 102,113 102,113
Transportation equipment 195,890 209,920
Machinery and equipment (note 9) 10,098,430 5,605,326
13,516,676 7,873,474
Less accumulated depreciation (3,643,341) (2,186,805)
Net property and equipment 9,873,335 5,686,669
Investment in Taiwan joint venture (note 6) 1,595,432 2,044,393
Investment in EV Global (note 7) 1,000,000 1,000,000
Patent and trademark costs, net of
accumulated amortization of $90,869
and $63,542 686,195 575,985
Goodwill, net of accumulated amortization
of $324,318 and $16,215 (note 2) 6,327,841 1,280,872
Other assets 33,778 853
$ 27,206,578 19,585,551
(Continued)
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
March 31, March 31,
Liabilities and Stockholders' Equity 1999 1998
Current liabilities:
Accounts payable $ 2,244,144 389,791
Other current liabilities (note 8) 952,498 876,357
Current portion of long-term
debt (note 9) 928,701 163,554
Revolving line-of-credit (note 9) 1,100,000 -
Billings in excess of costs and
estimated earnings on uncompleted
contracts (note 3) 69,393 450
Total current liabilities 5,294,736 1,430,152
Long-term debt, less current portion
(note 9) 4,396,127 1,029,924
Total liabilities 9,690,863 2,460,076
Minority interest in consolidated
subsidiary (note 5) 399,591 394,343
Stockholders' equity (notes 11 and 12):
Common stock, $.01 par value, 50,000,000
shares authorized; 16,222,932 and
15,394,621 shares issued 162,230 153,946
Additional paid-in capital 43,412,390 38,852,446
Accumulated deficit (25,552,794) (21,798,724)
Accumulated other comprehensive income (451,639) (420,480)
Notes receivable from officers (454,063) (56,056)
Total stockholders' equity 17,116,124 16,731,132
Commitments (notes 6, 9, 16, 19 and 20)
$ 27,206,578 19,585,551
See accompanying notes to consolidated financial statements.
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Consolidated Statements of Operations
Year Year Five Months Year
Ended Ended Ended Ended
March 31, March 31, March 31, October 31,
1999 1998 1997 1996
Revenue (note 14):
Contract services $ 1,517,960 2,790,496 700,132 1,436,484
Product sales 14,280,458 1,274,236 152,016 611,213
15,798,418 4,064,732 852,148 2,047,697
Operating costs and expenses:
Costs of contract services 1,471,827 2,635,599 631,823 1,168,757
Costs of product sales 13,033,930 980,034 132,418 570,481
Research and development 667,989 902,407 513,544 1,698,352
General and administrative 3,461,161 2,121,340 695,263 1,354,713
Amortization of goodwill 308,103 16,215 - -
Write-down of inventory - 416,736 - -
18,943,010 7,072,331 1,973,048 4,792,303
Operating loss (3,144,592) (3,007,599) (1,120,900) (2,744,606)
Other income (expense):
Interest income 111,365 191,186 54,802 113,582
Interest expense (338,396) (96,073) (84,704) (202,798)
Equity in loss of Taiwan
joint venture (note 6) (417,801) (246,648) (24,121) (45,164)
Minority interest share of
earnings of consolidated
subsidiary (72,596) (70,905) (27,725) (69,400)
Other 107,950 (36,321) 1,563 43,643
(609,478) (258,761) (80,185) (160,137)
Net loss $ (3,754,070) (3,266,360) (1,201,085) (2,904,743)
Net loss per common
share - basic and
diluted (note 1p) $(.24) (.23) (.12) (.26)
Weighted average number of shares
of common stock outstanding 15,960,966 13,924,434 12,043,481 11,021,742
See accompanying notes to consolidated financial statements.
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity and Comprehensive Income (Loss)
<TABLE>
Number of Accumulated Notes
common Additional Accumu- other receivable Total
shares Common paid-in lated comprehensive due from Treasury stockholders'
issued stock capital deficit income officers stock equity
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
Comprehensive income (loss):
Net loss - - - (2,904,743) - - - (2,904,743)
Translation adjustment - - - - (21,030) - - (21,030)
Total comprehensive income (loss) - - - - - - - (2,925,773)
Balances at October 31, 1996 11,751,365 117,514 23,021,339 (17,331,279) (21,030) (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
Comprehensive income (loss):
Net loss - - - (1,201,085) - - - (1,201,085)
Translation adjustment - - - - (12,761) - - (12,761)
Total comprehensive income (loss) (1,213,846)
Retirement of treasury stock (39,341) (393) (127,459) - - - 127,852 -
Balances at March 31, 1997 13,042,964 130,430 27,094,170 (18,532,364) (33,791) (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
Comprehensive income (loss):
Net loss - - - (3,266,360) - - - (3,266,360)
Translation adjustment - - - - (386,689) - - (386,689)
Total comprehensive income (loss) (3,653,049)
Repayment of officers' notes (2,654) (27) (19,380) - - 27,590 - 8,183
Balances at March 31, 1998 15,394,621$153,946 38,852,446 (21,798,724) (420,480) (56,056) - 16,731,132
</TABLE>
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity and Comprehensive Income,
Continued
<TABLE>
<CAPTION>
Number of Accumulated Notes
common Additional Accumu- other receivable Total
shares Common paid-in lated comprehensive due from Treasury stockholders'
issued stock capital deficit income officers stock equity
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock in private
offerings, net of offering costs
of $33,671 (note 11) 123,125 1,231 950,098 - - - - 951,329
Issuance of common stock upon
exercise of employee and directors
options 329,339 3,294 942,316 - - (794,341) - 151,269
Issuance of common stock upon
exercise of warrants 68,600 686 297,689 - - - - 298,375
Issuance of common stock under
employee stock purchase plan 3,120 31 15,089 - - - - 15,120
Issuance of common stock for services 17,845 179 91,303 - - - - 91,482
Compensation expense accrued for
issuance of common stock options
granted for services - - 19,000 - - - - 19,000
Issuance of common stock for
acquisition of Franklin 286,282 2,863 2,244,449 - - - - 2,247,312
Comprehensive income (loss):
Net loss - - - (3,754,070) - - (3,754,070)
Translation adjustment - - - - (31,159) - - (31,159)
Total comprehensive income (loss) (3,785,229)
Repayment of officers' notes - - - - - 396,334 - 396,334
Balances at March 31, 1999 16,222,932 $162,230 43,412,390 (25,552,794) (451,639) (454,063) - 17,116,124
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year Year Five Months Year
Ended Ended Ended Ended
March 31, March 31, March 31, October 31,
1999 1998 1997 1996
<S> <C> <C> <C> <C>
Cash flows used by operating activities:
Net loss $ (3,754,070) (3,266,360) (1,201,085) (2,904,743)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 1,825,323 545,295 159,473 375,590
Minority interest share of earnings of
consolidated subsidiary 72,596 70,905 27,725 69,400
Noncash compensation expense for
common stock, stock options and
warrants issued for services 110,482 47,520 3,949 61,391
Equity in loss of Taiwan joint venture 417,801 246,648 24,121 45,164
Loss (gain) on sale of property and
equipment - 32,180 - (45,676)
Write-off of patent costs - 18,731 55,529 -
Other (8,373) - 1,210 (20,092)
Change in operating assets and liabilities:
Accounts receivable and costs and
estimated earnings in excess of
billings on uncompleted contracts 231,768 (609,588) 167,846 (148,782)
Inventories (1,444,538) 331,294 (17,246) (3,444)
Prepaid expenses and other current
assets (361,498) (41,084) (66,910) (12,846)
Accounts payable and other current
liabilities 506,805 (395,256) 106,497 (25,681)
Billings in excess of costs and
estimated earnings on uncompleted
contracts 68,943 (659,357) 634,122 25,685
Net cash used by operating
activities (2,334,761) (3,679,072) (104,769) (2,584,034)
Cash provided by(used by)investing activities:
Cash paid for acquisition of subsidiary, net (3,848,640) (337,702) - -
Acquisition of property and equipment (4,399,114) (703,562) (118,608) (182,011)
Increase in patent and trademark costs (137,537) (110,411) (47,865) (92,390)
Investment in Taiwan joint venture - (1,375,121) -
Proceeds from sale of certificates of deposit -
and other investments - - - 319,107
Proceeds from sale of property and equipment - 25,250 - 63,361
Net cash provided by (used by)
investing activities (8,385,291) (1,126,425) (1,541,594) 108,067
</TABLE>
(Continued)
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
<TABLE>
<CAPTION>
Year Year Five Months Year
Ended Ended Ended Ended
March 31, March 31, March 31, October 31,
1999 1998 1997 1996
<S> <C> <C> <C> <C>
Cash flows provided by financing activities:
Proceeds from borrowings $ 10,827,358 - - -
Repayment of debt (7,320,466) (212,440) (34,085) (83,045)
Repayment of note payable for investment
in Taiwan joint venture - (1,345,285) - -
Proceeds from sale of common stock, net 951,329 4,673,797 4,146,820 3,909,379
Issuance of common stock upon exercise
of employee options, net of note repayments 547,603 1,092,334 45,000 130,565
Issuance of common stock under employee
stock purchase plan 15,120 24,038 - 20,267
Issuance of common stock upon exercise of
warrants 298,375 1,932,375 - -
Distributions paid to holders of minority
interest (67,347) (67,346) (28,061) (67,345)
Net cash provided by financing
activities 5,251,972 6,097,473 4,129,674 3,909,821
Increase (decrease) in cash
and cash equivalents (5,468,080) 1,291,976 2,483,311 1,433,854
Cash and cash equivalents at beginning of period 7,005,533 5,713,557 3,230,246 1,796,392
Cash and cash equivalents at end of period $ 1,537,453 7,005,533 5,713,557 3,230,246
Interest paid in cash during the period $ 314,983 129,599 276,591 82,494
</TABLE>
Non-cash investing and financing transactions:
Translation adjustments of $31,159, $386,689, $12,761 and $21,030 were recorded
for the years ended March 31, 1999 and 1998, the five months ended March 31,
1997, and the year ended October 31, 1996, respectively.
In April 1998, the Company purchased all of the outstanding stock of Franklin
Manufacturing Company for $4 million cash and 286,282 shares of the Company's
common stock (see note 2). 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
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
prior to the date of the option exercise. For the years ended March 31, 1999 and
October 31, 1996, the Company issued 15,870 and 13,666 shares of common stock
for an aggregate exercise price of $15,870 and $10,250, respectively, for which
the Company received 2,308 and 2,000 shares of common stock as payment for the
exercise price. The shares received were recorded at cost as treasury stock and
subsequently retired. For the year ended March 31, 1998 and the five months
ended March 31, 1997, there were no such transactions.
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 year ended March 31, 1999, the five months ended
March 31, 1997 and the year ended October 31, 1996, the Company issued 267,362,
20,105 and 13,395 shares of common stock for an aggregate exercise price of
$794,341, $17,830 and $13,395, respectively, for which the company received
promissory notes for the same amount. There were no notes receivable exchanged
for the exercise of options during the year ended March 31, 1998.
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) Description of 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
grinding and manufacturing of high precision gears and the manufacture
and sale of electronic circuit board assemblies, wire harness
assemblies and other electronic products. The Company's revenue is
derived primarily from product sales to customers in the automotive,
agriculture, telecommunications, industrial, medical and aerospace
markets, and from contract research and development services. The
Company is impacted by other factors such as the continued receipt of
contracts from industrial and governmental parties, its ability to
protect and maintain the proprietary nature of its technology, its
continued product and technological advances and the ability of the
Company and its partners to commercialize its products and technology.
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, 1999 and 1998, 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 buildings,
which are depreciated over 31 years. Maintenance and repairs are
charged to expense as incurred.
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(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.
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 years ended
December 31, 1998 and 1997, the two months ended December 31, 1996,
and the year ended October 31, 1996. Similarly, the accompanying
consolidated balance sheets and related footnote disclosures as of
March 31, 1999 and 1998, include the financial position of the Taiwan
joint venture as of December 31, 1998 and 1997, respectively. The
cumulative foreign currency translation adjustments with respect to
the Taiwan joint venture were calculated using the average rates in
effect during the years ended December 31, 1998 and 1997, and the
two-month period and year ended December 31, 1996 and October 31,
1996, respectively, and the spot rates in effect at the respective
December 31, 1998 and 1997 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 costs 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.
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(i) Long-Lived Assets
The Company accounts for long-lived assets in accordance with the
provisions 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 be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable.
(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 costs
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.
(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 and operating loss and tax credit carryforwards. 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. 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.
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(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 or options 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 or the fair market value of the option
determined using an appropriate option pricing model.
(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) Comprehensive Income
On April 1, 1998, the Company adopted SFAS No. 130, Reporting
Comprehensive Income, SFAS No. 130 establishes standards for reporting
and presentation of comprehensive income and its components in a full
set of financial statements. Comprehensive income consists of net
income and foreign currency translation adjustments and is presented
in the consolidated statements of stockholder's equity and
comprehensive income (loss). The Statement requires only additional
disclosures in the consolidated financial statements; it does not
affect the Company's financial position or results of operations.
Prior year financial statements have been reclassified to conform to
the requirements of SFAS No. 130.
(p) 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 years
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
ended March 31, 1999 and 1998, the five months ended March 31, 1997 or
the year ended October 31, 1996. 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.
(q) 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.
(r) Reclassifications
Certain prior year amounts have been reclassified to conform to the
current period presentation.
(2) Acquisitions
On April 30, 1998, the Company acquired all of the outstanding common stock
of Franklin Manufacturing Company (Franklin) for $4 million cash and
286,282 shares of the Company's common stock. The total value of the
consideration exchanged was $6,247,316. The allocation of the purchase
price was as follows:
Cash $ 151,360
Accounts receivable 1,396,276
Inventories 1,089,539
Property, plant and equipment 1,299,449
Goodwill 5,383,811
Other 75,028
9,395,463
Debts and other liabilities
assumed (3,148,147)
Purchase price $ 6,247,316
The acquisition has been accounted for using the purchase method of
accounting and the results of Franklin's operations have been included with
those of the Company since April 30, 1998.
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
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 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 years ended March 31, 1999 and 1998, assuming the acquisitions of
Aerocom and Franklin occurred on April 1, 1997, is as follows:
Year Ended Year Ended
March 31, 1999 March 31, 1998
Revenue $ 16,758,131 16,817,275
Net loss $ (3,717,658) (3,119,632)
Basic and diluted loss
per common share $ (.23) (.22)
The pro forma information does not necessarily represent the results that
would have occurred if the acquisitions had been consummated on April 1,
1997, 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, 1999, the estimated period to complete contracts in process
ranged from 1 to 7 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, 1999, within one year.
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The following summarizes contracts in process at March 31, 1999, and 1998:
March 31, March 31,
1999 1998
Costs incurred on uncompleted
contracts $ 1,457,955 1,724,552
Estimated earnings 285,804 515,782
1,743,759 2,240,334
Less billings to date (1,639,695) (1,786,046)
$ 104,064 454,288
Included in the accompanying balance
sheets as follows:
Costs and estimated earnings
in excess of billings on
uncompleted contracts $ 173,457 454,738
Billings in excess of costs and
estimated earnings on
uncompleted contracts (69,393) (450)
$ 104,064 454,288
(4) Inventories
Inventories at March 31, 1999, and 1998 consist of:
March 31, March 31,
1999 1998
Raw materials $ 2,205,042 76,377
Work in process 452,653 159,825
Finished products 130,299 17,715
$ 2,787,994 253,917
(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
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
only to certain protective rights of the private investor, and by virtue of
the lease agreement with the 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
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.
During the year ended March 31, 1998, an investment was made in Taiwan UQM
by employees of Taiwan UQM diluting the Company's investment to 38 1/4%.
The Company's investment in Taiwan UQM is accounted for under the equity
method of accounting. Under this method, the investment, originally
recorded at cost, is adjusted to recognize the Company's share of the net
earnings or losses of the joint venture.
Income or loss recognition is limited to the extent of the Company's
investment in, advances to and guarantees of the joint venture. 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 years ended December 31, 1998 and 1997, the
two months ended December 31, 1996, and the year ended October 31, 1996.
Similarly, the accompanying consolidated balance sheets and related
footnote disclosures as of March 31, 1999 and 1998, include the financial
position of the Taiwan joint venture as of December 31, 1998 and 1997,
respectively. The cumulative foreign currency translation adjustments with
respect to the Taiwan joint venture were calculated using the average rates
in effect during the years ended December 31, 1998 and 1997, the two-month
period ended December 31, 1996 and the year ended October 31, 1996,
respectively, and the exchange rates in effect at the respective
December 31, 1998 and 1997 balance sheet dates.
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Summarized unaudited financial information for Taiwan UQM is as follows:
December 31, December 31,
Financial Position 1998 1997
Current assets $ 607,889 341,178
Noncurrent assets-land, property
and equipment 6,647,023 6,474,301
Total assets 7,254,912 6,815,479
Current liabilities 682,073 1,470,684
Noncurrent liabilities 2,401,775 -
Stockholders' equity 4,171,064 5,344,795
Total liabilities and equity $ 7,254,912 6,815,479
Year Year Two Months Year
Ended Ended Ended Ended
December 31, December 31, December 31, October 31,
Results of Operations 1998 1997 1996 1996
Revenue $ 127,638 663 10,123 -
Expenses (1,219,928) (597,278) (56,403) (128,214)
Net loss $(1,092,290) (596,615) (46,280) (128,214)
(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 a total of 1,501,925 shares of the
Company's common stock from third parties in open market purchases.
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. The Company's investment in EVG is accounted for
under the cost method.
(8) Other Current Liabilities
Other current liabilities at March 31, 1999 and 1998, consist of:
March 31, March 31,
1999 1998
Accrued interest $ 28,623 5,692
Accrued legal and accounting fees 66,205 55,376
Accrued payroll, consulting, personal property
taxes and real estate taxes 268,729 158,604
Accrued material purchases 285,722 82,357
Accrued machinery and equipment purchases - 402,834
Other 303,219 171,494
$ 952,498 876,357
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(9) Long-term debt
Long-term debt at March 31, 1999 and 1998 consists of:
March 31, March 31,
1999 1998
Note payable to bank, payable in monthly
installments with interest at 8.65%; matures
July 2003; secured by land and building $ 903,338 -
Note payable to bank, payable in monthly
installments with interest at 9.1%; matures
October 2007; secured by land and building 676,652 726,202
Note payable to bank, payable in monthly
installments with interest at 10.05%; matures
November 2001; secured by equipment - 467,276
Notes payable to bank, payable in monthly
installments with interest at 8.5%; matures
October 2001, April, May, October and
December 2005; secured by equipment 1,451,242 -
Note payable to bank, payable in monthly
installments with interest at 8.125%; matures
July 2001; secured by accounts receivable,
inventory and equipment 729,167 -
Note payable to bank, payable in monthly
installments with interest at 7.70%; matures
March 2004; secured by equipment 1,500,000 -
Note payable to commercial lender, payable in
monthly installments with interest at 6.38%;
matures October 1999 50,648 -
Capital lease obligation 13,781 -
Total long-term debt 5,324,828 1,193,478
Less current portion 928,701 163,554
Long-term debt, less current portion $ 4,396,127 1,029,924
Certain of the above loan agreements require the Company to achieve
specific financial and operating requirements. As of March 31, 1999, the
Company was in compliance with all covenants.
The annual aggregate maturities of long-term debt for each of the next five
fiscal years and thereafter are as follows:
2000 $ 928,701
2001 965,656
2002 762,854
2003 609,482
2004 661,616
Thereafter 1,396,519
$ 5,324,828
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Lines of credit
At March 31, 1999, the Company has lines of credit of $.75 million and $2.5
million with available borrowing capacity of $.75 million and $1.4 million,
respectively. The $.75 million line of credit expires in June 1999. The
$2.5 million line of credit is due on demand, but if no demand is made, it
is due August 15, 1999. Interest on the lines of credit is payable monthly
at prime plus .75% (8.50% at March 31, 1999) and prime less .50% (7.25% at
March 31, 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. Outstanding borrowings under both lines of credit are
secured by accounts receivable, inventory and general intangibles, and are
limited to certain percentages of eligible accounts receivable and
inventory.
(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 Year Ended Ended Year Ended
March 31, March 31, March 31, October 31,
1999 1998 1997 1996
Computed "expected"
tax benefit $(1,276,384) (1,110,562) (408,369) (987,613)
Increase (decrease) in
taxes resulting from:
Amortization of
goodwill not
deductible for
tax 97,915 - - -
Expiration of
net operating
loss carry-
forwards 89,369 - - -
Increase in
valuation
allowance for
net deferred
tax assets 906,668 1,015,804 407,443 985,132
Other, net 182,432 94,758 926 2,481
Income tax benefit $ - - - -
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The tax effects of temporary differences that give rise to significant
portions of the net deferred tax asset are presented below:
March 31,
1999 1998
Deferred tax assets:
Research and development
credit carryforwards $ 97,565 83,671
Net operating loss
carryforwards 8,617,380 7,522,664
Total deferred
tax assets 8,714,945 7,606,335
Less valuation allowance 8,513,003 7,606,335
Net deferred tax
assets, net of
valuation allowance 201,942 -
Deferred tax
liabilities -
property and
equipment 201,942 -
Net deferred tax
liability $ - -
As of March 31, 1999, the Company had net operating loss carryforwards
(NOL) of approximately $25.5 million for U.S. income tax purposes which
expire in varying amounts through 2019. Approximately $2.6 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. 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 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
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 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.
(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, 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 650,000 5.20
Exercised (331,647) 2.90
Forfeited (109,151) 7.68
Outstanding at March 31, 1999 3,037,554 $5.49
Exercisable at March 31, 1999 1,933,571 $5.37
<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, 1999:
Options Outstanding Options Exercisable
Weighted Weighted Weighted
Number Average Average Number Average
Range of Outstanding Remaining Exercise Exercisable Exercise
Exercise Prices at 3/31/99 Contractual Life Price at 3/31/99 Price
$0.50 - 1.00 23,959 1.9 years $0.75 23,959 $0.75
$2.25 - 3.31 547,292 6.7 years $3.07 406,195 $2.99
$3.50 - 5.00 1,129,663 7.6 years $4.23 627,554 $4.10
$5.38 - 8.13 1,336,640 6.8 years $7.64 875,863 $7.51
$0.50 - 8.13 3,037,554 7.0 years $5.49 1,933,571 $5.37
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 64,000 5.06
Outstanding at March 31, 1999 253,333 $5.66
Exercisable at March 31, 1999 146,666 $5.49
<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 3/31/99 Contractual Life Price at 3/31/99 Price
$4.38 - 6.00 157,333 7.6 years $4.94 93,333 $4.85
$6.25 - 7.13 96,000 7.4 years $6.84 53,333 $6.60
253,333 7.5 years $5.66 146,666 $5.49
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:
<TABLE>
<CAPTION Five Months
Year Ended Year Ended Ended Year Ended
March 31, 1999 March 31, 1998 March 31, 1997 October 31, 1996
<S> <C> <C> <C> <C>
Net loss - as reported $(3,754,070) (3,266,360) (1,201,085) (2,904,743)
Compensation expense -
current period option
grants (129,406) (821,800) (116,847) (339,221)
Compensation expense -
prior period option
grants (1,274,213) (619,654) (145,042) -
Net loss - pro forma $(5,157,689) (4,707,814) (1,462,974) (3,243,964)
Net loss per common share -
as reported $ (.24) (.23) (.12) (.26)
Net loss per common share -
pro forma $ (.32) (.34) (.14) (.29)
</TABLE>
The fair value of stock options granted was calculated using the Black
Scholes option pricing model based on the following weighted average
assumptions:
<TABLE>
<CAPTION>
Five Months
Year Ended Year Ended Ended Year Ended
March 31, 1999 March 31, 1998 March 31, 1997 October 31, 1996
<S> <C> <C> <C> <C>
Expected volatility 48.3% 48.1% 47.6% 49.1%
Expected dividend yield 0.0% 0.0% 0.0% 0.0%
Risk free interest rate 5.4% 5.7% 6.4% 5.6%
Expected life of option
granted 6 years 6 years 6 years 6 years
Fair value of options
granted as computed
under the Black Scholes
option pricing models $2.74 per share $4.15 per share $1.79 per share $2.22 per share
</TABLE>
<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
2000 $1,565,187
2001 $ 579,800
2002 $ 447,567
Warrants
As discussed in Note 11, the Company completed a private placement in
fiscal 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 remain outstanding as of March 31, 1999.
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, 1999.
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 June 1998, warrants to acquire 38,100 shares of the Company's
common stock of $5.00 per share were exercised resulting in cash
proceeds to the Company of $190,500.
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
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 45,000 shares
at $4.25 per share remain outstanding as of March 31, 1999.
In connection with a 1995 private placement, the placement agent was
issued warrants expiring July 1998, to acquire 150,000 shares of the
Company's common stock at $5.75 per share. During July 1998, warrants
to acquire 500 shares of the Company's common stock were exercised,
resulting in cash proceeds to the Company of $2,875. 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. The remaining 29,500 warrants
expired in July 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 were exercisable at a price of $6.00 per share and
expired in January 1999. 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. The remaining 220,000 warrants
expired in January 1999.
(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 manufacture and sale of products or processes
embodying the related technology. For the years ended March 31, 1999
and 1998, the five months ended March 31, 1997, and the year ended
October 31, 1996, the Company recorded royalty expense of $14,240,
$14,999, $4,077, and $9,497, respectively, under this agreement.
(14) Significant Customers
The Company has historically derived significant revenue from a few
key customers. The customers from which this revenue has been derived
and the percentage of revenue is summarized as follows:
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Year Ended Year Ended Five Months Year Ended
March 31, March 31, Ended March 31, October 31,
1999 1998 1997 1996
Customer A $ 3,108,929 - - -
B - - 162,500 -
C - 707,771 113,229 -
D - - 176,749 -
E - 571,924 - -
F - - - 378,640
$ 3,108,929 1,279,695 452,478 378,640
Percentage of
revenue 20% 31% 53% 18%
The significant customer for the year ended March 31, 1999, was a
customer in the Company's Electronic Products Segment. In the prior
years, the significant customers were all customers of the Technology
Segment. These customers, in total, also represented 19% and 0% of
total accounts receivable at March 31, 1999 and 1998, 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 $758,853 and $846,740 for the years
ended March 31, 1999 and 1998,respectively, $78,532 for the five
months ended March 31, 1997, and $800,208 for the year ended October
31, 1996.
(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.
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(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 currently matches 33% of participants contributions, subject
to certain limitations. These contributions vest ratably over a
three-year period. Matching contributions to the Plan by the Company
were $107,455, $100,212, $39,535 and $90,935 for the years ended March
31, 1999 and 1998, the five months ended March 31, 1997, and the year
ended October 31, 1996, 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 years
ended March 31, 1999 and 1998, the Company issued 3,120 and 7,523
shares of common stock, respectively, 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 year ended
October 31, 1996, the Company issued 6,668 shares of common stock
under the Stock Purchase Plan.
(17) 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 prototype components as well as
its corporate headquarters and executive management. 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 years ended March 31, 1999 and 1998, intersegment sales or
transfers were immaterial. Salaries of the executive officers and
corporate general and administrative expense is allocated entirely to
the technology segment.
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, 1999:
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Mechanical Electronic
Technology Products Products Total
Revenue $ 2,135,818 3,532,871 10,129,729 15,798,418
Interest income 88,307 23,058 - 111,365
Interest expense (67,306) (165,473) (105,617) (338,396)
Depreciation and
amortization (399,823) (804,246) (313,151) (1,517,220)
Goodwill amortization - (61,682) (246,421) (308,103)
Equity in loss of
Taiwan joint venture (417,801) - - (417,801)
Segment loss (2,646,442) (1,205,556) 97,928 (3,754,070)
Segment assets 8,032,683 7,495,481 11,678,414 27,206,578
Expenditures for
segment assets $ (487,550) (2,418,688) (1,630,413) (4,536,651)
The following table summarizes significant financial statement
information for each of the reportable segments for the year ended
March 31, 1998:
Mechanical
Technology Products Total
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)
During the five months ended March 31, 1997 and the year ended
October 31, 1996, the Company operated in only the technology segment.
(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:
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
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 and Contingencies
Employment Agreements
The Company has entered into employment agreement 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 $711,573.
Lease Commitments
The Company has entered into operating lease agreements for office
space and equipment which expire at various times through 2007. As of
March 31, 1999, the future minimum lease payments under operating
leases with initial noncancelable terms in excess of one year are as
follows:
Year ending March 31:
2000 $ 290,419
2001 279,937
2002 265,364
2003 251,444
2004 253,961
Thereafter 756,420
$ 2,097,545
<PAGE>
UNIQUE MOBILITY, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Rental expense under these leases totaled approximately $327,000 for
the year ended March 31, 1999. Rental expense under operating leases
for the year ended March 31, 1998, the five months ended October 31,
1997 and the year ended October 31, 1996 was immaterial.
Litigation
The Company is involved in various claims and legal actions arising in
the ordinary course of business. In the opinion of management, the
ultimate disposition of these matters will not have a material adverse
effect on the Company's financial position.
Uncertainty due to Year 2000 Issue
The Year 2000 issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may
recognize the Year 2000 as 1900 or some other date, resulting in
errors when information using Year 2000 dates is processed. In
addition, similar problems may arise in some systems which use certain
dates in 1999 to represent something other than a date. The effects of
the Year 2000 issue may be experienced before, on, or after January 1,
2000, and, if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure
which could affect the Company's ability to conduct normal business
operations. There can be no assurance that all aspects of the Year
2000 issue affecting the Company, including those related to the
efforts of customers, suppliers or other third parties, will be fully
resolved.
(20) Subsequent Events
On May 10, 1999, the Company and three other entities, including EVG,
formed a German private company, Unique Mobility Europa GmbH (UME), to
develop and manufacture a battery-electric cargo and passenger
vehicle. UME is headquartered in Mittweida, in the State of Saxony,
Germany. UME was initially capitalized with DM50,000 cash and 625,000
shares of the Company's common stock, of which 208,333 were newly
issued shares contributed by the Company. The Company currently holds
a 33.6 percent ownership interest in UME.
In June 1999, Unique acquired an approximately 9.5 percent
participation in a $5.225 million loan from EVG to Windermere Eco
Development Limited, a Bahamian company ("WED") for $500,000 in cash.
WED is an environmentally sensitive development of Windermere Island
in the Bahamas. The entire loan is convertible into approximately 50.4
percent of the total outstanding equity of WED. Therefore, if EVG
converts the loan, Unique will have the right to receive approximately
4.82 percent of the equity of WED.
<PAGE>
ITEM 9. CHANGE IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
<PAGE>
PART III
Pursuant to instruction G(3) to Form 10-K, the information required in Items
10-13 is hereby incorporated by reference from the Company's definitive Proxy
Statement for the Annual Meeting of Shareholder to be held on August 11, 1999,
to be filed on or about June 25, 1999, pursuant to Regulation 14A.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements:
Unique Mobility, Inc. (included in Part II):
Independent Auditors' Report.
Consolidated Balance Sheets, March 31, 1999 and March 31,
1998.
Consolidated Statements of Operations for the years ended
March 31, 1999 and 1998, the five months ended March
31, 1997 and the year ended October 31, 1996.
Consolidated Statements of Stockholders' Equity and
Comprehensive and Income(Loss) for the years ended
March 31, 1999 and 1998, the five months ended March
31, 1997, and the year ended
October 31, 1996.
Consolidated Statements of Cash Flows for the years ended
March 31, 1999 and 1998, the five months ended March
31, 1997 and year ended October 31, 1996.
Notes to Consolidated Financial Statements.
2. Financial Statement Schedules:
None.
(b) Repprts on Form 8-K:
Report regarding signing of Letter of Intent to acquire
Franklin Manufacturing Company dated April 2, 1998.
Report regarding the completion of the acquisition of
Franklin Manufacturing Company dated May 6, 1998.
Report regarding the Financial Information required upon the
acquisition of Franklin Manufacturing Company dated
June 29, 1998.
Report regarding the formation of Unique Mobility Europa
Gmbh dated May 11, 1999.
(c) Exhibits
3.1 Articles of Incorporation and Bylaws. Reference is made to Exhibit
3.1 of the Company's Registration Statement on Form S-1 (No.
33-42342), which is incorporated herein by reference.
3.2 Restated Articles of Incorporation. Reference is made to Exhibit
3.2 of the Company's Quarter Report on Form 10-K for the year
ended October 31, 1993 (No. 0-9146) which is incorporated herein by
reference.
4.1 Specimen Stock Certificate. Reference is made to Exhibit 3.1 of the
Company Registration Statement on Form 10, dated February 27,
1980 (No. 0-9146) which is incorporated herein by reference.
10.1 Shareholder Agreement by and among Alcan International Limited,
Ray A. Geddes and Unique Mobility, Inc. dated June 7, 1988.
Reference is made to Exhibit 10.2 of the Company's Quarterly Report
on Form 10-Q for the quarter ended April 30, 1988 (No. 0-9146)
which is incorporated herein by reference.
10.2 Unique Mobility, Inc. Incentive and Non-qualified Stock Option Plan
(amended and restated effective January 1, 1988). Reference is
made to Exhibit 10.4 of the Company's Quarterly Report on Form 10-Q
for the quarter ended April 30, 1988 (No. 0-9146).
<PAGE>
10.3 Unique Mobility, Inc. 1992 Stock Option Plan. Reference is made to
Exhibit 4.1 to the Company's Registration Statement on Form S-8
(No. 33-47454), which is incorporated herein by reference.
10.4 Unique Mobility, Inc. Employee Stock Purchase Plan. Reference is
made to Exhibit 4.3 to the Company's Registration Statement on
Form S-8 (No. 33-34612), which is incorporated herein by reference.
10.5 401(k) Savings Plan of Unique Mobility, Inc. Reference is made to
Exhibit 4.3 to the Company's Registration Statement on Form S-8
(No. 33-34613), which is incorporated herein by reference.
10.6 Amendment to Shareholder Agreement dated March 25, 1992 between
Unique Mobility, Inc., Ray A. Geddes and Alcan International
Limited. Reference is made to Exhibit 19.7 to the Company's
Quarterly Report on Form 10-Q for the quarter ended April 30, 1992
(No. 0-9146) which is incorporated herein by reference.
10.6 Unique Building Partners, Ltd. Liability Co. Operating Agreement
dated September 16, 1992. Reference is made to Exhibit 10.33 of
the Company's Registration Statement on Form S-2 (No. 33-53376), which
is incorporated herein by reference.
10.8 Lease between the Company and Unique Building Partners, Ltd.
Liability Co. dated September 22, 1992. Reference is made to Exhibit
10.34 of the Company's Registration Statement on Form S-2 (No.
33-53376), which is incorporated herein by reference.
10.9 Amended Warrant Agreements between Unique Mobility, Inc. and
affiliates of Advent International Corporation and Techno-Venture
U.S.A., Inc. Reference is made to exhibits 10.1 through 10.7 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
April 30, 1993, (No. 0-9146) which is incorporated herein by reference.
10.10 Unique Mobility, Inc. Stock Option Plan for Non-Employee
Directors. Reference is made to Exhibit 10.39 of the Company's
Quarter Report on Form 10-K (No. 0-9146) for the year ended October 31,
1993 which is incorporated herein by reference.
10.11 Warrant Agreement with Arnhold and S. Bleichroeder, Inc. Reference
is made to Exhibit 10.41 of the Company's Quarter Report on Form
10-K (No. 0-9146) for the year ended October 31, 1993 which is
incorporated herein by reference.
10.12 Assignment Agreement with Alcan International Limited. Reference is
made to Exhibit 10.3 to the Company's Quarterly Report on Form
10-Q for the quarter ended April 30, 1994 (No. 0-9146) which is
incorporated herein by reference.
10.13 Amendment to the 1992 Stock Option Plan of Unique Mobility, Inc.
Reference is made to Exhibit 10.4 to the Company's Quarterly
Report on Form 10-Q for the quarter ended April 30, 1994 (No. 0-9146)
which is incorporated herein by reference.
10.14 Amendment to the 401(k) Savings Plan of Unique Mobility, Inc.
dated January 18, 1995. Reference is made to Exhibit 10.1 in the
Company's Quarterly Report on Form 10-Q for the Quarter ended
January 31, 1995 (No. 0-9146) which is incorporated herein by
reference.
10.15 Amendment to the 1992 Stock Option Plan of Unique Mobility, Inc.
dated December 7, 1994. Reference is made to Exhibit 10.2 in the
Company's Quarterly Report on Form 10-Q for the Quarter ended
January 31, 1995 (No. 0-9146) which is incorporated herein by
reference.
10.16 Stock Purchase Agreement by and among Unique Mobility, Inc. and
Invacare Corporation dated December 7, 1995. Reference is made to
exhibit 10.36 in the Company's Annual Report on Form 10-K for the
fiscal year ended October 31, 1995, (No. 1-10869)which is
incorporated herein for reference.
10.17 Amendment to the Stock Purchase Agreement by and among Unique Mobility
Inc. and Invacare Corporation. Reference is made to exhibit
10.3 in the Company's Quarterly Report on Form 10-Q for the quarter
ended April 30, 1996, (No. 0-9146) which is incorporated herein by
reference.
10.18 Incentive Stock Option Agreement with Ray A. Geddes, Reference is
made to Exhibit 10.1 in the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1997, (No. 0-9146) which is
incorporated herein by reference.
10.19 Non-qualified Stock Option Agreement with Ray A. Geddes, Reference
is made to Exhibit 10.2 in the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1997, (No. 0-9146) which
is incorporated herein by reference.
10.20 Agreement and Plan of Merger and Reorganization between Unique
Mobility, Inc., Unique Merger Sub, Inc., Aerocom Industries, Inc.,
Thomas J. Lang, James M. Buschy, Robert C. Jeffers and Gary R.
Morton. Reference is made to Exhibit 2 in the Company's current
report on Form 8-K filed January 20, 1998 (No. 0-9146) which is
incorporated herein by reference.
10.21 Escrow Agreement between Unique Mobility, Inc., Thomas J. Lang,
James M. Buschy, Robert C. Jeffers, Gary P. Morton and Norwest
Bank Colorado N.A. Reference is made to Exhibit 2 in the Company's
current report on Form 8-K filed January 20,1998 (No. 0-9146) which
is incorporated herein by reference.
10.22 Share Exchange Agreement between Unique Mobility, Inc., Franklin
Manufacturing Company, Michael G. Franklin and Deborah M. McNatt.
Reference is made to Exhibit 2.2 in the Company's current report on
Form 8-K filed May 6, 1998, (No. 09146) which is incorporated
herein by reference.
10.23 Escrow Agreement between Unique Mobility, Inc., Michael G. Franklin,
Deborah M. McNatt and Norwest Bank Colorado N.A. Reference is
made to Exhibit 2.1 in the Company's current report on Form 8-K filed
May 6, 1998, (No. 09146) which is incorporated herein by reference.
10.24 Employment Agreement between Unique Mobility, Inc. and Michael G.
Franklin. Reference is made to Exhibit 2.3 in the Company's
current report on Form 8-K filed May 6, 1998, (No. 09146) which is
incorporated herein by reference.
10.25 Non-competition Agreement between Unique Mobility, Inc. and Michael G.
Franklin. Reference is made to Exhibit 2.4 in the Company's
current report on Form 8-K filed May 6, 1998, (No. 09146) which is
incorporated herein by reference.
21 Subsidiaries of the Company
23 Consent of KPMG Peat Marwick LLP.
27 Financial Data Schedule
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities and Exchange Act of
1934, Unique Mobility, Inc. has duly caused this Annual Report on Form 10-K to
be signed on its behalf by the undersigned, thereunto duly authorized, in
Golden, Colorado on the 18th day of June, 1999.
UNIQUE MOBILITY, INC.,
a Colorado Corporation
By: "Ray A. Geddes"
Ray A. Geddes
Chairman of the Board of Directors
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
Annual Report on Form 10-K has been signed below by the following persons on
behalf of Unique Mobility, Inc., in the capacities indicted and on the date
indicated.
Signature Title Date
Chairman of the Board of Directors
"Ray A. Geddes" (Principal Executive Officer) June 18, 1999
Ray A. Geddes
Treasurer
"Donald A. French (Principal Financial and
Donald A. French Accounting Officer) June 18, 1999
"William G. Rankin" President and Director June 18, 1999
William G. Rankin
"Francis S.M. Hodsoll" Director June 18, 1999
Francis S.M. Hodsoll
"H. J. Young" Director June 18, 1999
H. J. Young
"J. B. Richey" Director June 18, 1999
J. B. Richey
"Lee Iacocca" Director June 18, 1999
Lee Iacocca
"Michael G. Franklin" Vice-President - Electronics June 18, 1999
Michael G. Franklin Manufacturing and Director
Exhibit 23
Consent of Independent Auditors
The Board of Directors and Stockholders
Unique Mobility, Inc.:
Our report dated June 4, 1999, states that we did not audit the financial
statements of Taiwan UQM Electric Co., Ltd. (a 38.25% percent owned investee
company). 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 years ended March 31, 1999 and 1998 is based solely on the report of the
other auditors.
We consent to the incorporation by reference in the registration statements on
Form S-8 (Nos. 33-23113, 33-24071, 33-34612, 33-35055, 33-34613, 33-41325,
33-64852, 33-47454, 33-81430 and 33-92288) and in the registration statements
on Form S-3 (Nos. 33-61166, 33-63399, 333-01919, 333-13883, 333-44597,
333-23843, 333-50393, 333-52861, 333-67313 and 333-78525) of Unique Mobility,
Inc. of our report dated June 4, 1999 relating to the consolidated balance
sheets of Unique Mobility, Inc. and subsidiaries as of March 31, 1999 and 1998,
and the related consolidated statements of operations, stockholders' equity
and comprehensive income (loss), and cash flows for the years ended March 31,
1999 and 1998, the five months ended March 31, 1997 and the year ended
October 31, 1996, which report appears in the March 31, 1999 Annual Report on
Form 10-K of Unique Mobility, Inc.
/s/KPMG LLP
KPMG LLP
Denver, Colorado
June 18, 1999
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Name of Subsidiary State of Incorporation
Franklin Manufacturing Company Missouri
Unique Power Products, Inc. Colorado
UQM Leasing, Inc. Colorado
Unique Building Partners Limited
Liability Co. Colorado
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS OF UNIQUE MOBILITY, INC. AND CONSOLIDATED
SUBSIDIARIES AS OF MARCH 31, 1999, AND THE CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,537,453
<SECURITIES> 0
<RECEIVABLES> 2,601,994
<ALLOWANCES> 0
<INVENTORY> 2,961,451
<CURRENT-ASSETS> 7,689,997
<PP&E> 13,516,676
<DEPRECIATION> 3,643,341
<TOTAL-ASSETS> 27,206,578
<CURRENT-LIABILITIES> 5,294,736
<BONDS> 4,396,127
0
0
<COMMON> 43,574,620
<OTHER-SE> (26,458,496)
<TOTAL-LIABILITY-AND-EQUITY> 27,206,578
<SALES> 14,280,458
<TOTAL-REVENUES> 15,798,418
<CGS> 14,505,757
<TOTAL-COSTS> 18,943,010
<OTHER-EXPENSES> 271,082
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 338,396
<INCOME-PRETAX> (3,754,070)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,754,070)
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<EXTRAORDINARY> 0
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<NET-INCOME> (3,754,070)
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