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, 2000
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 October 17, 2000, was 17,362,906.
<PAGE>
PART I - FINANCIAL INFORMATION
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
September 30, March 31,
Assets 2000 2000
(unaudited)
<CAPTION>
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,678,014 2,085,115
Accounts receivable, net (notes 6 and 8) 3,597,468 2,821,894
Costs and estimated earnings in excess
of billings on uncompleted contracts
(note 3) 269,930 329,111
Inventories (notes 4 and 6) 5,817,695 3,120,279
Prepaid expenses 119,804 192,492
Other 136 400,068
Total current assets 11,483,047 8,948,959
Property and equipment, at cost:
Land 517,080 517,080
Building 2,678,525 2,678,525
Molds 102,113 102,113
Transportation equipment 146,386 146,386
Machinery and equipment 11,451,474 10,462,893
14,895,578 13,906,997
Less accumulated depreciation (6,115,285) (5,365,304)
Net property and equipment 8,780,293 8,541,693
Patent and trademark costs, net of
accumulated amortization of $145,447
and $125,078 744,714 731,282
Goodwill, net of accumulated amortization
of $823,029 and $656,696 5,829,130 5,995,463
Other assets 99,206 40,446
$ 26,936,390 24,257,843
</TABLE>
(Continued)
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
<TABLE>
September 30, March 31,
Liabilities and Stockholders' Equity 2000 2000
(unaudited)
<CAPTION>
<S> <C> <C>
Current liabilities:
Accounts payable $ 2,140,570 1,379,316
Other current liabilities (note 5) 1,717,705 845,462
Current portion of long-term debt 1,123,155 972,123
Revolving line-of-credit (note 6) 956,000 -
Billings in excess of costs and
estimated earnings on uncompleted
contracts (note 3) 456,406 79,499
Total current liabilities 6,393,836 3,276,400
Long-term debt, less current portion 3,478,390 3,422,459
Total liabilities 9,872,226 6,698,859
Minority interest in consolidated subsidiary 418,971 413,066
Stockholders' equity (note 7):
Common stock, $.01 par value, 50,000,000
shares authorized; 17,332,877 and
17,194,192 shares issued 173,329 171,942
Additional paid-in capital 50,289,333 49,382,877
Accumulated deficit (33,433,169) (32,024,601)
Accumulated other comprehensive loss (note 12) (384,300) (384,300)
Total stockholders' equity 16,645,193 17,145,918
Commitments (note 11)
$ 26,936,390 24,257,843
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited)
<TABLE>
Quarter Ended Six Monthes Ended
September 30, September 30,
2000 1999 2000 1999
<CAPTION>
<S> <C> <C> <C> <C>
Revenue (note 8):
Contract services $ 352,881 381,984 897,899 815,423
Product sales 6,078,452 4,952,179 11,998,924 10,283,151
6,431,333 5,334,163 12,896,823 11,098,574
Operating costs and expenses:
Costs of contract services 380,479 294,017 866,341 737,444
Costs of product sales 5,625,913 4,199,503 10,824,411 8,625,924
Research and development 27,501 108,267 65,410 134,446
General and administrative 1,064,499 1,481,527 1,965,232 2,355,528
Write-down of investments - 4,104,628 - 4,104,628
Impairment of assets 216,818 - 216,818 -
Amortization of goodwill 83,167 83,166 166,333 166,045
7,398,377 10,271,108 14,104,545 16,124,015
Operating loss (967,044)(4,936,945) (1,207,722) (5,025,441)
Other income (expense):
Interest income 16,140 21,759 42,853 38,155
Interest expense (104,798) (122,787) (201,212) (239,939)
Equity in loss of joint ventures - (139,602) - (280,170)
Minority interest share of
earnings of consolidated
subsidiary (19,992) (18,631) (39,577) (36,893)
Other 4 - (2,910) 2,331
(108,646) (259,261) (200,846) (516,516)
Net loss $ (1,075,690)(5,196,206) (1,408,568) (5,541,957)
Net loss per common
share basic and
diluted $ (.06) (.31) (.08) (.33)
Weighted average number of shares
of common stock outstanding
(note 9) 17,269,444 16,572,161 17,242,489 16,484,458
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
Six Months Ended
September 30,
2000 1999
<CAPTION>
<S> <C> <C>
Cash flows used by operating activities:
Net loss $ (1,408,568) (5,541,957)
Adjustments to reconcile net loss to net
cash used by operating activities:
Write-down of investments - 4,104,628
Depreciation and amortization 1,147,372 1,054,606
Impairment of assets 216,818 -
Minority interest share of earnings of
consolidated subsidiary 39,577 36,893
Noncash compensation expense for common stock
issued for services 78,253 15,618
Equity in loss of joint ventures - 280,170
Loss on sale of property and equipment 2,917 -
Change in operating assets and liabilities:
Accounts receivable and costs and
estimated earnings in excess of
billings on uncompleted contracts (700,153) (572,699)
Inventories (2,697,416) 83,490
Prepaid expenses and other current
assets 72,620 (176,780)
Accounts payable and other current
liabilities 1,633,497 194,063
Billings in excess of costs and estimated
earnings on uncompleted contracts 376,907 121,569
Net cash used by operating
activities (1,238,176) (400,399)
Cash used by investing activities:
Acquisition of property and equipment (1,426,005) (210,770)
Proceeds from sale of property and equipment 7,000 -
Increase in patent and trademark costs (33,801) (32,138)
Proceeds from sale of Germany joint venture 400,000 -
Investment in other long-term assets (75,000) (515,708)
Net cash used by investing
activities $ (1,127,806) (758,616)
</TABLE>
(Continued)
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
(unaudited)
<TABLE>
Six Months Ended
September 30,
2000 1999
<CAPTION>
<S> <C> <C>
Cash provided by financing activities:
Proceeds from borrowings $ 700,000 57,166
Repayment of debt (493,037) (520,455)
Net borrowings on revolving line-of-credit 956,000 555,000
Proceeds from sale of common stock, net - 491,300
Issuance of common stock upon exercise of
employee options, net of repayments 712,025 159,670
Issuance of common stock under employee stock
purchase plan 21,565 19,107
Issuance of common stock upon exercise of warrants 96,000 55,250
Distributions paid to holders of minority interest (33,672) (33,673)
Net cash provided by financing
activities 1,958,881 783,365
Decrease in cash and cash equivalents (407,101) (375,650)
Cash and cash equivalents at beginning of period 2,085,115 1,537,453
Cash and cash equivalents at end of period $ 1,678,014 1,161,803
Interest paid in cash during the period $ 198,718 251,790
</TABLE>
Non-cash investing and financing transactions:
Cumulative translation adjustment of $67,339 was recorded for the six months
ended September 30, 1999.
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.
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. The
notes contained herein should be read in conjunction with the notes to the
Company's Consolidated Financial Statements filed on Form 10-K for the year
ended March 31, 2000.
(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-one months at September 30, 2000, and from one to seventeen months
at March 31, 2000. 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:
<TABLE>
September 30, 2000 March 31, 2000
(unaudited)
<CAPTION>
<S> <C> <C>
Costs incurred on uncompleted
contracts $ 1,204,266 645,425
Estimated earnings 158,231 180,293
1,362,497 825,718
Less billings to date (1,548,973) (576,106)
$ (186,476) 249,612
Included in the accompanying
balance sheets as follows:
Costs and estimated earnings
in excess of billings on
uncompleted contracts $ 269,930 329,111
Billings in excess of costs
and estimated earnings on
uncompleted contracts (456,406) (79,499)
$ (186,476) 249,612
</TABLE>
(4) Inventories consist of:
<TABLE>
September 30, 2000 March 31, 2000
(unaudited)
<CAPTION>
<S> <C> <C>
Raw materials $ 5,057,362 2,446,779
Work in process 465,070 627,131
Finished products 295,263 46,369
$ 5,817,695 3,120,279
</TABLE>
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
(5) Other current liabilities consist of:
<TABLE>
September 30, 2000 March 31, 2000
(unaudited)
<CAPTION>
<S> <C> <C>
Accrued interest $ 23,853 21,360
Accrued legal and accounting fees 49,163 71,275
Accrued payroll, consulting, personal
property taxes and real estate taxes 572,301 339,263
Accrued material purchases 927,994 327,828
Other 144,394 85,736
$ 1,717,705 845,462
</TABLE>
(6) Lines of credit
The Company recently renewed its two lines of credit; one lined remained
the same at $.75 million, the other line of credit was increased from $2.5
million to $4.0 million. At September 30, 2000, the Company had advanced
$956,000 against these lines. The $.75 million line of credit expires in
October 2001. The $4.0 million line of credit is due on demand, but if no
demand is made, it is due August 2001. Interest on the lines of credit is
payable monthly at prime plus .75% (10.25% at September 30, 2000) and prime
less .50% (9.00% at September 30, 2000), 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.
(7) 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, 2000:
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
<TABLE>
Shares Under Weighted-Average
Option Exercise Price
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Outstanding at March 31, 2000 3,231,394 $ 6.01
Granted 20,000 7.63
Exercised (115,077) 6.19
Forfeited (42,637) 8.45
Outstanding at September 30, 2000 3,093,680 $ 5.99
Exercisable at September 30, 2000 2,157,291 $ 5.55
</TABLE>
The following table presents summarized information about stock options
outstanding at September 30, 2000:
<TABLE>
Options Outstanding Options Exercisable
Weighted Weighted Weighted
Number Average Average Number Average
Range of Outstanding Remaining Exercise Exercisable Exercise
Exercise Prices at 9/30/00 Contractual Life Price at 9/30/00 Price
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
$0.75 18,959 0.4 years $0.75 18,959 $0.75
$2.25 - 3.31 461,792 5.0 years $3.03 461,792 $3.03
$3.50 - 5.00 980,593 5.9 years $4.25 639,525 $4.18
$6.25 - 8.75 1,632,336 6.3 years $7.92 1,037,015 $7.61
$0.75 - 8.75 3,093,680 6.0 years $5.99 2,157,291 $5.55
</TABLE>
Non-Employee Director Stock Option Plan
In February 1994, the Company's Board of Directors ratified a Stock Option
Plan for Non-Employee Directors pursuant to which Directors may elect to
receive stock options in lieu of cash compensation for their services as
directors. 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 are vested
on the date of grant and are exercisable for terms ranging from three years
to ten 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 six
months ended September 30, 2000: Weighted Shares Under Average Option
Exercise Price
Outstanding at March 31, 2000 41,275 $5.68
Granted 5,785 7.94
Outstanding at September 30, 2000 47,060 $5.96
Exercisable at September 30, 2000 29,758 $6.09
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
The following table presents summarized information about stock options
outstanding for non-employee directors:
<TABLE>
Options Outstanding Options Exercisable
Weighted Weighted Weighted
Number Average Average Number Average
Range of Outstanding Remaining Exercise Exercisable Exercise
Exercise Prices at 9/30/00 Contractual Life Price at 9/30/00 Price
<CAPTION>
<S> <C> <C> <C> <C> <C>
$4.25 - 5.06 25,275 6.1 years $4.76 13,758 $4.88
$7.13 - 8.00 21,785 6.2 years $7.34 16,000 $7.13
$4.25 - 8.00 47,060 6.1 years $5.96 29,758 $6.09
</TABLE>
Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation ("SFAS 123") defines a fair value method of
accounting for employee stock options and similar equity instruments. SFAS
123 permits an entity to choose to recognize compensation expenses by
adopting the 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 and directors
of the Company under the intrinsic value method. Stock options granted to
non-employees under the Company's 1992 Stock Option Plan are accounted for
under the fair value method. Had the Company reported compensation costs as
determined by the fair value method of accounting for option grants to
employees and directors, net loss and net loss per common share would have
been the pro forma amounts indicated in the following table:
<TABLE>
Quarter Ended Six Months Ended
September 30, September 30,
2000 1999 2000 1999
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net loss - as reported $(1,075,690) (5,196,206) (1,408,568) (5,541,957)
Compensation expense -
current option grants (10,200) (1,250) (19,150) (1,250)
Compensation expense -
prior period option
grants (126,603) (398,103) (452,657) (816,655)
Net loss - pro forma $(1,212,493) (5,595,559) (1,880,375) (6,359,862)
Net loss per common share -
as reported $ (.06) (.31) (.08) (.33)
Net loss per common share -
pro forma $ (.07) (.34) (.11) (.39)
</TABLE>
The fair value of stock options granted was calculated using the Black
Scholes option pricing model based on the following weighted average
assumptions:
<TABLE>
Quarter Ended Six Months Ended
September 30, September 30,
2000 1999 2000 1999
<CAPTION>
<S> <C> <C> <C> <C>
Expected volatility 49.1% 46.5% 46.3% 46.5%
Expected dividend yield 0.0% 0.0% 0.0% 0.0%
Risk free interest rate 6.4% 6.3% 6.5% 6.3%
Expected life of option granted 3 years 3 years 8.7 years 3 years
Fair value of options granted as
computed under the Black
Scholes option pricing model $3.12 per $1.62 per $4.75 per $1.62 per
share share share share
</TABLE>
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
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:
<TABLE>
Fiscal Year Pro Forma
Ended Compensation
March 31, Expense
<CAPTION>
<S> <C>
2001 $ 672,509
2002 $ 1,212,784
2003 $ 581,614
2004 $ 1,250
</TABLE>
Warrants
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, unless extended. During April, 2000 warrants to acquire 12,000
shares of the Company's common stock at $8.00 per share were exercised
resulting in cash proceeds to the Company of $96,000. During fiscal 2000,
warrants to purchase 299,375 shares of common stock were extended for a
period of eighteen months at the fair value of such extension and remain
outstanding as of September 30, 2000.
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. No warrants were outstanding as of
September 30, 2000.
(8) The Company has historically derived significant revenue from two
customers. The customers from which this revenue has been derived and the
percentage of total revenue for the quarter ended September 30, 2000 and
1999 was $1,987,161, or 31%, and $1,237,461, or 23%, respectively, and
$4,231,905, or 33% and $2,378,950, or 21% for the six months ended
September 30, 2000 and 1999, respectively. These customers also represented
27% and 19% of total accounts receivable at September 30, 2000 and 1999,
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 $163,991 and $134,935 for the quarter ended September 30, 2000 and
1999, respectively, and $332,146 and $393,206 for the six months ended
September 30, 2000 and 1999, respectively.
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
(9) 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, 2000 and 1999. Outstanding common stock options and warrants
were not included in the computation because the effect of such inclusion
would be antidilutive.
(10) 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, 2000, intersegment
sales or transfers were immaterial.
The Company's reportable segments are strategic business units that offer
different products and services. They are managed separately because each
business requires different business strategies.
The following table summarizes significant financial statement information
for each of the reportable segments for the quarter ended September 30,
2000:
<TABLE>
Mechanical Electronic
Technology Products Products Total
<CAPTION>
<S> <C> <C> <C> <C>
Revenue $ 725,666 1,117,693 4,587,974 6,431,333
Interest income 13,161 2,979 - 16,140
Interest expense (13,919) (42,256) (48,623) (104,798)
Depreciation and
amortization (102,332) (236,239) (171,160) (509,731)
Goodwill amortization - (15,580) (67,587) (83,167)
Segment loss (276,370) (267,411) (531,909) (1,075,690)
Segment assets 7,998,536 6,304,861 12,632,993 26,936,390
Expenditures for
segment assets $ (72,095) (22,974) (256,258) (351,327)
</TABLE>
<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,
1999:
<TABLE>
Mechanical Electronic
Technology Products Products Total
<CAPTION>
<S> <C> <C> <C> <C>
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
joint ventures (139,602) - - (139,602)
Segment earnings (loss) (4,803,669) (490,388) 97,851 (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)
</TABLE>
The following table summarizes significant financial statement information
for each of the reportable segments for the six months ended September 30,
2000:
<TABLE>
Mechanical Electronic
Technology Products Products Total
<CAPTION>
<S> <C> <C> <C> <C>
Revenue $ 1,523,783 2,205,634 9,167,406 12,896,823
Interest income 37,209 5,644 - 42,853
Interest expense (28,019) (86,130) (87,063) (201,212)
Depreciation and
amortization (197,349) (472,028) (311,662) (981,039)
Goodwill amortization - (31,159) (135,174) (166,333)
Segment loss (377,960) (602,506) (428,102) (1,408,568)
Segment assets 7,998,536 6,304,861 12,632,993 26,936,390
Expenditures for
segment assets $ (254,857) (29,034) (1,250,915) (1,534,806)
</TABLE>
<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,
1999:
<TABLE>
Mechanical Electronic
Technology Products Products Total
<CAPTION>
<S> <C> <C> <C> <C>
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
joint venture (280,170) - - (280,170)
Segment earnings (loss) (5,250,707) (584,806) 293,556 (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)
</TABLE>
(11) Commitments and Contingencies
Employment Agreements
The Company has entered into employment agreement with two of its officers
which expire December 31, 2002. The aggregate future compensation under the
employment agreements is $896,227.
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, 2000, 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:
<TABLE>
<CAPTION>
<S> <C>
2001 $ 150,139
2002 272,597
2003 251,444
2004 253,961
2005 252,140
Thereafter 504,280
$ 1,684,561
</TABLE>
Rental expense under these leases totaled $75,749 and $71,793 for the
quarter ended September 30, 2000 and 1999, respectively, and $151,498 and
$143,586 for the six months ended September 30, 2000 and 1999,
respectively.
<PAGE>
UNIQUE MOBILITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(unaudited)
(12) Comprehensive Income
The following table summarizes the Company's comprehensive loss for the
quarter and six months ended September 30, 2000 and 1999:
Quarter Ended Six Months Ended
September 30, September 30,
2000 1999 2000 1999
Net loss $(1,075,690) (5,196,206) (1,408,568) (5,541,957)
Other comprehensive income
- translation adjustment - 26,403 - 67,339
Comprehensive loss $(1,075,690) (5,169,803) (1,408,568) (5,474,618)
<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 the
Company's ability to be profitable, its ability to obtain additional financing,
the Company's reliance on major customers and suppliers 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, 2000 was $1,678,014. Working capital
(the excess of current assets over current liabilities) was $5,089,211 compared
with $5,672,559,respectively, at March 31, 2000.
Accounts receivable rose $775,574 to $3,597,468 at September 30, 2000 from
$2,821,894 at March 31, 2000. The increase is primarily attributable to record
revenue levels during the six months ended September 30, 2000.
Costs and estimated earnings on uncompleted contracts decreased $59,181 to
$269,930 at September 30, 2000 from the fiscal 2000 year-end level of $329,111.
The decrease was attributable to lower levels of unbilled work on engineering
contracts. Estimated earnings on contracts in process decreased to $158,231 at
September 30, 2000 on costs incurred on contracts in process of $1,204,266
compared to estimated earnings on contracts in process of $180,293 on costs
incurred on contracts in process of $645,425 at March 31, 2000. The decrease in
estimated earnings on contracts in process is attributable to lower billing rate
realization and cost overruns on development programs in process.
Raw materials and finished products inventories rose by $2,610,583 and $248,894,
respectively, to $5,057,362 and $295,263, respectively, at September 30, 2000.
Raw materials inventories rose primarily due to inventory accumulation in
anticipation of the launch of new production orders, higher revenue levels in
the Company's electronic products segment and sporadic part shortages of
selected electronic components. Finished products inventories rose primarily as
a result of the commencement of building certain electronic products in
anticipation of future shipment release orders.
Prepaid expenses declined to $119,804 at September 30, 2000 from $192,492 at
March 31, 2000 reflecting the periodic expensing of prepaid insurance premium
costs on the Company's commercial insurance coverages.
Other current assets declined $399,932 to $136 at September 30, 2000 reflecting
the collection of amounts due from the disposition of the Company's remaining
equity interest in its German joint venture.
The Company invested $342,023 and $1,426,005 for the acquisition of property and
equipment during the quarter and six months ended September 30, 2000,
respectively, compared to $126,761 and $210,770 for the quarter and six months
ended September 30, 1999, respectively. The increase in capital expenditures is
primarily attributable to expenditures for manufacturing equipment at the
Company's electronic products segment to improve manufacturing throughput and
component placement density.
<PAGE>
Patent and trademark costs rose $13,432 to $744,714 at September 30, 2000
reflecting expenditures for the filing and prosecution of trademarks and patents
during the six months ended September 30, 2000, net of amortization on existing
patents and trademarks.
Goodwill, net of accumulated amortization, declined $166,333 to $5,829,130 at
September 30, 2000 due to the amortization of this asset over its 20 year useful
life.
Other assets increased $58,760 to $99,206 at September 30, 2000 due primarily
due to the Company's purchase of a minority equity interest in Aeromax
Corporation.
Accounts payable rose $761,254 to $2,140,570 at September 30, 2000 from
$1,379,316 at March 31, 2000. The increase is primarily attributable to higher
levels of inventory purchases from supplier in anticipation of higher levels of
production.
Other current liabilities increased $872,243 to $1,717,705 at the end of the
first half from $845,462 at March 31, 2000. The increase is primarily
attributable to the purchase of raw material as a result of a new order by a
significant customer.
Revolving line-of-credit rose to $956,000 at September 30, 2000 due to expanded
working capital requirements during the six months ended September 30, 2000
primarily due to higher levels of trade accounts receivable and inventory
purchases.
Billings in excess of costs and estimated earnings on uncompleted contracts rose
$376,907 to $456,406 at September 30, 2000 from $79,499 at March 31, 2000
reflecting the prepayment by several customers for engineering services
commenced during the six months ended September 30, 2000.
Long-term debt increased $55,931 to $3,478,390 at September 30, 2000 due to
additional term borrowing for the purchase of manufacturing equipment at the
Company's electronic products segment, offset by principal repayments on the
Company's term bank debt during the first half.
Common stock and additional paid-in capital increased to $173,329 and
$50,289,333 at September 30, 2000, respectively, compared to $171,942 and
$49,382,877 at March 31, 2000. The increases were primarily due to the proceeds
received upon the exercise of stock options by employees of $712,025; and
proceeds received upon the exercise of warrants of $96,000.
Results of Operations
Operations for the quarter ended September 30, 2000, resulted in a net loss of
$1,075,690 or $.06 per share compared to a net loss of $5,196,206 or $0.31 per
share for the quarter ended September 30, 1999. Operations for the six months
ended September 30, 2000 resulted in a net loss of $1,408,568 or $0.08 per share
compared to a net loss of $5,541,957 or $0.33 per share for the six months ended
September 30, 1999.
Operations for the quarter and six months ended September 30, 1999 were
adversely impacted by the write-down of the Company's investments in various
joint ventures which resulted in a charge to earnings of $4,104,628 or $0.25 per
share.
Total revenue for the quarter ended September 30, 2000 rose $1,097,170 or 21
percent to $6,431,333 compared to $5,334,163 for the comparable quarter last
year. For the six months ended September 30, 2000 total revenue rose $1,798,249
or 16 percent to $12,896,823 compared to $11,098,574 for the comparable period
last year. Contract services revenue decreased $29,103 or 8% to $352,881
compared to $381,984 for the comparable quarter last year, and rose $82,476 or
10% to $897,899 compared to $815,423 for the six months ended September 30,
2000. The decrease in contract services revenue for the quarter ended September
30, 2000 is attributable to lower billing rate realization and cost overruns on
development programs. The increase for the first half was attributable to
improved demand for development programs. Product sales for the quarter rose
<PAGE>
$1,126,273 or 23% to $6,078,452 versus $4,952,179 for the comparable quarter
last year. Product sales for the six months ended September 30, 2000 rose
$1,715,773 or 17% to $11,998,924 compared to $10,283,151 for the first half last
year. The increase in product sales is attributable to over a three-fold
increase in prototype propulsion system shipments by the technology segment for
hybrid electric buses and new customer shipments in the electronic products
segment. Revenue for the mechanical products segment was $1,117,693 and
$2,205,634 for the quarter and six months ended September 30, 2000,
respectively, compared to $1,017,904 and $2,429,404, for the comparable periods
last year reflecting weakness in the over the road truck and agricultural
sectors. Revenue for the electronic products segment was $4,587,974 and
$9,167,406, respectively, compared to $3,807,004 and $7,619,307, for the
comparable periods last year. Increased product sales by the electronic products
segment is attributable to the launch of several customer orders and higher
production volumes for certain customers.
Gross profit margins for the second quarter and first half were 6.6 percent and
9.4 percent, respectively, compared to 15.8 percent and 15.6 percent for the
comparable quarter and six month period last year. Gross profit margins on
contract services was a negative 7.8 percent for the quarter ended September 30,
2000 and 3.5 percent for the six months ended September 30, 2000, compared to
23.0 percent and 9.6 percent for the comparable periods last year. The decline
in contract services margins is attributable to lower billing rate realization
and cost overruns on development programs. Gross profit margins on product sales
for the second quarter and first half were 7.4 percent and 9.8 percent,
respectively, compared to 15.2 percent and 16.1 percent for the comparable
periods last year. The decrease in margins on product sales is primarily
attributable to decreased overhead absorption resulting from lower production
volumes at the Company's gear manufacturing operations and lower margins in the
electronic products segment associated with start-up costs on new production
orders.
Research and development expenditures during the second quarter declined $80,766
to $27,501 and declined $69,036 to $65,410 for the first half. The decrease is
generally attributable to lower levels of internally-funded development
activities.
General and administrative expense for the second quarter decreased $417,028 to
$1,064,499 compared to $1,481,527 for the comparable quarter last year and
decreased $390,296 to $1,965,232 for the first half compared to $2,355,528 for
the comparable six month period last year. The decrease 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 in the comparable prior year periods.
Write-down of investments in the prior year periods represents charges resulting
from the Company's write down of its investment in EVG, Europa and Taiwan UQM.
During the quarter the Company amended its license agreement with Taiwan UQM to
grant additional territories for certain fields of use of the Company technology
and cancel other previously granted fields of use. The license, as amended,
provides that Taiwan UQM shall have: (1) an exclusive license for Taiwan and non
exclusive license for Asia including India and Japan for on-road electric and
hybrid electric products for automobiles, trucks and buses; (2) an exclusive
license for Taiwan and a non exclusive license for the remainder of the world
for products for use in electric and hybrid electric bicycles; and (3) an
exclusive license for Asia including India and Japan and a non exclusive license
for the remainder of the world for licensed products for use in electric and
hybrid electric motor scooters and on-road 3-wheel vehicles. All other fields of
use are no longer licensed to Taiwan UQM.
During the first half the Company purchased additional quick changeover "ball
grid array" high component density placement equipment at its Franklin
Manufacturing unit and subsequently conducted a re-layout and balancing of its
manufacturing lines. As a result, certain older machines were taken out of
service, resulting in an impairment change of $216,818. Interest income was
<PAGE>
$16,140 and $42,853 for the quarter and six months ended September 30, 2000
compared to $21,759 and $38,155 for the comparable prior year periods. The
decrease for the quarter is attributable to the application of cash to fund
working capital requirements. The increase in interest income during the first
half of the year was due to higher levels of invested cash.
Interest expense decreased $17,989 to $104,798 for the quarter ended September
30, 2000 and $38,727 to $201,212 for the six months ended September 30, 2000,
respectively. The decrease for the quarter is attributable to lower levels of
borrowing on the Company's revolving line-of-credit. The decrease for the first
half is attributable to generally lower levels of long-term debt.
Equity in loss of joint ventures for the prior year periods represents the
Company's proportionate share of the losses of various joint ventures which the
Company wrote down in the second quarter last year. As a result, the Company no
longer reports its pro rata share of the earnings or loss of these entities.
Liquidity and Capital Resources
The Company's cash balances and liquidity throughout the quarter and six months
ended September 30, 2000 were adequate to meet operating needs. Net cash used by
operating activities was $1,584,903 and $1,238,176 for the quarter and six
months ended September 30, 2000 versus net cash provided by operating activities
of $387,868 for the comparable prior year quarter and cash used by operating
activities of $400,399 for the six months ended September 30, 1999. Cash
requirements throughout the first half of the year were funded from existing
cash balances, cash proceeds from the exercise of warrants and employee stock
options and from borrowings on the Company's revolving lines-of-credit.
During the first six months of the year the Company experienced a significant
increase in its working capital requirements as the result of higher levels of
inventories and accounts receivable which rose $2,697,416 and 775,574 during the
first half of the year. The increase in inventories was driven by the launch of
new customer production orders and sporadic shortages of selected electronic
components in the Company's electronic products segment and higher revenue
levels generally. The Company expects inventory levels to decline throughout the
remainder of the fiscal year. The increase in accounts receivables is primarily
attributable to record revenue levels during the first six months. The Company
funded its working capital requirements from a combination of cash balances on
hand, increases in trade accounts payable balances and borrowings on its
revolving lines-of-credit. The Company believes that existing cash balances and
available bank facilities are sufficient to fund its current and anticipated
operations.
During the first half of the year the Company invested $1,426,005 for the
purchase of additional manufacturing equipment. Over the remainder of the fiscal
year the Company expects to invest a similar amount on additional equipment to
improve its manufacturing capability and capacity, which it expects to fund from
a combination of existing cash and borrowings of long-term debt.
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, 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 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.
<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 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. Long-term
debt obligations have fixed interest rates and the Company's revolving
line-of-credit have variable rates of interest indexed to the prime rate.
Interest rates on these instruments approximate current market rates as of
September 30, 2000.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial data schedule
(b) Reports on Form 8-K
None
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: October 24, 2000 By: /s/Donald A. French
Donald A. French
Treasurer and Secretary
(Principal Financial and
Accounting Officer)
<PAGE>
