UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
[ ] Transition Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 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)
(303) 278-2002
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
The number of shares outstanding (including shares held by affiliates) of the
registrant's common stock, par value $0.01 per share at August 11, 1999, was
16,573,026.
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PART I - FINANCIAL INFORMATION
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, March 31,
Assets 1999 1999
(unaudited)
Current assets:
Cash and cash equivalents $ 1,205,747 1,537,453
Accounts receivable (note 11) 3,208,027 2,601,994
Costs and estimated earnings in excess
of billings on uncompleted contracts
(note 3) 350,901 173,457
Inventories (note 4) 2,400,938 2,787,994
Prepaid expenses 209,064 248,441
Other 461,374 340,658
Total current assets 7,836,051 7,689,997
Property and equipment, at cost:
Land (note 9) 444,480 444,480
Building (note 9) 2,675,763 2,675,763
Molds 102,113 102,113
Transportation equipment 212,530 195,890
Machinery and equipment (note 9) 10,165,799 10,098,430
13,600,685 13,516,676
Less accumulated depreciation (4,080,090) (3,643,341)
Net property and equipment 9,520,595 9,873,335
Investment in Taiwan joint venture (note 5) 1,544,432 1,595,432
Investment in EV Global (note 6) 1,000,000 1,000,000
Investment in Germany joint venture (note 7) 1,110,834 9,572
Patent and trademark costs, net of
accumulated amortization of $97,700
and $90,869 702,005 686,195
Goodwill, net of accumulated amortization
of $407,197 and $324,318 6,244,962 6,327,841
Other assets (note 6) 527,455 24,206
$ 28,486,334 27,206,578
(Continued)
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
June 30, March 31,
Liabilities and Stockholders' Equity 1999 1999
(unaudited)
Current liabilities:
Accounts payable $ 1,766,576 2,244,144
Other current liabilities (note 8) 763,029 952,498
Current portion of long-term
debt (note 9) 948,916 928,701
Revolving line-of-credit (note 9) 1,685,000 1,100,000
Billings in excess of costs and
estimated earnings on uncompleted
contracts (note 3) 86,385 69,393
Total current liabilities 5,249,906 5,294,736
Long-term debt, less current portion
(note 9) 4,160,058 4,396,127
Total liabilities 9,409,964 9,690,863
Minority interest in consolidated
subsidiary 401,018 399,591
Stockholders' equity (note 10):
Common stock, $.01 par value, 50,000,000
shares authorized; 16,568,522 and
16,222,932 shares issued 165,685 162,230
Additional paid-in capital 45,248,033 43,412,390
Accumulated deficit (25,898,545) (25,552,794)
Accumulated other comprehensive loss (410,703) (451,639)
Notes receivable from officers (429,118) (454,063)
Total stockholders' equity 18,675,352 17,116,124
Commitments (notes 9 and 15)
$ 28,486,334 27,206,578
See accompanying notes to consolidated financial statements.
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UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited)
Quarter Ended June 30,
1999 1998
Revenue (note 11):
Contract services $ 433,439 299,334
Product sales 5,330,972 2,553,447
5,764,411 2,852,781
Operating costs and expenses:
Costs of contract services 443,427 260,791
Costs of product sales 4,426,421 2,174,948
Research and development 26,179 277,448
General and administrative 819,995 847,204
Depreciation and amortization 136,885 121,290
5,852,907 3,681,681
Operating loss (88,496) (828,900)
Other income (expense):
Interest income 16,396 53,303
Interest expense (117,152) (53,622)
Equity in loss of Taiwan joint venture (note 5) (91,936) (94,420)
Equity in loss of Germany joint venture (note 7) (48,632) -
Minority interest share of earnings
of consolidated subsidiary (18,262) (18,613)
Other 2,331 -
(257,255) (113,352)
Net loss $ (345,751) (942,252)
Net loss per common share -
basic and diluted $ (.02) (.06)
Weighted average number of shares
of common stock outstanding (note 12) 16,395,791 15,743,062
See accompanying notes to consolidated financial statements.
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
Quarter Ended June 30,
1999 1998
Cash flows used by operating activities:
Net loss $ (345,751) (942,252)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 526,459 375,892
Minority interest share of earnings of
consolidated subsidiary 18,262 18,613
Noncash compensation expense for common
stock issued for services - 9,500
Equity in loss of Taiwan joint venture 91,936 94,420
Equity in loss of Germany joint venture 48,632 -
Change in operating assets and liabilities:
Accounts receivable and costs and
estimated earnings in excess of
billings on uncompleted contracts (783,477) (1,931)
Inventories 387,056 (261,300)
Prepaid expenses and other current
assets (81,339) 22,287
Accounts payable and other current
liabilities (667,037) 240,675)
Billings in excess of costs and
estimated earnings on uncompleted
contracts 16,992 16,240
Net cash used by operating
activities (788,267) (909,206)
Cash used by investing activities:
Cash paid for acquisition of subsidiary, net - (3,848,640
Acquisition of property and equipment (84,009) (1,686,542)
Increase in patent and trademark costs (22,641) (12,830)
Investment in other long-term assets (503,249) -
Net cash used by investing
activities $ (609,899) (5,548,012)
(Continued)
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
(unaudited)
Quarter Ended June 30,
1999 1998
Cash provided by financing activities:
Proceeds from borrowings $ 57,166 1,449,677
Repayment of debt (273,020) (528,565)
Net borrowings (repayments) on revolving
line-of-credit 585,000 (75,000)
Proceeds from sale of common stock, net 496,271 956,329
Issuance of common stock upon exercise of
employee options net of repayments 158,216 132,891
Issuance of common stock under employee stock
purchase plan 4,412 2,682
Issuance of common stock upon exercise of warrants 55,250 190,500
Distributions paid to holders of minority interest (16,835) (16,838)
Net cash provided by financing
activities 1,066,460 2,111,676
Decrease in cash and cash equivalents (331,706) (4,345,542)
Cash and cash equivalents at beginning of quarter 1,537,453 7,005,533
Cash and cash equivalents at end of quarter $ 1,205,747 2,659,991
Interest paid in cash during the period $ 127,064 43,885
Non-cash investing and financing transactions:
Cumulative translation adjustments of $40,936 and $(98,722) were recorded for
the quarter ended June 30, 1999 and 1998, respectively.
In May 1999, the Company acquired a 33.6 percent ownership interest in a German
company. Pursuant to this transaction the Company issued 208,333 shares of
common stock with an aggregate value of $1,149,894 in exchange for its ownership
interest.
In April 1998, the Company purchased all of the outstanding stock of Franklin
Manufacturing Company for $4,000,000 cash and 286,282 shares of the Company's
common stock with a value of $2,247,316.
See accompanying notes to consolidated financial statements.
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
(1) The accompanying consolidated financial statements are unaudited; however,
in the opinion of management, all adjustments which were solely of a normal
recurring nature, necessary to a fair presentation of the results for the
interim period, have been made. The results for the interim period are not
necessarily indicative of results to be expected for the fiscal year.
(2) Certain financial statement amounts have been reclassified for comparative
purposes.
(3) The estimated period to complete contracts in process ranged from one to
five months at June 30, 1999, and from one to seven months at March 31,
1999. The Company expects to collect substantially all related accounts
receivable and costs and estimated earnings in excess of billings on
uncompleted contracts within seven months. Contracts in process consist of
the following:
June 30, 1999 March 31, 1999
(unaudited)
Costs incurred on uncompleted
contracts $ 1,513,740 1,457,955
Estimated earnings 244,848 285,804
1,758,588 1,743,759
Less billings to date (1,494,072) (1,639,695)
$ 264,516 104,064
Included in the accompanying
balance sheets as follows:
Costs and estimated earnings
in excess of billings on
uncompleted contracts $ 350,901 173,457
Billings in excess of costs
and estimated earnings on
uncompleted contracts (86,385) (69,393)
$ 264,516 104,064
(4) Inventories consist of:
June 30, 1999 March 31, 1999
(unaudited)
Raw materials $ 1,820,300 2,205,042
Work in process 545,592 452,653
Finished products 35,046 130,299
$ 2,400,938 2,787,994
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
(5) Investment in Taiwan Joint Venture
On January 29, 1994, the Company, Kwang Yang Motor Co. Ltd. ("KYMCO"), and
Turn Luckily Technology Co. Ltd. ("TLT"), entered into a joint venture
agreement (the "Joint Venture Agreement") providing for the formation,
funding, and operation of Taiwan UQM Electric Co., Ltd., a company
organized under the laws of the Republic of China ("Taiwan UQM"). Taiwan
UQM was incorporated in April 1995.
The Company owns a 38 1/4% interest in Taiwan UQM and its investment is
accounted for under the equity method.
Summarized unaudited financial information for Taiwan UQM is as follows:
March 31, December 31,
Financial Position 1999 1998
Current assets $ 296,737 607,889
Noncurrent assets-land, property
and equipment 7,023,643 6,647,023
Total assets 7,320,380 7,254,912
Current liabilities 787,879 682,073
Noncurrent liabilities 2,494,771 2,401,775
Stockholders' equity 4,037,730 4,171,064
Total liabilities and equity $ 7,320,380 7,254,912
Quarter Ended
March 31, March 31,
Results of Operations 1999 1998
Revenue $ 102,419 -
Expenses (342,774) (246,847)
Net loss $(240,355) (246,847)
(6) Investment in EV Global
In June of 1997, the Company acquired 400,000 shares of EV Global Motors
Company (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.
In June 1999, Unique acquired an approximately 9.5 percent participation in
a $5.225 million convertible note receivable from Windermere Eco
Development Limited, a Bahamian company ("WED") held by EVG, for $500,000
in cash. WED is an environmentally sensitive development of Windermere
Island in the Bahamas. The
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
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.
(7) Investment in Germany Joint Venture
On May 10, 1999, the Company and three other entities formed a German
private company, Unique Mobility Europa GmbH (Europa), to develop
and manufacture a battery-electric cargo and passenger vehicle.
Europa was initially capitalized with DM50,000 cash (US $9,572) and a
contribution to surplus of 625,000 shares of Unique Mobility, Inc.
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 Europa. The Company's investment in Europa is accounted for under the
equity method of accounting.
(8) Other current liabilities consist of:
June 30, March 31,
1999 1999
(unaudited)
Accrued interest $ 23,271 28,623
Accrued legal and accounting fees 33,884 66,205
Accrued payroll, consulting, personal
property taxes and real estate taxes 229,370 268,729
Accrued material purchases 255,142 285,722
Other 221,362 303,219
$ 763,029 952,498
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
(9) Long-term debt consists of:
June 30, March 31,
1999 1999
(unaudited)
Note payable to bank, payable in monthly
installments with interest at 8.65%; matures
July 2003; secured by land and building $ 895,953 903,338
Note payable to bank, payable in monthly
installments with interest at 9.1%; matures
October 2007; secured by land and building 663,656 676,652
Note payable to bank, payable in monthly
installments with interest at 8.5%; matures
October 2001; April, May, October and
December 2005; secured by equipment 1,388,078 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 651,042 729,167
Note payable to bank, payable in monthly
installments with interest at 7.70%; matures
March 2004; secured by equipment 1,433,605 1,500,000
Note payable to bank, payable in monthly
installments with interest at 9.50%;
matures June 2006; secured by equipment 56,232 -
Note payable to commercial lender, payable in
monthly installments with interest at 6.38%;
matures October 1999 20,408 50,648
Capital lease obligation - 13,781
Total long-term debt 5,108,974 5,324,828
Less current portion 948,916 928,701
Long-term debt, less current portion $ 4,160,058 4,396,127
Certain of the above loan agreements require the Company to achieve
specific financial and operating requirements. As of June 30, 1999, the
Company was in compliance with all covenants.
The annual aggregate maturities of long-term debt for the reminder of this
fiscal year and for each of the next five fiscal years and thereafter are
as follows:
2000 $ 712,847
2001 965,656
2002 762,854
2003 609,482
2004 661,616
Thereafter 1,396,519
$ 5,108,974
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
Lines of credit
At June 30, 1999, the Company has lines of credit of $.75 million and $2.5
million with available borrowing capacity of $.75 million and $.815
million, respectively. 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 June 30, 1999)
and prime less .50% (7.25% at June 30, 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) 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 for the quarter
ended June 30, 1999:
Shares Under Weighted-Average
Option Exercise Price
Outstanding at March 31, 1999 3,037,554 5.49
Exercised (34,345) 3.88
Forfeited (70,917) 6.30
Outstanding at June 30, 1999 2,932,292 $ 5.49
Exercisable at June 30, 1999 1,895,497 $ 5.42
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
The following table presents summarized information about stock options
outstanding at June 30, 1999:
Options Outstanding Options Exercisable
Weighted Weighted Weighted
Number Average Average Number Average
Range of Outstanding Remaining Exercise Exercisable Exercise
Exercise Prices at 6/30/99 Contractual Life Price at 6/30/99 Price
$0.50 - 1.00 23,959 1.7 years $0.75 23,959 $0.75
$2.25 - 3.31 528,473 6.4 years $3.06 393,649 $2.98
$3.50 - 5.00 1,091,377 7.4 years $4.23 601,097 $4.10
$5.38 - 8.13 1,288,483 6.6 years $7.65 876,792 $7.54
$0.50 - 8.13 2,932,292 6.8 years $5.49 1,895,497 $5.42
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 for the
quarter ended June 30, 1999:
Weighted
Shares Under Average
Option Exercise Price
Outstanding at March 31, 1999 253,333 5.66
Forfeited (48,000) 5.88
Outstanding at June 30, 1999 205,333 $5.61
Exercisable at June 30, 1999 98,666 $5.30
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 6/30/99 Contractual Life Price at 6/30/99 Price
$4.38 - 5.13 141,333 7.5 years $4.92 77,333 $4.80
$7.13 64,000 8.2 years $7.13 21,333 $7.13
$4.38 - 7.13 205,333 7.7 years $5.61 98,666 $5.30
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
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
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 APB 25. The Company
accounts for stock options granted to employees of the Company under
the intrinsic value method. Stock options granted to non-employees
under the Company's 1992 Stock Option Plan and the Non-employee
Director Stock Option Plan are accounted for under the fair value
method. Had the Company reported compensation costs as determined by
the fair value method of accounting for 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:
Quarter Ended June 30,
1999 1998
Net loss - as reported $(345,751) (942,252)
Compensation expense - current
quarter option grants - (53,208)
Compensation expense - prior
period option grants (418,552) (296,056)
Net loss - pro forma $(764,303) (1,291,516)
Net loss per common share -
as reported $ (.02) (.06)
Net loss per common share -
pro forma $ (.05) (.08)
Future pro forma compensation cost for the remainder of the current
fiscal year and each fiscal year thereafter, assuming no additional
grants by the Company to employees and directors, is as follows:
Pro Forma
Compensation
Expense
2000 $1,138,810
2001 $ 571,974
2002 $ 439,741
During the quarter ended June 30, 1999 the Company completed a private
placement of 88,900 shares of common stock with an institutional
investor. Cash proceeds to the Company, net of offering costs was
$496,271.
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 June 30, 1999.
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
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.
Warrants to acquire 73,875 shares of the Company's common stock at
$3.50 per share remain outstanding as of June 30, 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. The warrants expire
three years from the date of issuance. During May 1999, warrants to
acquire 13,000 shares of the Company's common stock at $4.25 per share
were exercised resulting in cash proceeds to the Company of $55,250.
Warrants to acquire 32,000 shares at $4.25 per share remain
outstanding as of June 30, 1999.
(11) 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 total revenue is summarized as follows:
Quarter Ended
June 30,
1999 1998
Customer A $ 1,141,489 543,563
Percentage of total revenue 20% 19%
This customer also represented 15% and 11% of total accounts
receivable at June 30, 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 totaled $88,262 and $95,987 for the quarter ended June 30,
1999 and 1998, respectively.
(12) Net loss per common share amounts are based on the weighted average
number of common shares outstanding during the quarters ended June 30,
1999 and 1998. Outstanding common stock options and warrants were not
included in the computation because the effect of such inclusion would
be antidilutive.
(13) 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. 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.
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
During the quarter ended June 30, 1999, intersegment sales or
transfers were immaterial.
The Company's reportable segments are strategic business units that
offer different products and services. They are managed separately
because each business requires different business strategies.
The following table summarizes significant financial statement
information for each of the reportable segments for the quarter ended
June 30, 1999:
Mechanical Electronic
Technology Products Products Total
Revenue $ 540,608 1,411,500 3,812,303 5,764,411
Interest income 15,549 847 - 16,396
Interest expense (10,978) (50,069) (56,105) (117,152)
Depreciation and
amortization (90,572) (230,875) (122,133) (443,580)
Goodwill amortization - (15,579) (67,300) (82,879)
Equity in loss of
Taiwan joint venture (91,936) - - (91,936)
Equity in loss of
Germany joint venture (48,632) - - (48,632)
Segment earnings (loss) (657,038) 10,582 300,705 (345,751)
Segment assets 9,026,677 7,281,793 12,177,864 28,486,334
Expenditures for
segment assets $ (54,517) (7,297) (44,836) (106,650)
The following table summarizes significant financial statement
information for each of the reportable segments for the quarter ended
June 30, 1998:
Mechanical Electronic
Technology Products Products Total
Revenue $ 645,890 665,397 1,541,494 2,852,781
Interest income 39,606 13,697 - 53,303
Interest expense (15,378) (22,537) (15,707) (53,622)
Depreciation and
amortization (99,695) (171,963) (43,879) (315,537)
Goodwill amortization - (16,215) (44,140) (60,355)
Equity in loss of
Taiwan joint venture (94,420) - - (94,420)
Segment earnings (loss) (629,580) (250,592) (62,080) (942,252)
Segment assets 8,523,660 7,866,236 9,465,498 25,855,394
Expenditures for
segment assets $ (178,250) (1,521,122) - (1,699,372)
(14) Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments:
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
Cash and cash equivalents, certificates of deposit, accounts
receivable and accounts payable and revolving line of credit:
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.
(15) 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 $535,407.
Lease Commitments
The Company has entered into operating lease agreements for office
space and equipment which expire at various times through 2007. As of
June 30, 1999, the future minimum lease payments under operating
leases with initial noncancelable terms in excess of one year for the
remainder of the fiscal year and each fiscal year thereafter are as
follows:
2000 $ 218,626
2001 279,937
2002 265,364
2003 251,444
2004 253,961
Thereafter 756,420
$ 2,025,752
Rental expense under these leases totaled approximately $71,793 and
$42,362 for the quarter ended June 30, 1999 and 1998, respectively.
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,
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
2000, and, if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failures
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.
(16) Reporting Comprehensive Income
The following table summarizes the Company's comprehensive loss for
the quarter ended June 30, 1999 and 1998:
Quarter Ended June 30,
1999 1998
Net loss $ (345,751) (942,252)
Other comprehensive income
(loss) - translation
adjustment 40,936 (98,722)
Income tax effect - -
Comprehensive loss $ (304,815) (1,040,974)
(17) Acquisition of Franklin
On April 30, 1998, the Company acquired all of the outstanding common
stock of Franklin Manufacturing Company (Franklin) for cash and shares
of the Company's common stock.
The acquisition was accounted for using the purchase method of
accounting. The unaudited pro forma revenue, net loss and loss per
common share for the quarter ended June 30, 1999 and 1998
respectively, assuming the acquisition occurred on April 1, 1998 is as
follows:
Quarter Ended June 30,
1999 1998
Revenue $ 5,764,411 $ 3,812,494
Net loss (345,751) (905,804)
Basic and diluted loss
per common share $ (.02) $ (.06)
The pro forma information does not necessarily represent the results
that would have occurred if the acquisition had been consummated on
April 1, 1998.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Report contains forward-looking statements that involve risks and
uncertainties. These statements may differ materially from actual future events
or results. Readers are referred to the Risk Factor section of the Registration
Statement on Form S-3 (File No. 333-78525) filed by the Company with the SEC,
which identified important risk factors that could cause actual results to
differ from those contained in the forward-looking statements, including its
ability to obtain additional financing, the Company's ability to integrate
acquired businesses into existing operation, 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.
Financial Condition
The Company's financial condition strengthened during the quarter ended June 30,
1999 due to the sale of 88,900 shares of common stock pursuant to an offering
under Regulation D of the Securities Act of 1933, the issuance of common stock
upon the exercise of outstanding common stock warrants and options, positive
earnings before interest, taxes, depreciation and amortization ("EBITDA"). Cash
proceeds to the Company from the Regulation D offering, net of offering costs,
amounted to $496,271, cash proceeds received upon the exercise of outstanding
common stock warrants and options amounted to $188,521 and EBITDA was $297,860.
Primarily as a result of these events, shareholders' equity rose to $18,675,352
at June 30, 1999 from $17,116,124 at March 31, 1999. Working capital (the excess
of current assets over current liabilities) rose to $2,586,145 at June 30, 1999
from $2,395,261 at March 31, 1999.
Accounts receivable rose $606,033 to $3,208,027 at June 30, 1999 from $2,601,994
at March 31, 1999. The increase is primarily attributable to record revenue
levels achieved during the quarter.
Costs and estimated earnings on uncompleted contracts increased $177,444 to
$350,901 at June 30, 1999 from the fiscal 1999 year end level of $173,457. The
increase was due to the performance of a greater number of contract services
programs milestone billing or payment on completion terms during the quarter.
Estimated earnings on contracts in process declined to $244,848 at June 30, 1999
on costs incurred on contracts in process of $1,513,740 compared to estimated
earnings on contracts in process of $285,804 on costs incurred on contracts in
process of $1,457,955 at March 31, 1999. The decrease reflects lower margins on
commercial product development programs, generally, and the effect of
anticipated cost overruns on certain development projects being performed during
the quarter.
Raw materials, and finished products inventories decreased by $384,742 and
$95,253, respectively, to $1,820,300 and $35,046, respectively, at June 30,
1999. Raw materials inventory declined primarily as a result of inventory
management initiatives implemented during the quarter at the Company's
manufacturing units. Work in process inventories rose $92,939 to $545,592 at
June 30, 1999. The increase is attributable to increased revenue levels at the
Company's electronics product segment during the quarter.
Prepaid expenses declined to $209,064 at June 30, 1999 from $248,441 at March
31, 1999 reflecting the periodic expensing of prepaid insurance premium costs on
the Company's commercial insurance coverage.
<PAGE>
Other current assets rose $120,716 to $461,374 at June 30, 1999 reflecting
increased amounts due from the Company's European joint venture for joint
venture expenses advanced by the Company, on an unsecured basis, and
reimbursable by the joint venture.
The Company invested $84,009 for the acquisition of property and equipment
during the first quarter compared to $1,686,542 for the comparable quarter last
year. The decrease in capital expenditures is primarily attributable to
expenditures during the first quarter last year for manufacturing equipment to
expand Unique Power Products manufacturing capabilities and construct a new
manufacturing plant in Frederick, Colorado.
Investment in Taiwan joint venture declined to $1,544,432 at June 30, 1999 from
$1,595,432 at the beginning of the fiscal year. The decrease is attributable to
the Company's proportionate share of operating losses which amounted to $91,936
during the first quarter partially offset by a positive foreign currency
translation adjustment of $40,936.
During the first quarter the Company issued 208,333 shares of common stock in
exchange for a 33.6 percent ownership of share interest in Unique Mobility
Europa GmbH, a newly formed German company organized to manufacture
battery-electric, hybrid-electric and fuel cell electric vehicles. Europa
was initially capitalized with DM 50,000 cash (US $9,572) and a contribution
to surplus of 625,000 shares of Unique Mobility, Inc. common stock. In addition
to the Company's contribution, Energy Conversion Devices, Inc. ("ECD")
contributed 208,333 shares in exchange for a 33.2 percent share interest,
EV Global Motors Company ("EVG") contributed 118,750 shares in exchange for a
19.0 percent share interest and Haco Trading Ltd. ("HACO") contributed 89,584
shares in exchange for a 14.2 percent share interest. The Company has recorded
its investment in Europa under the equity method of accounting. Under
the equity method of accounting, the Company will record its proportionate
share of the earnings or losses of Europa in its statement of operations and
as an increase or decrease, respectively, in the carrying value of its
investment. As a result of this transaction and the recording of the
Company's proportionate share of Europa's losses during the quarter,
investment in Germany joint venture rose to $1,110,834. See also
"Liquidity and Capital Resources" below.
Patent and trademark costs rose $15,810 to $702,005 at June 30, 1999 reflecting
expenditures for the filing and maintenance of trademarks and patents during the
quarter.
During the first quarter the Company acquired an approximately 9.5 percent
participation in a $5.225 million convertible note receivable from Windermere
Eco Development, Ltd. ("WED") held by EVG for $500,000 in cash received from a
private placement of the Company's common stock. WED plans to develop Windermere
Island in the Bahamas in an environmentally sensitive manner, including the
showcasing of electric transportation on the island. The entire loan is
convertible into approximately 50.4 percent of the total outstanding equity of
WED. Therefore, if EVG converts the loan, the Company will have the right to
receive approximately 4.82 percent of the equity of WED. As a result of this
transaction, other assets increased to $527,455 at June 30, 1999.
Accounts payable declined $477,568 to $1,766,576 at June 30, 1999 from
$2,244,144 at March 31, 1999. The decrease is primarily attributable to lower
levels of raw material inventory purchases during the quarter.
Other current liabilities decreased $189,469 to $763,029 at the end of the first
quarter from $952,498 at March 31, 1999. The decrease is primarily attributable
to generally lower levels of accrued compensation, property taxes, professional
fees and material purchases.
<PAGE>
Revolving line-of-credit rose $585,000 to $1,685,000 at June 30, 1999 due to
higher revenue levels during the quarter.
Long-term debt decreased $236,069 to $4,160,058 at June 30, 1998 reflecting
principal repayments on the Company's term bank debt
during the quarter.
Common stock and additional paid-in capital increased to $165,685 and
$45,248,033 at June 30, 1999, respectively, compared to $162,230 and $43,412,390
at March 31, 1999. The increases were due to the sale of common stock to
investors in the amount of $496,271; the issuance of common stock in exchange
for a 33.6 percent ownership interest in UME in the amount of $1,149,894 and
proceeds received upon the exercise of stock options and warrants of $188,521.
Results of Operations
Operations for the quarter ended June 30, 1999, resulted in a net loss of
$345,751 or $.02 per share compared to a net loss of $942,252 or $0.06 per share
for the quarter ended June 30, 1998. Earnings before interest, taxes,
depreciation and amortization ("EBITDA") for the first quarter improved by
$810,598 to $297,860 or $0.02 per share compared to $(512,738) or $(0.03) per
share for the first quarter last year of the increase in product sales, First
quarter results included a one-time charge to earnings of $89,029 arising from
settlement of a contract dispute and an income item from a prior period of
$50,023 arising from a retroactive price increase to a mechanical products
segment customer. The improvement in net loss and EBITDA for the quarter is
generally attributable to higher revenue levels and margins in the Company's
manufacturing operations.
Total revenue for the first quarter more than doubled to $5,764,411 compared to
$2,852,781 for the comparable quarter last year. Contract services revenue rose
$134,105 or 45 percent to $433,439 compared to $299,334 for the first quarter
last year. The increase in contract services revenue is attributable to improved
demand for development projects. Product sales more than doubled to $5,330,972
for the quarter compared to $2,553,447 for the comparable quarter last year.
Mechanical product segment sales during the first quarter more than doubled to
$1,411,500 from $665,397 for the first quarter last year. The increase in
revenue is attributable to motor production operations which had not been
launched during the first quarter last year. Similarly, electronic product
segment sales more than doubled to $3,812,303 from $1,541,494 for the first
quarter last year.
Gross profit margins for the first quarter improved to 15.5 percent compared to
Gross profit margins of 14.6 percent for the comparable quarter last year. Gross
profit margin on contract services was a negative 2.3 percent for the quarter
ended June 30, 1999 compared to 12.9 percent for the first quarter last year.
The decline in gross profit margin on contract services during the first quarter
is attributable to cost overruns on various development programs which
negatively impacted margins and generally lower margins on commercial
development programs. Gross profit margins on product sales during the first
quarter improved to 17.0 percent compared to gross profit margins of 14.8
percent for the comparable quarter last year. The increase in margins on product
sales is primarily attributable improved product mix and pricing in the
Company's mechanical product segment.
Research and development expenditures during the first quarter declined to
$26,179 compared to $277,448 for the quarter ended June 30, 1998. The decrease
is attributable to lower levels of internally-funded and cost-share type
development programs and the only nominal expenditures for production
engineering activities this quarter on wheelchair motors compared to significant
expenditures in the first quarter of last year.
<PAGE>
General and administrative expense for the quarter ended June 30, 1999 declined
to $819,995 compared to $847,204 for the comparable quarter last year. The
decrease is attributable to lower general and administrative expenses in the
Company's technology and mechanical product segments. The lower levels of
general and administrative expenses in these segments is generally attributable
to lower staffing levels and the effect of cost reduction measures implemented
during the third quarter last year.
Interest income decreased to $16,396 for the quarter ended June 30, 1999
compared to $53,303 for the quarter ended June 30, 1998. The decrease is
attributable to lower levels of invested cash.
Interest expense was $117,152 for the first quarter, an increase of $63,530 over
the comparable amount for the first quarter last year. The increase is
attributable to increased levels of borrowing on the Company's revolving
line-of-credit and increased levels of long-term debt.
Equity in loss of Taiwan joint venture declined to $91,936 for the quarter ended
June 30, 1999 compared to $94,420 for the quarter ended June 30, 1998. The
decrease is due to increasing revenue at Taiwan UQM coincident with the launch
of manufacturing operations.
Equity in loss of Germany joint venture was $48,632 for the first quarter
reflecting the Company's proportionate share of the losses of Europa which
commenced operations during the quarter.
Liquidity and Capital Resources
The Company's cash balances and liquidity throughout the first quarter of Fiscal
1999 were adequate to meet operating needs. Net cash used by operating
activities was $788,267 for the quarter ended June 30, 1999 versus $909,206 for
the comparable prior year quarter. The composition of cash used by operations
for the first quarter consisted primarily of the application of cash to fund
higher levels of accounts receivable and costs incurred on uncompleted
contracts, which accounted for $783,477 used by operations and the reduction of
trade accounts payable and other accrued liabilities which accounted for
$667,037 of cash used by operations. By comparison, during the first quarter
last year, approximately two-thirds of the cash used by operations was expended
to fund operating losses incurred during the quarter. Cash requirements
throughout the quarter were funded through the sale of common stock to
investors, cash received upon the exercise of outstanding common stock warrants
and options and borrowings on the Company's bank facilities. At June 30, 1999,
the Company had approximately $1.5 million of borrowing availability on its
lines-of-credit with commercial banks.
Taiwan UQM and Europa incurred net losses during the first quarter of which the
Company's proportionate share totaled $140,568. Further losses or capital
expenditures by Taiwan UQM could result in capital calls by Taiwan UQM at a
future date. Capital calls by Taiwan UQM can be made only by unanimous vote of
their Board of Directors, of which the Company holds two seats. A capital call
by Taiwan UQM would require the Company to either fund its proportionate share
or suffer a dilution of its ownership interest. Europa does not currently
possess the financial resources to complete its business plan. Europa expects
to finance its future operations through the issuance of equity or debt
securities or a combination of both. There can, however, be no assurance
that Europa can secure additional capital on terms acceptable to Europa. The
Company is not obligated to participate in the future funding of Europa
should additional capital not be obtained. However, in the event Europa
obtains additional capital and the Company chooses not to participate
proportionately, the Company would incur a dilution in its ownership interest.
In the event Europa does not obtain additional capital, the Company may incur
a partial or total loss of its investment in Europa.
<PAGE>
The Company believes that existing cash balances and available bank facilities
are sufficient to fund its operating requirements over the near term.
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, securing production orders from new and existing customers for gear
and component assemblies manufacture design and introduce new products for
manufacture, seek strategic alliances to accelerate the commercialization of its
technology and pursue 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 will modify its strategy to
align its operations with its then available financial resources.
Year 2000 Issues
The Year 2000 presents issues because many computer hardware and software
systems use only the last two digits to refer to a calendar year. Consequently,
these systems may fail to process dates correctly after December 31, 1999, which
may cause systems failures.
State of Readiness
The Company has conducted numerous internal discussions over the last eighteen
months amongst its management and technical staff to informally assess the
extent of the Year 2000 Issue on the Company's operations. In September, 1998,
the Company adopted a formal project to evaluate all of the Company's systems
for Year 2000 compliance. The project is being monitored and supervised by the
Company's Chief Operating Officer. The evaluation of all hardware and software
systems 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 has
contacted all key suppliers and customers. However, the Company 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 $20,000 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.
<PAGE>
PART II - OTHER INFORMATION
Item 3. Quantitative and Qualitative Disclosure About Market Risks
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.
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 June 30, 1999.
Item 4. Submissions of Matters to a Vote of Security Holders
The Annual Meeting of the Shareholders of Unique Mobility, Inc. was held on
August 11, 1999. The following is a summary of the matters submitted to a vote
of security holders and the results of the voting thereon:
Proposal 1: Election of Directors
Withhold
For Authority
Ray A. Geddes 11,968,548 1,557,722
William G. Rankin 13,011,031 515,239
J. B. Richey 12,950,119 576,151
Michael G. Franklin 13,005,131 521,139
Ernest H. Drew 13,596,705 -0-
Broker non-votes on Messrs. Geddes, Rankin, Richey and Franklin were: 70,435
Proposal 2: Proposal to ratify the appointment of KPMG Peat Marwick LLP as the
Independent Auditors of the Company.
For Against Abstain
13,405,118 65,808 55,344
Broker non-votes on proposal 2 were: 70,435
Proposal 3: Proposal to increase the number of shares available for grant under
the Unique Mobility, Inc. 1992 Stock Option Plan from 4
million to 5 million shares.
For Against Abstain
4,812,780 3,370,804 138,979
Broker non-votes on proposal 3 were: 5,274,142
Proposal 4: Proposal to amend the articles of incorporation to authorize a new
class of 10 million shares of preferred stock.
For Against Abstain
4,948,983 2,901,011 128,337
Broker non-votes on proposal 4 were: 5,618,374
Total votable shares: 16,568,522
Total shares represented in person and by proxy: 13,596,705
Percentage of votable shares voted: 82.06%
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial data schedule
(b) Reports on Form 8-K
Current Report dated May 11, 1999 regarding the formation of Unique
Mobility Europa GmbH.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Unique Mobility, Inc.
Registrant
Date: August 12, 1999 By:/s/ Donald A. French
Donald A. French
Treasurer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE CONSOLIDATED
BALANCE SHEETS OF UNIQUE MOBILITY, INC. AND CONSOLIDATED SUBSIDIARIES AS OF JUNE
30, 1999, AND THE CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE QUARTER ENDED
JUNE 30, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> JUN-30-1999
<CASH> 1,205,747
<SECURITIES> 0
<RECEIVABLES> 3,208,027
<ALLOWANCES> 0
<INVENTORY> 2,751,839
<CURRENT-ASSETS> 7,836,051
<PP&E> 13,600,685
<DEPRECIATION> 4,080,090
<TOTAL-ASSETS> 28,486,334
<CURRENT-LIABILITIES> 5,249,906
<BONDS> 4,160,058
0
0
<COMMON> 45,413,718
<OTHER-SE> (26,738,366)
<TOTAL-LIABILITY-AND-EQUITY> 28,486,334
<SALES> 5,330,972
<TOTAL-REVENUES> 5,764,411
<CGS> 4,869,848
<TOTAL-COSTS> 5,852,907
<OTHER-EXPENSES> 140,103
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 117,152
<INCOME-PRETAX> (345,751)
<INCOME-TAX> 0
<INCOME-CONTINUING> (345,751)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (345,751)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
