UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
[ ] Transition Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 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 November 11, 1999, was
16,574,769.
<PAGE>
PART I - FINANCIAL INFORMATION
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, March 31,
Assets 1999 1999
(unaudited)
Current assets:
Cash and cash equivalents $ 1,161,803 1,537,453
Accounts receivable (note 11) 3,171,198 2,601,994
Costs and estimated earnings in excess
of billings on uncompleted contracts
(note 3) 176,952 173,457
Inventories (note 4) 2,704,504 2,787,994
Prepaid expenses 212,690 248,441
Other 506,337 340,658
Total current assets 7,933,484 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) 10,292,560 10,098,430
13,727,446 13,516,676
Less accumulated depreciation (4,518,238) (3,643,341)
Net property and equipment 9,209,208 9,873,335
Investment in Taiwan joint venture (note 5) - 1,595,432
Investment in EV Global (note 6) - 1,000,000
Patent and trademark costs, net of
accumulated amortization of $104,533
and $90,869 704,669 686,195
Goodwill, net of accumulated amortization
of $490,363 and $324,318 6,161,796 6,327,841
Other assets 24,205 33,778
$ 24,033,362 27,206,578
(Continued)
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
September 30, March 31,
Liabilities and Stockholders' Equity 1999 1999
(unaudited)
Current liabilities:
Accounts payable $ 2,065,696 2,244,144
Other current liabilities (note 8) 1,325,009 952,498
Current portion of long-term
debt (note 9) 945,320 928,701
Revolving line-of-credit (note 9) 1,655,000 1,100,000
Billings in excess of costs and
estimated earnings on uncompleted
contracts (note 3) 190,962 69,393
Total current liabilities 6,181,987 5,294,736
Long-term debt, less current portion
(note 9) 3,916,219 4,396,127
Total liabilities 10,098,206 9,690,863
Minority interest in consolidated
subsidiary 402,811 399,591
Stockholders' equity (note 10):
Common stock, $.01 par value, 50,000,000
shares authorized; 16,573,026 and
16,222,932 shares issued 165,730 162,230
Additional paid-in capital 45,275,395 43,412,390
Accumulated deficit (31,094,751) (25,552,794)
Accumulated other comprehensive loss (384,300) (451,639)
Notes receivable from officers (429,729) (454,063)
Total stockholders' equity 13,532,345 17,116,124
Commitments (notes 9 and 15)
$ 24,033,362 27,206,578
See accompanying notes to consolidated financial statements.
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited)
Quarter Ended Six Months Ended
September 30, September 30,
1999 1998 1999 1998
Revenue (note 11):
Contract services $ 381,984 445,994 815,423 745,328
Product sales 4,952,179 2,941,800 10,283,151 5,495,247
5,334,163 3,387,794 11,098,574 6,240,575
Operating costs and expenses:
Costs of contract services 294,017 437,279 737,444 698,070
Costs of product sales 4,199,503 2,975,567 8,625,924 5,150,515
Research and development 108,267 173,274 134,446 450,722
General and administrative 1,481,527 948,753 2,355,528 1,856,892
Write-down of investments 4,104,628 - 4,104,628 -
Amortization of goodwill 83,166 80,518 166,045 140,873
10,271,108 4,615,391 16,124,015 8,297,072
Operating loss (4,936,945)(1,227,597)(5,025,441)(2,056,497)
Other income (expense):
Interest income 21,759 27,282 38,155 80,585
Interest expense (122,787) (101,628) (239,939) (155,250)
Equity in loss of Taiwan joint
venture (note 5) (94,602) (105,869) (186,538) (200,289)
Equity in loss of Germany joint
venture (note 7) (45,000) - (93,632) -
Minority interest share of
earnings of consolidated
subsidiary (18,631) (17,381) (36,893) (35,994)
Other - 2,389 2,331 2,389
(259,261) (195,207) (516,516) (308,559)
Net loss $(5,196,206)(1,422,804)(5,541,957)(2,365,056)
Net loss per common share
basic and diluted $ (.31) (.09) (.33) (.15)
Weighted average number of shares
of common stock outstanding
(note 12) 16,572,161 15,925,669 16,484,458 15,834,864
See accompanying notes to consolidated financial statements.
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
Six Months Ended
September 30,
1999 1998
Cash flows used by operating activities:
Net loss $(5,541,957) (2,365,056)
Adjustments to reconcile net loss to net
cash used by operating activities:
Write-down of investments 4,104,628 -
Depreciation and amortization 1,054,606 808,013
Minority interest share of earnings of
consolidated subsidiary 36,893 35,994
Noncash compensation expense for common stock
issued for services 15,618 19,000
Equity in loss of Taiwan joint venture 186,538 200,289
Equity in loss of Germany joint venture 93,632 -
Gain on sale of property and equipment - (2,900)
Change in operating assets and liabilities:
Accounts receivable and costs and estimated
earnings in excess of billings on
uncompleted contracts (572,699) 103,559
Inventories 83,490 (1,123,596)
Prepaid expenses and other current assets (176,780) 83,940
Accounts payable and other current liabilities 194,063 606,655
Billings in excess of costs and estimated
earnings on uncompleted contracts 121,569 181,475
Net cash used by operating activities (400,399) (1,452,627)
Cash used by investing activities:
Cash paid for acquisition of subsidiary, net - (3,848,640)
Acquisition of property and equipment (210,770) (2,458,251)
Proceeds from sale of assets - 2,900
Increase in patent and trademark costs (32,138) (62,000)
Investment in other long-term assets (515,708) -
Net cash used by investing activities $ (758,616) (6,365,991)
(Continued)
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
(unaudited)
Six Months Ended
September 30,
1999 1998
Cash provided by financing activities:
Proceeds from borrowings $ 57,166 4,061,635
Repayment of debt (520,455) (3,011,877)
Net borrowings on revolving line-of-credit 555,000 956,329
Proceeds from sale of common stock, net 491,300 8,308
Issuance of common stock upon exercise of
employee options, net of repayments 159,670 148,177
Issuance of common stock under employee stock
purchase plan 19,107 3,849
Issuance of common stock upon exercise of warrants 55,250 193,375
Distributions paid to holders of minority interest (33,673) (33,674)
Net cash provided by financing
activities 783,365 2,326,122
Decrease in cash and cash equivalents (375,650) (5,492,496)
Cash and cash equivalents at beginning of period 1,537,453 7,005,533
Cash and cash equivalents at end of period $ 1,161,803 1,513,037
Interest paid in cash during the period $ 251,790 136,122
Non-cash investing and financing transactions:
Cumulative translation adjustments of $67,339 and $(99,519) were recorded for
the six months ended September 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.
In accordance with the provisions of the Company's stock option plans, the
Company accepts as payment of the exercise price, mature shares of the Company's
common stock held by the option holder for a period of six months prior to the
date of the option exercise. For the six months ended September 30, 1998, the
Company issued 15,870 shares of common stock for options exercised for an
aggregate exercise price of $15,870, for which the Company received 2,308 shares
of common stock as payment for the exercise price. The shares received were
recorded at cost as treasury stock and were subsequently retired.
In accordance with the provisions of the Company's stock option plans, the
Company may and has, accepted promissory notes from officers of the Company in
satisfaction of the exercise price of options exercised. These notes receivable
are recorded as a reduction of shareholders' equity in the consolidated
financial statements. For the six months ended September 30, 1998, the Company
issued 71,900 shares of common stock for an aggregate exercise price of $69,176
for which the Company received promissory notes for the same amount.
See accompanying notes to consolidated financial statements.
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
(1) The accompanying consolidated financial statements are unaudited; however,
in the opinion of management, all adjustments which were solely of a normal
recurring nature, necessary to a fair presentation of the results for the
interim period, have been made. The results for the interim period are not
necessarily indicative of results to be expected for the fiscal year.
(2) Certain financial statement amounts have been reclassified for comparative
purposes.
(3) The estimated period to complete contracts in process ranged from one to
twenty-two months at September 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 twenty-two months. Contracts in process
consist of the following:
September 30, 1999 March 31, 1999
(unaudited)
Costs incurred on uncompleted
contracts $ 530,905 1,457,955
Estimated earnings 117,864 285,804
648,769 1,743,759
Less billings to date (662,779) (1,639,695)
$ (14,010) 104,064
Included in the accompanying
balance sheets as follows:
Costs and estimated earnings
in excess of billings on
uncompleted contracts $ 176,952 173,457
Billings in excess of costs
and estimated earnings on
uncompleted contracts (190,962) (69,393)
$ (14,010) 104,064
(4) Inventories consist of:
September 30, 1999 March 31, 1999
(unaudited)
Raw materials $ 2,148,469 2,205,042
Work in process 484,828 452,653
Finished products 71,207 130,299
$ 2,704,504 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., and Turn-Luckily
Technology Co., Ltd., entered into a 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 was
incorporated in April 1995. The Company owns a 38-1/4 percent interest in
Taiwan UQM which was acquired through an initial investment of $45,082. In
1995 and 1996 the Company invested an additional $2,748,778 pursuant to
capital calls by Taiwan UQM's Board of Directors, raising its aggregate
investment since inception to $2,793,860.
Since inception, Taiwan UQM has incurred substantial operating losses and
the Company has reported its proportionate share of such losses and foreign
exchange rate fluctuations as a reduction in the recorded value of its
investment in Taiwan UQM under the equity method of accounting. Because of
continued operating losses at September 30, 1999 the Company evaluated this
investment relative to its potential to achieve profitable operations over
the near-term and the Company's potential to recover the recorded value of
its investment. Based on its assessment of these factors and the
uncertainty of recovering its investment, on September 30, 1999 the Company
wrote down the carrying value of this investment from $1,476,233 to zero.
The Company does not intend to make any further investments in Taiwan UQM
and through its participation on Taiwan UQM's Board of Directors has the
ability to restrict or prevent future capital calls by Taiwan UQM.
(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 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.
Because of continuing operating losses reported by these investees at
September 30, 1999 the Company evaluated these investments relative to
their potential to achieve profitable operations over the near-term and the
Company's potential to recover the carrying value of each asset. Based on
its assessment of these factors, on September 30, 1999 the Company wrote
down the carrying value of EV Global from $1,000,000 to zero and the
carrying value of the WED note receivable from $515,708 to zero.
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
(7) Investment in Germany Joint Venture
In May, 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 in exchange for 33.6 percent
ownership interest in Europa.
On October 8, 1999 the Company entered into an agreement with the
Shareholder's of Europa providing for the reduction of its ownership
percentage to 5.9 percent in exchange for a funding commitment from one of
the shareholders in the amount of DM 3 million (USA $1,630,200) and the
reimbursement of $400,000 of organization costs incurred by the Company on
behalf of Europa. As a result of this agreement and the Company's
assessment of the potential for Europa to achieve profitable operations
over the near-term and the Company's potential to recover the carrying
value of its investment at September 30, 1999 the Company wrote down the
carrying value of its investment from $1,112,687 to zero.
(8) Other current liabilities consist of:
September 30, March 31,
1999 1999
(unaudited)
Accrued interest $ 24,240 28,623
Accrued legal and accounting fees 55,484 66,205
Accrued payroll, consulting, personal
property taxes and real estate taxes 385,539 268,729
Accrued executive compensation 324,866 -
Accrued material purchases 325,438 285,722
Other 209,442 303,219
$ 1,325,009 952,498
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
(9) Long-term debt consists of:
September 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 $ 888,158 903,338
Note payable to bank, payable in monthly
installments with interest at 9.1%; matures
October 2007; secured by land and building 650,353 676,652
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 1,323,780 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 572,917 729,167
Note payable to bank, payable in monthly
installments with interest at 7.70%; matures
March 2004; secured by equipment 1,370,682 1,500,000
Note payable to bank, payable in monthly
installments with interest at 9.50%;
matures June 2006; secured by equipment 55,649 -
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 4,861,539 5,324,828
Less current portion 945,320 928,701
Long-term debt, less current portion $ 3,916,219 4,396,127
Certain of the above loan agreements require the Company to achieve
specific financial and operating requirements. As of September 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 $ 465,412
2001 965,656
2002 762,854
2003 609,482
2004 661,616
2005 351,385
Thereafter 1,045,134
$ 4,861,539
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
Lines of credit
At September 30, 1999, the Company has lines of credit of $.75 million and
$2.5 million with available borrowing capacity of $.75 million and $.845
million, respectively. The $.75 million line of credit expires in October
2000. The $2.5 million line of credit is due on demand, but if no demand is
made, it is due August 15, 2000. Interest on the lines of credit is payable
monthly at prime plus .75% (9.00% at September 30, 1999) and prime less
.50% (7.75% at September 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 6,104,000 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 six months
ended September 30, 1999:
Shares Under Weighted-Average
Option Exercise Price
Outstanding at March 31, 1999 3,037,554 5.49
Granted 50,000 4.38
Exercised (34,845) 3.88
Forfeited (70,800) 6.31
Outstanding at September 30, 1999 2,981,909 $ 5.47
Exercisable at September 30, 1999 1,907,497 $ 5.43
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
The following table presents summarized information about stock options
outstanding at September 30, 1999:
Options Outstanding Options Exercisable
Weighted Weighted Weighted
Number Average Average Number Average
Range of Outstanding Remaining Exercise Exercisable Exercise
Exercise Prices at 9/30/99 Contractual Life Price at 9/30/99 Price
$0.50 - 1.00 23,959 1.4 years $0.75 23,959 $0.75
$2.25 - 3.31 528,473 6.3 years $3.06 393,649 $2.98
$3.50 - 5.00 1,140,994 6.8 years $4.24 601,097 $4.10
$5.38 - 8.13 1,288,483 6.3 years $7.65 888,792 $7.53
$0.50 - 8.13 2,981,909 6.5 years $5.47 1,907,497 $5.43
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. Directors electing options grants in lieu of cash compensation
may elect option periods ranging from three years to ten years, and must
elect to receive options at least six months prior to the anticipated grant
date. 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.
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 six
months ended September 30, 1999:
Weighted
Shares Under Average
Option Exercise Price
Outstanding at March 31, 1999 253,333 5.66
Granted 9,275 4.25
Forfeited (48,000) 5.88
Outstanding at September 30, 1999 214,608 $5.55
Exercisable at September 30, 1999 141,333 $5.54
The following table presents summarized information about stock options
outstanding for non-employee directors:
Options Outstanding Options Exercisable
Weighted Weighted Weighted
Number Average Average Number Average
Range of Outstanding Remaining Exercise Exercisable Exercise
Exercise Prices at 9/30/99 Contractual Life Price at 9/30/99 Price
$4.25 - 5.13 150,608 7.5 years $4.88 98,666 $4.85
$7.13 64,000 7.9 years $7.13 42,667 $7.13
$4.25 - 7.13 214,608 7.6 years $5.55 141,333 $5.54
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
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:
Quarter Ended Six Months Ended
September 30, September 30,
1999 1998 1999 1998
Net loss - as reported $(5,196,206) (1,422,804) (5,541,957) (2,365,056)
Compensation expense - current
option grants (1,250) (50,094) (1,250) (100,189)
Compensation expense - prior
period option grants (398,103) (334,752) (816,655) (669,505)
Net loss - pro forma $(5,595,559) (1,807,650) (6,359,862) (3,134,750)
Net loss per common share -
as reported $ (.31) (.09) (.33) (.15)
Net loss per common share -
pro forma $ (.34) (.11) (.39) (.20)
The fair value of stock options granted was calculated using the Black
Scholes option pricing model based on the following weighted average
assumptions:
Quarter Ended Six Months Ended
September 30, September 30,
1999 1998 1999 1998
Expected volatility 46.5% 48.3% 46.5% 48.4%
Expected dividend yield 0.0% 0.0% 0.0% 0.0%
Risk free interest rate 6.3% 4.5% 6.3% 5.4%
Expected life of option granted 3 years 6 years 3 years 6 years
Fair value of options granted as
computed under the Black
Scholes option pricing model $1.62 per $2.61 per $1.62 per $3.76 per
share share share share
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 $ 726,671
2001 $ 584,800
2002 $ 452,567
2003 $ 1,250
During June 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 $491,300.
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
The Company completed a private placement in fiscal 1998 of 750,000 units
consisting of one common share and a warrant to purchase a common share at
an exercise price of $8.00 per share for a term of two years. 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
September 30, 1999.
In connection with the 1997 private placement, the placement agents were
issued warrants in February 1997, to acquire 225,625 shares of the
Compan'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 September 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. The remaining 32,000 shares at $4.25
per share expired unexercised during the quarter ended September 30, 1999.
(11) The Company has historically derived significant revenue from one key
customer. The customer from which this revenue has been derived and the
percentage of total revenue for the quarter ended September 30, 1999 and
1998 was $1,237,461 or 23%, and $618,502 or 18%, respectively, and
$2,378,950 or 21% and $1,162,261 or 19% for the six months ended September
30, 1999 and 1998, respectively.
This customer also represented 19% and 29% of total accounts receivable at
September 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 $134,935 and $217,007 for the quarter ended September 30, 1999 and
1998, respectively, and $393,206 and $332,963 for the six months ended
September 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 quarter and six months ended
September 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.
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
(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.
During the quarter and six months ended September 30, 1999, intersegment
sales or transfers were immaterial. The 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 quarter ended September 30,
1999:
Mechanical Electronic
Technology Products Products Total
Revenue $ 509,255 1,017,904 3,807,004 5,334,163
Interest income 20,331 1,428 - 21,759
Interest expense (12,148) (49,832) (60,807) (122,787)
Depreciation and
amortization (90,537) (232,309) (122,135) (444,981)
Write-down of
investments (4,104,628) - - (4,104,628)
Goodwill amortization - (15,579) (67,587) (83,166)
Equity in loss of
Taiwan joint venture (94,602) - - (94,602)
Equity in loss of
Germany joint venture (45,000) - - (45,000)
Segment earnings (loss) (5,013,669) (385,388) 202,851 (5,196,206)
Segment assets 4,631,755 6,781,661 12,619,946 24,033,362
Expenditures for
segment assets $ (97,544) (9,765) (28,949) (136,258)
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
The following table summarizes significant financial statement information
for each of the reportable segments for the quarter ended September 30,
1998:
Mechanical Electronic
Technology Products Products Total
Revenue $ 493,795 537,849 2,356,150 3,387,794
Interest income 19,601 7,681 - 27,282
Interest expense (17,571) (47,233) (36,824) (101,628)
Depreciation and
amortization (100,338) (185,448) (65,817) (351,603)
Write-down of
investments - - - -
Goodwill amortization - (14,308) (66,210) (80,518)
Equity in loss of
Taiwan joint venture (105,869) - - (105,869)
Equity in loss of
Germany joint venture - - - -
Segment loss (856,280) 418,138) (148,386) (1,422,804)
Segment assets 7,830,670 8,136,627 9,718,383 25,685,680
Expenditures for
segment assets $ (178,608) (504,269) (138,002) (820,879)
The following table summarizes significant financial statement information
for each of the reportable segments for the six months ended September 30,
1999:
Mechanical Electronic
Technology Products Products Total
Revenue $ 1,049,863 2,429,404 7,619,307 11,098,574
Interest income 35,880 2,275 - 38,155
Interest expense (23,126) (99,901) (116,912) (239,939)
Depreciation and
amortization (181,109) (463,184) (244,268) (888,561)
Write-down of
investments (4,104,628) - - (4,104,628)
Goodwill amortization - (31,158) (134,887) (166,045)
Equity in loss of
Taiwan joint venture (186,538) - - (186,538)
Equity in loss of
Germany joint venture (93,632) - - (93,632)
Segment earnings (loss) (5,670,707) (374,806) 503,556 (5,541,957)
Segment assets 4,631,755 6,781,661 12,619,946 24,033,362
Expenditures for
segment assets $ (152,061) (17,062) (73,785) (242,908)
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
The following table summarizes significant financial statement information
for each of the reportable segments for the six months ended September 30,
1998:
Mechanical Electronic
Technology Products Products Total
Revenue $ 1,139,685 1,203,246 3,897,644 6,240,575
Interest income 59,207 21,378 - 80,585
Interest expense (32,949) (69,770) (52,531) (155,250)
Depreciation and
amortization (200,033) (357,411) (109,696) (667,140)
Write-down of
investments - - - -
Goodwill amortization - (30,523) (110,350) (140,873)
Equity in loss of
Taiwan joint venture (200,289) - - (200,289)
Equity in loss of
Germany joint venture - - - -
Segment loss (1,485,860) (668,730) (210,466) (2,365,056)
Segment assets 7,830,670 8,136,627 9,718,383 25,685,680
Expenditures for
segment assets $ (356,858) (2,025,391) (138,002) (2,520,251)
(14) 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, 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. One of the officers has announced his intention to retire
at December 31, 1999. The compensation due this officer under the
provisions of his employment agreement is $324,866 which has been recorded
in the Company's
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
operating results for the quarter ended September 30, 1999. The aggregate
annual future compensation under these agreements, through their expiration
date, excluding the aforementioned retirement payment, is $353,858.
Lease Commitments
The Company has entered into operating lease agreements for office space
and equipment which expire at various times through 2007. As of September
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 for each of the next five fiscal years and thereafter are
as follows:
2000 $ 146,833
2001 279,937
2002 265,364
2003 251,444
2004 253,961
2005 252,144
Thereafter 504,276
$ 1,953,959
Rental expense under these leases totaled $71,793 and $63,543 for the
quarter ended September 30, 1999 and 1998, respectively and approximately
$143,586 and $105,905 for the six months ended September 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, 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.
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
(16) Reporting Comprehensive Income
The following table summarizes the Company's comprehensive loss for the
quarter and six months ended September 30, 1999 and 1998:
Quarter Ended Six Months Ended
September 30, September 30,
1999 1998 1999 1998
Net loss $ (5,196,206) (1,422,804) (5,541,957) (2,365,056)
Other comprehensive
earnings (loss) -
translation
adjustment 26,403 (797) 67,339 (99,519)
Income tax effect - - - -
Comprehensive loss $ (5,169,803) (1,423,601) (5,474,618) (2,464,575)
(17) Acquisition of Franklin Manufacturing Company
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
six months ended September, 1999 and 1998 respectively, assuming the
acquisition occurred on April 1, 1998 is as follows:
Six Months Ended September 30,
1999 1998
Revenue $ 11,098,574 7,200,288
Net loss (5,541,957) (2,328,644)
Basic and diluted loss
per common share $ (.33) (.15)
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. Examples of forward-looking statements are statements of the
Company's expectations regarding future financial results and its ability to
further commercialize its technology and increase its manufacturing activities.
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 Compan's
ability to become profitable and its ability to obtain additional financing, the
Company's reliance on major customers and suppliers, 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
Cash and cash equivalents at September 30, 1999 was $1,161,803 and working
capital (the excess of current assets over current liabilities) was $1,751,497
compared with $1,537,453 and $2,395,261,respectively, at March 31, 1999.
Accounts receivable rose $569,204 to $3,171,198 at September 30, 1999 from
$2,601,994 at March 31, 1999. The increase is primarily attributable to the
higher levels of revenue during the quarter and six months ended September 30,
1999.
Inventories declined $83,490 to $2,704,504 at September 30, 1999 from $2,787,994
at March 31, 1999 reflecting decreases in raw material and finished good
inventories resulting from execution of inventory management initiatives
throughout the first half.
Prepaid expenses declined to $212,690 at September 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.
Other current assets rose $165,679 to $506,337 at September 30, 1999 from
$340,658 at March 31, 1999 reflecting payment of expenses on behalf of Unique
Mobility Europa GmbH (Europa) throughout the period.
The Company invested $126,761 and $210,770 for the acquisition of property and
equipment during the quarter and six months ended September 30, 1999,
respectively, compared to $771,709 and $2,458,251 for the quarter and six months
ended September 30, 1998, respectively. The decreases reflect higher levels of
capital expenditures in the comparable prior year periods arising from
investments in manufacturing equipment and the construction of a manufacturing
plant by the mechanical products segment, investments in manufacturing equipment
and tooling by the electronic products segment, and investments in equipment by
the technology segment.
During the quarter ended September 30, 1999, the Company evaluated its
investments in Taiwan UQM Electric Co., Ltd. (Taiwan UQM), Europa and EV Global
Motors Co. (EVG) and a participation interest in a note receivable from
Windermere Eco Development Limited (WED). Each investment was evaluated relative
to its potential to achieve profitable operations over the near term and the
Company's ability to recover the carrying value of its investment in each
entity. In conducting this evaluation, the Company considered such factors as
each company's history of operating losses, capital resources required to
execute each company's business plan, the availability of third-party funding,
development and strength of commercial markets for each company's products or
proposed products, competition within such markets and the liquidity of the
investment market for each company's securities. Based on this evaluation, the
Company reduced the carrying value of each of these investments to zero
effective September 30, 1999. See also notes 5, 6 and 7 to the Consolidated
Financial Statements.
Investment in Taiwan joint venture declined $1,595,432 to zero at September 30,
1999 reflecting the Company's proportionate share of operating losses during the
quarter and six months ended September 30, 1999 of $94,602 and $186,538,
respectively, and the Company's impairment of the remaining carrying value of
this investment of $1,476,233. See also note 5 to the Consolidated Financial
Statements.
During the first quarter the Company issued 208,333 shares of common stock with
a fair market value of $1,149,894 and $9,572 of cash in exchange for a 33.6
percent ownership of share interest in Europa. During the quarter and six months
ended September 30, 1999 the Company recorded its proportionate share of the
operating losses of Europa amounting to $45,000 and $93,632, respectively. On
October 8, 1999, the Company entered into an agreement with the shareholder's of
Europa providing for the reduction of its ownership interest to 5.9 percent in
exchange for a funding commitment from one of the shareholders in the amount of
DM 3,000,000 (USD$1,630,200) and the reimbursement of $400,000 of organization
costs incurred by the Company on behalf of Europa. As a result, the Company
reduced the carrying value of its investment at September 30, 1999 from
$1,112,687 to zero. See also note 7 to the Consolidated Financial Statements.
Investment in EVG declined $1,000,000 to zero at September 30,1999 reflecting
the Company's impairment of the carrying value of this investment pursuant to
its evaluation described above. In addition, the Company also impaired its
approximately 9.5 percent participation interest in a $5.225 million convertible
note receivable from WED held by EVG reducing its carrying value of the note
receivable from $515,708 to zero effective September 30, 1999. See also note 6
to the Consolidated Financial Statements.
Patent and trademark costs rose $18,474 to $704,669 at September 30, 1999
reflecting expenditures for the filing and maintenance of patents during the six
months ended September 30, 1999.
Goodwill, net of accumulated amortization, declined to $6,161,796 at September
30, 1999 from $6,327,841 at March 31, 1999 due to the amortization of this asset
over its 20 year useful life.
Accounts payable declined $178,448 to $2,065,696 at September 30, 1999 from
$2,244,144 at March 31, 1999. The decrease is primarily attributable to a
reduction in the average days outstanding of vendor invoices at the Company's
Franklin Manufacturing unit.
Other current liabilities increased $372,511 to $1,325,009 at the end of the
first half from $952,498 at March 31, 1999. The increase is primarily
attributable to the accrual of compensation payable to the Company's former
Chief Executive Officer.
Revolving line-of-credit rose to $1,655,000 at September 30, 1999 due to
expanded working capital requirements during the six months ended September 30,
1999 arising from higher revenue and accounts receivable levels at the Company's
Franklin Manufacturing unit.
Billings in excess of costs and estimated earnings on uncompleted contracts rose
$121,569 to $190,962 at September 30, 1999 from $69,393 at March 31, 1999
reflecting the prepayment by a customer for engineering services commenced
during the six months ended September 30, 1999.
Long-term debt declined $479,908 to $3,916,219 at September 30, 1999 due to
principal repayments on the Company's term bank debt during the first half.
Common stock and additional paid-in capital increased to $165,730 and
$45,275,395 at September 30, 1999, respectively, compared to $162,230 and
$42,412,390 at March 31, 1999. The increases were due to the sale of common
stock to investors in the amount of $491,300; the issuance of common stock in
exchange for an ownership interest in Europa of $1,149,894; proceeds received
upon the exercise of warrants of $55,250; and sales of common stock to employees
and consultants through the Company's benefit plans and the exercise of options
of $178,777.
Results of Operations
Operations for the quarter ended September 30, 1999, resulted in a net loss of
$5,196,206 or $.31 per share compared to a net loss of $1,422,804 or $0.09 per
share for the quarter ended September 30, 1998. Operations for the six months
ended September 30, 1999 resulted in a net loss of $5,541,957 or $0.33 per share
compared to a net loss of $2,365,056 or $0.15 per share for the six months ended
September 30, 1998.
Operations for the quarter and six months ended September 30, 1999 were
adversely impacted by the write-down of the Company's investments in Taiwan UQM,
Europa, EVG and WED which resulted in a charge to earnings of $4,104,628 or
$0.25 per share.
Total revenue for the quarter ended September 30, 1999 rose to $5,334,163
compared to $3,387,794 for the comparable quarter last year. For the six months
ended September 30, 1999 total revenue rose to $11,098,574 compared to
$6,240,575 for the comparable period last year.
Product sales for the quarter and six months ended September 30, 1999 were
$4,952,179 and $10,283,151, respectively, compared to $2,941,800 and $5,495,247
for the comparable periods last year. Revenue growth during the second quarter
and first half were fueled by the Company's mechanical products and electronic
products segments. Revenue for the mechanical products segment during the
quarter and six months ended September 30, 1999 was $1,017,904 and $2,429,404,
respectively, compared to $537,849 and $1,203,246 for the comparable periods
last year. Revenue for the electronic products segment was $3,807,004 and
$7,619,307, respectively, compared to $2,356,150 and $3,897,644, for the
comparable periods last year. The increase in product sales in the mechanical
products segment is primarily due to the launch of motor production operations
earlier this year. The increase in product sales in the electronic products
segment is attributable to continued strong demand and revenue growth at the
Company's Franklin Manufacturing unit as well as comparable prior year results
including five months revenue from Franklin versus six months in the first half
of this year. The Company expects that seasonal factors together with inventory
adjustments by calendar year end customers may result in weaker product sales in
its fiscal third quarter ending December 31, 1999.
Contract services revenue declined $64,010 or 14 percent to $381,984 during the
second quarter and rose $70,095 or 9 percent to $815,423 for the first half. The
decrease during the second quarter is attributable to lower levels of billing
rate realization. The increase during the first half is attributable to strong
billing rate realization during the first quarter which more than offset lower
realization levels during the second quarter.
Gross profit margins for the second quarter and first half were 15.8 percent and
15.6 percent, respectively, compared to a negative gross profit margin of .7
percent for the comparable quarter last year and a gross profit margin of 6.3
percent for the comparable six month period last year. Gross profit margins on
contract services during the quarter and first half were 23.0 percent and 9.6
percent, respectively, compared to 2.0 percent and 6.3 percent for the
comparable periods last year. The improvement in contract services margins is
attributable to reduced levels of cost overruns on development programs and
improved pricing on development projects in process. Gross profit margins on
product sales for the second quarter and first half were 15.2 percent and 16.1
percent, respectively, compared to a negative gross profit margin of 1.1 percent
for the comparable quarter last year and a gross profit margin of 6.3 percent
for the comparable six month period last year. The improvement in gross profit
margins on product sales is attributable to production cost improvements at the
Company's Franklin Manufacturing unit as well as improved pricing on motor
products and a more favorable product mix on gearing products at the Company's
Unique Power Products unit.
Research and development expenditures during the second quarter declined $65,007
to $108,267 and declined $316,276 to $134,446 for the first half. The decrease
is generally attributable to internally-funded development expenditures on the
product launch for Invacare Corporation during the comparable prior year periods
which have decreased substantially since the launch of production during the
fourth quarter last year.
General and administrative expense for the second quarter rose $532,774 to
$1,481,527 compared to $948,753 for the comparable quarter last year and rose
$498,636 to $2,355,528 for the first half compared to $1,856,892 for the
comparable six month period last year. The increase for the quarter and the six
month period is primarily attributable to the accrual of compensation payable to
the Company's former Chief Executive Officer under the terms of his employment
agreement of $324,866 and the write-off of an uncollectible account receivable
from a customer of $254,870.
Write-down of investments represents charges resulting from the Company's
impairment of its investment in three entities; EVG, Europa and Taiwan UQM which
amounted to $1,515,708, $1,112,687 and $1,476,233, respectively. See also
"Financial Condition" above and notes 5, 6 and 7 to the Consolidated Financial
Statements.
Interest expense rose $21,159 to $122,787 for the quarter ended September 30,
1999 and $84,689 to $239,939 for the six months ended September 30, 1999,
respectively. The increase for the quarter is attributable to higher borrowing
levels on the Company's line-of credit associated with higher levels of revenue
and accounts receivable. The increase for the six month period is attributable
to higher levels of short-term and long-term debt.
Equity in loss of Taiwan joint venture declined to $94,602 and $186,538 for the
second quarter and first half, respectively, compared to $105,869 and $200,289,
respectively, for the comparable periods last year. The decrease is due to
higher revenue levels and cost containment measures at Taiwan UQM.
Equity in loss of Germany joint venture was $45,000 and $93,632 for the quarter
and six months ended September 30, 1999. The increase for each period reflects
the Company's proportionate share of the losses incurred by Europa.
Liquidity and Capital Resources
The Company's cash balances and liquidity throughout the quarter and six months
ended September 30, 1999 were adequate to meet operating needs. Working capital
(the excess of current assets over current liabilities) at September 30, 1999
was $1,751,497 compared with $2,395,261 at March 31, 1999. The lower level of
working capital at September 30, 1999 is attributable to accrued compensation
payable to the Company's former Chief Executive Officer and lower balances of
cash and cash equivalents.
Net cash used by operations for the six months ended September 30, 1999 was
$400,399 a decline of $1,052,228 from the $1,452,627 used by operations for the
comparable period last year. The decrease is primarily attributable to improved
operating cash flows before non-cash charges and reduced rates of inventory
growth during the current period versus the comparable period last year.
Cash used by investing activities for the six months ended September 30, 1999
was $758,616 a decline of $5,607,375 from the $6,365,991 used by investing
activities for the comparable period last year. The decrease is attributable to
the acquisition of Franklin Manufacturing Company, the construction of a
manufacturing plant in Frederick, Colorado and related equipment purchases
during the comparable six month period last year.
The Company's cash requirements for the six months ended September 30, 1999 were
funded primarily through the sale of common stock to investors and borrowings on
the Company's line-of-credit. At September 30, 1999 the Company had additional
borrowing availability on its bank lines-of-credit of $1,595,000.
During the quarter ended September 30, 1999, the Company evaluated its
investments in Taiwan UQM, Europa and EVG and a note receivable from its
participation interest in WED relative to each investments potential to achieve
profitable operations over the near term and the Company's ability to recover
the carrying value of its investment in each entity. In conducting this
evaluation, the Company considered such factors as each company's history of
operating losses, capital resources required to execute each company's business
plan, the availability of third-party funding, development and strength of
commercial markets for each company's products or proposed products, competition
within such markets and the liquidity of the investment market for each
company's securities. Based on this evaluation, the Company reduced the carrying
value of each of these investments to zero effective September 30, 1999. See
also notes 5, 6 and 7 to the Consolidated Financial Statements. The Company has
no future funding obligations to Europa, EVG or WED. Pursuant to the terms of
the Joint Venture Agreement governing the operations of Taiwan UQM, upon the
unanimous vote of the directors of Taiwan UQM, the shareholders of Taiwan UQM
may be obligated to contribute additional capital. The Company holds two seats
on the board of directors of Taiwan UQM and therefore has the ability to
restrict or eliminate future capital calls by Taiwan UQM. However, in the event
the other shareholders of Taiwan UQM elect to contribute additional capital to
fund Taiwan UQM's future operations the Company may suffer a dilution of its
ownership interest.
The Company expects to fund its future working capital requirement through a
combination of existing cash resources, cash flow generated from operations, if
any, and borrowings on short-term bank lines-of-credit. The Company believes its
existing cash resources and bank lines-of-credit are sufficient to fund its
operations for the foreseeable future.
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 believes it can configure its
operations such that existing cash balances and cash flow from operations and
bank lines-of-credit and term debt will be sufficient to meet its operating
requirements.
Year 2000 Issues
The Year 2000 presents issues because many computer hardware and software
systems use only the last two digits to refer to a calendar year. Consequently,
these systems may fail to process dates correctly after December 31, 1999, which
may cause systems failures.
State of Readiness
The Company has conducted numerous internal discussions over the last twenty-one
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.
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
$30,000. To date the Company has spent less than $25,000 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 orders to purchase goods and services from
the Company. Either of the foregoing occurrences could have a material adverse
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.
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 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. 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 September 30, 1999.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial data schedule
(b) Reports on Form 8-K
Current Report filed October 15, 1999 regarding the write-down of
its investment in three joint ventures.
Current Report filed May 15, 1999 regarding the formation of
Unique Mobility Europa GmbH and the acquisition of a
participation interest in a note receivable held by EV Global
Motors Company.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Unique Mobility, Inc.
Registrant
Date: November 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
SEPTEMBER 30, 1999, AND THE CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE PERIOD
ENDED SEPTEMBER 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> SEP-30-1999
<CASH> 1,161,803
<SECURITIES> 0
<RECEIVABLES> 3,171,198
<ALLOWANCES> 0
<INVENTORY> 2,881,456
<CURRENT-ASSETS> 7,933,484
<PP&E> 13,727,446
<DEPRECIATION> 4,518,238
<TOTAL-ASSETS> 24,033,362
<CURRENT-LIABILITIES> 6,181,987
<BONDS> 3,916,219
0
0
<COMMON> 45,441,125
<OTHER-SE> (31,908,780)
<TOTAL-LIABILITY-AND-EQUITY> 24,033,362
<SALES> 4,952,179
<TOTAL-REVENUES> 5,334,163
<CGS> 4,493,520
<TOTAL-COSTS> 10,271,108
<OTHER-EXPENSES> 136,474
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 122,787
<INCOME-PRETAX> (5,196,206)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,196,206)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,196,206)
<EPS-BASIC> (.31)
<EPS-DILUTED> (.31)
</TABLE>
