FORM 10Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________.
Commission file number 0-16323
ELECTROSOURCE, INC.
(Exact name of Registrant as specified in its charter.)
Delaware 742466304
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2809 IH 35 South
San Marcos, Texas 78666
(Address of principal (Zip Code)
executive offices)
(512)753-6500
(Registrant's telephone number, including area code)
__________________________________________
(Former name, former address and former fiscal year,
if changes since last report)
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 __
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes __ No __
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date: 3,843,746 shares as of November 11, 1996.
INDEX TO FINANCIAL STATEMENTS
September 30, 1996
Electrosource, Inc. Commission file number 0-16323
Condensed Balance Sheets at September 30, 1996 (Unaudited)
and December 31, 1995......................................... Page 3
Condensed Statements of Operations for the three and nine months
ended September 30, 1996 and 1995 (Unaudited)................. Page 4
Condensed Statements of Cash Flows for the nine months ended
September 30, 1996 and 1995 (Unaudited)........................ Page 5
Notes to Condensed Financial Statements........................... Page 6
Managements' Discussion and Analysis.............................. Page 9
Exhibits to Form 10Q.............................................. Page 14
Index to Exhibits ................................................ Page 15
Part I - Financial Information
Item I. Financial Statements
Electrosource, Inc.
Condensed Balance Sheets
September 30, 1996 December 31,
(Unaudited) 1995
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,260,282 $ 2,083,032
Trade receivables 203,745 1,535,749
Inventories 215,461 404,755
Prepaid expenses and other assets 197,084 245,133
TOTAL CURRENT ASSETS 1,876,572 4,268,669
PLANT AND EQUIPMENT (net of accumulated
depreciation of $2,327,176 in 1996 and
$1,538,899 in 1995) 5,320,711 6,009,334
INTANGIBLE ASSETS (net of accumulated
amortization of $2,358,813 in 1996 and
$1,613,973 in 1995) 3,102,747 3,847,587
RESTRICTED CASH 744,824 744,824
OTHER ASSETS 85,039 406,787
TOTAL ASSETS $11,129,893 $15,277,201
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 399,068 $ 876,746
Accrued salaries and employee benefits 165,668 306,579
Other accrued liabilities 716,475 931,341
Deferred revenue 695,353 0
Current portion of capital lease obligations 640,514 598,420
Current portion of convertible notes payable 250,000 0
TOTAL CURRENT LIABILITIES 2,867,078 2,713,086
CONVERTIBLE NOTES PAYABLE 0 8,020,000
TECHNOLOGY LICENSE PAYABLE 1,481,018 2,178,014
CAPITAL LEASE OBLIGATIONS (less current
portion) 689,328 1,126,252
SHAREHOLDERS' EQUITY
Common stock par value $1.00 per share,
$.10 per share (pre-reverse split);
authorized 50,000,000 shares; issued
and outstanding: 3,843,746 in 1996 and
30,137,826 in 1995 (pre-reverse split) 3,843,746 3,013,782
Warrants 0 0
Paid in capital 42,893,501 33,685,800
Accumulated deficit (40,644,778) (35,459,733)
6,092,469 1,239,849
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $11,129,893 $15,277,201
See notes to condensed financial statements.
Electrosource, Inc.
Condensed Statements of Operations (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
Revenues
Battery sales $ 173,240 $ 408,876 $ 574,773 $ 961,216
Project revenue 126,660 11,000 187,750 889,593
Miscellaneous income 2,365,535 0 2,365,535 0
License fees 0 0 0 1,000,000
Interest income 31,410 7,401 72,953 77,905
2,696,845 427,277 3,201,011 2,928,714
Costs and expenses
Manufacturing 952,086 2,178,736 2,616,640 6,968,825
Selling, general and
administrative 735,944 2,655,287 2,294,635 5,021,579
Research and development 395,189 561,453 1,396,877 3,168,014
Technology license
and royalties 25,000 74,705 75,000 224,115
Depreciation and
amortization 523,991 284,004 1,565,898 552,387
Interest expense 47,467 169,678 265,111 339,425
Loss on disposal of
equipment 0 0 171,895 0
2,679,677 5,923,863 8,386,056 16,274,345
Income (loss) before
income taxes 17,168 (5,496,586) (5,185,045) (13,345,631)
Income taxes (foreign) 0 0 0 120,000
Net income (loss) $ 17,168 $(5,496,586) $(5,185,045) $(13,465,631)
Net income (loss) per
common share $ .00 $ (2.53) $ (1.44) $ (7.11)
Average common shares
outstanding 3,829,031 2,170,579 3,607,548 1,894,623
See notes to condensed financial statements.
Electrosource, Inc.
Condensed Statements of Cash Flows (Unaudited)
Nine Months Ended September 30,
1996 1995
OPERATING ACTIVITIES
Net loss $(5,185,045) $(13,465,631)
Adjustments to reconcile net loss to
net cash used in operating activities:
Equity instruments issued for
consulting services 98,600 1,468,800
Depreciation 796,883 552,387
Amortization of intangible assets 781,101 141,615
Interest expense paid in Common Stock 105,103 0
Loss on disposal of equipment 171,895 0
Non-cash accruals 81,300 0
Non-cash decrease in deferred revenue 0 (1,000,000)
Changes in operating assets and
liabilities:
Decrease in trade receivables 332,004 776,857
(Increase) decrease in inventories 189,294 (561,557)
(Increase) decrease in prepaid 48,048 (334,062)
expenses and other assets
Increase (decrease) in accounts
payable, accrued salaries and
employee benefits and other
accrued liabilities (827,282) 606,272
Increase in deferred revenue 695,353 0
NET CASH USED IN OPERATING
ACTIVITIES (2,712,746) (11,815,319)
INVESTING ACTIVITES
Purchases of property and equipment (262,155) (3,245,442)
CASH USED IN INVESTING ACTIVITIES (262,155) (3,245,442)
FINANCING ACTIVITIES
Payments on capital lease obligations (394,830) (136,180)
Proceeds from issuance of common stock, net 2,546,981 5,030,510
Proceeds from convertible notes payable 0 8,075,000
Proceeds from sale and leaseback
transactions 0 1,600,851
Increase in restricted cash 0 (744,824)
CASH PROVIDED BY FINANCING ACTIVITIES 2,152,151 13,825,357
DECREASE IN CASH AND CASH EQUIVALENTS (822,750) (1,235,404)
Cash and cash equivalents at beginning
of period 2,083,032 2,193,290
CASH AND CASH EQUIVALENTS AT END OF PERIOD 1,260,282 957,886
See notes to condensed financial statements.
Electrosource, Inc.
September 30, 1996
Item 1. Notes to Condensed Financial Statements (Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments,
consisting of normal recurring accruals, considered necessary for a fair
presentation have been included. These interim financial statements should be
read in conjunction with the financial statements and notes thereto included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1995,
and are not necessarily indicative of results for the entire year.
Certain reclassifications have been made to the 1995 financial statements to
conform with the 1996 presentation.
NOTE B - INVENTORIES
September 30, December 31,
1996 1995
Raw materials $157,546 $289,725
Work In Progress 4,000 80,729
Finished Goods 53,915 34,301
$215,461 $404,755
NOTE C - PROPERTY AND EQUIPMENT
September 30, December 31,
1996 1995
Office Equipment $ 754,350 $ 739,677
Production Equipment 4,206,838 4,157,700
Lab Equipment 1,207,215 1,182,472
Leasehold Improvements 1,479,484 1,468,384
7,647,887 7,548,233
Less: Accumulated depreciation (2,327,176) (1,538,899)
and amortization
Total Property and Equipment $5,320,711 $6,009,334
NOTE D - CONVERTIBLE NOTES PAYABLE
Convertible Notes Payable consist of the following:
September 30, December 31,
1996 1995
Convertible Notes - 10% $ 250,000 $ 250,000
Convertible Notes - 5% - 3,990,000
Convertible Notes - 8% - 3,780,000
250,000 8,020,000
Less Current Maturities (250,000) 0
Total Convertible Notes Payable $ 0 $8,020,000
NOTE D - CONTINUED
In April 1995, the Company issued $6,000,000 of 10% Convertible Debentures
(the "April 1995 Debentures") resulting in net proceeds to the Company of
$5,375,000. The April 1995 Debentures are convertible into Common Stock at
a conversion price equal to 80% of the average closing price of the Common
Stock for the five business days immediately preceding such time as the
debentures are converted and mature on April 5, 1997. Interest is payable
quarterly. In addition, warrants to purchase 5,424 shares of Common Stock
were issued at a price of $36.875 per share exercisable until April 5, 2000.
As of September 30, 1996, April 1995 Debentures with a total principal amount
of $5,750,000 had been converted into 379,548 shares of Common Stock.
In October 1994, the Company entered into a 5% Convertible Promissory Note
with Mitsui Engineering and Shipbuilding Co.,Ltd. ("MES") for $3,800,000
maturing in October 2004, with interest due and payable semi-annually in the
form of additional notes payable. A note payable in the amount of $190,000
was issued in October 1995 for interest for the year then ended with the same
terms and conditions as the original note. In March 1996, MES applied
$1,000,000 of its Convertible Notes Payable to pay $1,000,000 of outstanding
license fees to the Company (See Note G). A Replacement Note for $2,800,000
was issued at that time with the same terms and conditions as the original
note. Concurrently, a note payable in the amount of $73,150 was issued for
accrued interest on all notes (principal and interest) through the period
ended March 6, 1996. In July 1996, MES converted the Notes (principal and
interest) into 81,841 shares of Common Stock at a conversion price of $38.00
per share.
In November 1995, the Company issued $3,780,000 of 8% Convertible Debentures
(the "November 1995 Debentures") resulting in net proceeds to the Company of
$3,477,600. The November 1995 Debentures and related accrued interest were
convertible into Common Stock at a price equal to 75% of the average closing
price of the Common Stock for the five business days immediately preceding
the respective conversion date. In addition, warrants to purchase 5,670
shares of Common Stock at a price of $15.60 per share, exercisable until
November 10, 1997, were issued to an agent of the holders of the November
1995 Debentures. During the quarter ended March 31, 1996, all of the
November 1995 Debentures with a principal amount of $3,780,000 and accrued
interest of $47,216 were converted into 402,986 shares of Common Stock.
NOTE E - COMMON STOCK
During the quarter ended March 31, 1996, the Company sold 100,000 shares of
Common Stock which resulted in net proceeds to the Company of $898,231.
During the quarter ended June 30, 1996, the Company sold 192,084 shares of
Common Stock which resulted in net proceeds to the Company of $1,648,750.
In addition, in connection with the conversion of $3,827,216 of principal
and accrued interest associated with the November 1995 Debentures, the
Company issued 402,986 shares of Common Stock (See Note D).
On June 26, 1996, the Company's shareholders approved an amendment to the
Company's Restated Certificate of Incorporation that effected a one-for-ten
reverse stock split. The Company amended its Certificate of Incorporation
on July 22, 1996, to effect a one-for-ten reverse stock split. Pursuant to
this amendment, each ten shares of Common Stock outstanding immediately
prior to the reverse stock split ("Old Shares") were reclassified as one
share of new Common Stock ("New Shares"). The par value per share of the
Common Stock has correspondingly increased from $0.10 per share to $1.00 per
share as a result of the reverse stock split. No fractional New Shares were
issued as a result of the reverse stock split. In lieu thereof, each
shareholder whose Old Shares were not evenly divisible by ten received one
additional New Share for the fractional New Share that such shareholder would
otherwise be entitled to have received as a result of the reverse stock
split. As a result of the reverse stock split, the Company has
approximately 45,000,000 shares of Common Stock which are unissued and
unreserved and 10,000,000 shares of unissued Preferred Stock as of November 1,
1996. All references in the financial statements to average numbers of
shares outstanding and related prices and applicable share and per share
amounts have been restated to retroactively reflect the reverse stock split.
NOTE F - MISCELLANEOUS INCOME
In July 1996, the Company received a $3,000,000 payment from Chrysler
Corporation ("Chrysler"). This payment was compensation for continued
capacity maintenance and ramp-up costs incurred by the Company in relation
to its role as a supplier to the automaker for its electric vehicle EPIC
Minivan Program ($2,365,000) and for various engineering, research and
development (ER&D) efforts ($635,000). Accordingly, $2,365,000 was recorded
as miscellaneous income in the third quarter of 1996 and $635,000 was
recorded as deferred revenue which will be recognized as income as the ER&D
tasks are performed.
NOTE G - LICENSE FEES
During 1994, the Company and MES signed a Distribution Agreement whereby MES
agreed to pay the Company $2,000,000 for distribution rights of the Horizon
battery in Japan ($1,000,000 in 1994 and the remaining $1,000,000 in 1995)
and $3,000,000 if MES elected to exercise its option for a manufacturing
license. In January 1996, MES terminated the Distribution Agreement. In
March 1996, the Company and MES executed a Termination Agreement. In
accordance with the terms of the Agreement, MES applied $1,000,000 of its
Convertible Notes Payable to pay $1,000,000 of outstanding license fees to
the Company (See Note D). In July 1996, MES converted the remainder of its
Convertible Notes Payable ($3,063,150) and accrued interest ($46,798), at
$38.00 per share, into 81,841 shares of Common Stock.
NOTE H - LIQUIDITY
The Company has not generated sufficient cash flow from battery sales and
project revenue to fund operations for the nine months ended September 30,
1996. During the six months ended June 30, 1996, the Company sold 292,084
shares of Common Stock which resulted in net proceeds to the Company of
$2,546,981. No additional capital was raised in the quarter ended
September 30, 1996. In July 1996, the Company received a $3,000,000 payment
from Chrysler as compensation for continued capacity maintenance, engineering,
research and development (ER&D) efforts and ramp-up costs incurred by the
Company in relation to its role as a supplier to the automaker for its
electric vehicle EPIC Minivan Program. Additionally, the Company has finalized
project agreements with various domestic and international customers (Black &
Decker, the U. S. Army Tank-Automotive and Armaments Command, Lockheed Martin,
Fiat, Blue Bird Bus Corporation, the Defense Advanced Research Project Agency
and two large original equipment manufacturers that have requested
confidentiality) to design and provide prototype batteries for a variety of
electric vehicle and non-electric vehicle applications. Management expects
revenue and corresponding cash flow from such customers to increase from
current levels beginning in the fourth quarter of 1996.
As of October 31, 1996, the Company has approximately $825,000 of unrestricted
cash available. Management is continuing its efforts to control costs and
believes that it has sufficient cash to continue operations at current levels
through the fourth quarter of 1996. However, it will be necessary to raise
additional financing before the end of the first quarter of 1997 to sustain
operations and fund anticipated growth. The Company has historically been
able to raise funds on a repeated basis to sustain operations. Management is
currently attempting to raise additional funds, primarily in the form of
strategic partner relationships and license agreements with customers and
organizations that can aid penetration of target markets and can assist
financially; however, there can be no assurance that such funding can be
obtained on favorable terms to the Company, if at all.
Results of Operations:
Revenues. The Company had battery sales of approximately $173,000 and
$575,000 for the three and nine months ended September 30, 1996, as compared
to $409,000 and $961,000 for the three and nine months ended September 30,
1995. The decrease in revenue during 1996 is primarily due to decreases in
battery sales to Chrysler Corporation (Chrysler). Approximately 55% and 41%
of 1996 and 1995 battery sales, respectively, were from Chrysler. Battery
sales to Chrysler in 1996 were to fill orders placed in accordance with the
production purchase order placed in December 1995. Battery sales under this
order and from others currently testing the battery are expected to slightly
increase through the first quarter of 1997 and significantly increase in
late 1997. However, the timing of receipt of orders from Chrysler under this
order is uncertain and cannot be assured due to market uncertainties caused
by revised mandates established by the California Air Resources Board for zero
emission vehicle sales which have resulted in a delay in the production of
electric vehicles.
The Company had project revenue of approximately $127,000 and $188,000 for the
three and nine months ended September 30, 1996, as compared to $11,000 and
$890,000 for the three and nine months ended September 30, 1995.
Approximately $115,000 of project revenue in 1996 was generated from Chrysler
for various environmental and other tests performed on the Horizon battery.
The remainder of project revenue generated in 1996 was from project agreements
to provide prototype batteries to Black & Decker for a walk-behind lawnmower
and the U.S. Army Tank-Automotive and Armaments Command (TACOM) for a U.S.
Army tank power supply. Prototype batteries were delivered to these customers
in the third quarter of 1996. Project revenue of $100,000 generated during
1995 was from a program to perform a Preliminary Design Review for a potential
manufacturing facility in India. This review was concluded in 1995 and work
under this program was terminated. The remaining project revenue generated
during 1995 was from an agreement with Chrysler for the retrofit of the Horizon
battery for the NS Minivan Program. This agreement concluded in the first
quarter of 1995 and led to a production purchase order from Chrysler in
December 1995. This order, which called for up to $80 million in battery sales
cumulatively over the next few years, is subject to Chrysler's right to
withhold or cancel orders. Battery sales to date under this order have been
less than originally expected and it now appears that the amount and timing
of sales under this purchase order is uncertain. In July 1996, the Company
finalized a $635,000 project agreement with Chrysler to provide further
research and testing of the Horizon battery. Work under this project will
begin in the fourth quarter of 1996. The Company has delivered prototype
batteries to certain customers (Black & Decker and TACOM), and is finalizing
project agreements to build and/or is designing and building prototype
batteries for other domestic and international customers. As a result of these
efforts, management expects project revenue from such agreements to increase
from current levels beginning in the fourth quarter of 1996.
In July 1996, the Company received a $3,000,000 payment from Chrysler. This
payment was compensation for continued capacity maintenance and ramp-up costs
incurred by the Company in relation to its role as a supplier to the automaker
for its electric vehicle EPIC Minivan Program ($2,365,000) and for various
engineering, research and development (ER&D) efforts ($635,000). Accordingly,
$2,365,000 was recorded as miscellaneous income in the third quarter of 1996
and $635,000 was recorded as deferred revenue which will be recognized as
income as the ER&D tasks are performed.
License fees in 1995 represent final license payments from Mitsui Engineering
and Shipbuilding Co., Ltd. ("MES") in accordance with a distribution agreement
which was terminated in 1996.
Costs and Expenses. Total costs and expenses significantly decreased
during the three and nine months ended September 30, 1996 as compared to the
three and nine months ended September 30, 1995, as a result of management's
implementation of cost control measures to conserve cash and to reduce expenses
to a level more commensurate with sales. Generally, total costs were higher
in 1995 as compared to 1996 as the Company began to purchase machinery and
implement production processes to manufacture the Horizon battery in
commercial quantities and increased the sales, marketing and administrative
staffs accordingly. Selling, general and administrative costs in the three
months ended September 30, 1995 included a charge for the issuance of 136,000
shares of unregistered, restricted shares of Common Stock which were valued
at $1,468,800 and charged to expense, associated with investor/public relations
services which are being provided by a consulting firm over a two-year period.
Staffing has been reduced during 1996 throughout the Company while still
increasing the capacity of the San Marcos plant through upgrades and further
refinement of the production processes. Manufacturing costs remained high
as a percentage of battery sales during 1996 due to the fact that the Company
has maintained the minimum production level necessary to demonstrate the
ability to manufacture the Horizon battery in commercial quantities; however
battery sales of current battery models have been less than expected.
Management expects manufacturing costs to decrease as a percentage of battery
sales when volume production begins, which is uncertain based on current
market conditions. Management is continuing its efforts to control costs and
reduce monthly cash expenditures.
Even though total costs and expenses decreased in 1996 compared to 1995,
certain non-cash expenses significantly increased during the three and nine
month periods ending September 30, 1996 compared to the corresponding periods
in 1995. Depreciation and amortization costs were $1,578,000 for the nine
months ended September 30, 1996 compared to $694,000 for the same period in
1995 due to the fact that a significant amount of equipment and intangibles
were acquired during 1995 and have been depreciated/amortized for the entire
period in 1996 compared to a shorter time period during 1995. In addition,
approximately $172,000 of equipment which was no longer in use was disposed
of in the first quarter of 1996.
Liquidity and Capital Resources. As of November 11, the Company had sold
292,084 shares of Common Stock which resulted in net proceeds to the Company
of $2,546,981 during 1996. These funds have been used to maintain production
capabilities and marketing requirements and research and development
expenditures to further develop and refine the Horizon battery. In July 1996,
the Company received a $3,000,000 payment from Chrysler for compensation for
continued capacity maintenance, engineering, research and development effort
(ER&D) and ramp-up costs incurred by the Company in relation to its role as a
supplier to the automaker for its electric vehicle EPIC Minivan Program.
As of September 30, 1996, several working capital items have changed
significantly since December 31, 1995. Accounts receivable have decreased
approximately $1,500,000 primarily due to the application by MES of $1,000,000
of its Convertible Notes Payable to satisfy its obligation to pay $1,000,000 of
outstanding license fees to the Company. All other accounts receivable
outstanding as of December 31, 1995 have been collected. Total current
liabilities have slightly increased as of September 30, 1996 primarily due to
the receipt of approximately $700,000 of advance payments from Chrysler for
ER&D efforts which will be performed in late 1996 and early 1997.
Additionally, trade accounts payable have decreased by approximately $475,000
due to payments made in the first nine months of 1996 of outstanding
liabilities associated with increased expenditures incurred in 1995 to increase
production capacity of the San Marcos plant.
As of October 31, the Company had approximately $825,000 of unrestricted cash
available. Management is continuing its efforts to control costs and believes
it has sufficient cash to continue operations through the fourth quarter of
1996 at current levels based on expected cash flow from battery sales and
project revenue. Therefore, it will be necessary to raise additional financing
by the end of the first quarter of 1997 to sustain operations and fund
anticipated growth. The Company has historically been able to raise funds on
a repeated basis to sustain operations. Management is currently attempting to
raise additional funds, primarily in the form of strategic partner
relationships and license agreements with customers and organizations that can
aid penetration of target markets and can assist financially; however, there
can be no assurance that such funding can be obtained on favorable terms to the
Company, if at all.
On June 26, 1996, the Company's shareholders approved an amendment to the
Company's Restated Certificate of Incorporation that effected a one-for-ten
reverse stock split. The Company amended its Certificate of Incorporation on
July 22, 1996 to effect a one-for-ten reverse stock split. Pursuant to this
amendment, each ten shares of Common Stock currently outstanding was
reclassified as one share of new Common Stock. As a result of the reverse
stock split, the Company has approximately 45,000,000 shares of Common Stock
which were unissued and unreserved and 10,000,000 shares of unissued Preferred
Stock as of November 11, 1996.
From time to time, the Company may publish forward-looking statements relating
to such matters as anticipated financial performance, business prospects,
technological development, new products, research and development activities
and similar matters. The Private Securities Litigation Reform Act of 1995
provides a safe harbor for forward-looking statements. In order to comply
with the terms of the safe harbor, the Company notes that a variety of factors
could cause the Company's actual results and experience to differ materially
from the anticipated results or other expectations expressed in the Company's
forward-looking statements. The risks and uncertainties that may affect the
operations, performance, development and results of the Company's business
primarily include delays in shipment or cancellation of orders, timing of
future orders, customer reorganization, fluctuations in demand primarily
associated with governmental mandates for the sale of zero emission
vehicles and the ability to successfully commercialize the Horizon battery.
Part II - Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults on Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Consulting Agreement between Electrosource, Inc., and Rick Blanyer dated
September 1, 1996.
27. Financial Data Schedule.
(b) Reports on Form 8-K.
Reports on Form 8-K filed during the quarter ended September 30, 1996,
were:
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 thereto duly authorized.
Date: November 14, 1996 ELECTROSOURCE, INC.
/s/
Mary Beth Koenig
Chief Accounting Officer
Treasurer/Controller
/s/
Michael G. Semmens
Chairman, President
and Chief Executive Officer
Form 10-Q
Securities and Exchange Commission
Washington, D.C. 20549
EXHIBITS TO
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended Commission file
September 30, 1996 Number 0-16323
ELECTROSOURCE, INC.
(Exact name of Registrant as specified in its charter)
Delaware 742466304
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2809 IH 35 South
San Marcos, Texas 78666
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including
area code: (512) 753-6500
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $1.00 per share
INDEX TO EXHIBITS
10.1 Consulting Agreement between Electrosource, Inc., and Rick
Blanyer, dated September 1, 1996.
27. Financial Data Schedule.
ELECTROSOURCE, INC.
CONSULTING AGREEMENT
96-C-093
THIS CONSULTING AGREEMENT (the "Agreement"), made effective
the 1st day of September, 1996, is between ELECTROSOURCE, INC.
("Electrosource"), a Delaware corporation, having its principal
offices at 2809 HI 35 South, San Marcos, Texas, 78666, U.S.A. and
Richard J. Blanyer (Consultant) having his place of business at
Route 2, Box 171AC, Smithville, Texas 78957.
W I T N E S S E T H:
WHEREAS, Consultant possesses knowledge and experience in
battery technology, and related fields; and
WHEREAS, Electrosource desires the assistance of Consultant,
NOW, THEREFORE, in consideration of the promises and the
mutual agreements hereinafter contained, the parties hereto agree
as follows:
1. Term
1.1 Electrosource hereby engages Consultant as
independent contractor for a term commencing on
September 1, 1996 and ending on December 31, 1997.
1.2 Electrosource shall have the right to extend this
Agreement by written modification at the same rate of
compensation provided for in Section 3 by written
notice not less than two (2) weeks prior to the last
day of the initial term of this Agreement or Amendment
to same.
1.3 Either party may cancel this Agreement at its sole
discretion with ten (10) days written notice to the
other. Electrosource's sole liability will be for
hours worked at the rate specified, and for reasonable
travel or business expenses incurred in accordance with
Section 4.
1.4 Notwithstanding any other provision of this
Agreement, if Consultant breaches any of its
provisions, Electrosource may terminate this Agreement
immediately upon written notice to Consultant.
1.5 Upon termination of this Agreement in accordance
with any of its provisions, Electrosource shall have no
obligation to make further payments to Consultant for
services performed after notice is received by
Consultant. Notice may be hand carried or sent by
certified mail. Notice is effective upon receipt or
within five (5) days of mailing, whichever is earlier.
2. Duties
Consultant shall use its best efforts on behalf of
Electrosource to assist Electrosource with respect to all
matters pertaining to battery development, and related
matters. Consultant shall not, during the term of this
Agreement, accept any other engagement as consultant, or
enter into any employment relationship, with respect to
which any portion of his duties would entail assisting any
other entity in the field of battery development or battery
technology. The Consultant agrees not to perform work for a
competitor of Electrosource, during the term of this
Consulting Agreement. Consultant shall provide two days of
time per week to perform such advising and consulting duties
as may be assigned from time to time by Electrosource by
William F. Griffin, the Executive Vice President/Marketing
or such other person as is designated from time to time by
Electrosource. Such consulting services shall be provided
at the offices of Electrosource. Invoices shall be paid
within 15 days of receipt.
3. Compensation
As full compensation for the services which Consultant
renders to Electrosource under and in accordance with the
terms of this Agreement, Electrosource will pay to
Consultant $450.00 per day for two (2) days per week.
Invoices Consultant submits to Electrosource for services
rendered shall include the heading "a professional
consulting firm or individual."
4. Expenses
Electrosource shall reimburse Consultant for all proper and
reasonable expenses incurred by him pursuant to Consultant's
duties hereunder to the extent such expenses are approved in
writing in advance by Electrosource. Such expenses may
include necessary actual expenses of out-of-town travel
costs (e.i. outside of Austin or San Marcos),
communications, hotel accommodations, meals and the like
provided that Consultant shall keep receipts and provide
Electrosource an accurate and complete accounting of all
such expenses so incurred, and shall obtain Electrosource's
prior written consent to any such expenses. Reimbursement
of expenses will be issued within ten (10) days of receipt
of complete accounting, with receipts, of same.
5. Confidential and Proprietary Information
5.1 The parties agree that from time to time during
performance of this Agreement confidential or
proprietary technical or business information may be
provided either orally or in written form to
Consultant. Such information will be specifically
designated by Electrosource as "confidential" and/or
"proprietary." Consultant shall keep confidential all
such designated information furnished by Electrosource
and safeguard same from disclosure or use by any
unauthorized individuals for any purpose other than in
performance of this Agreement.
5.2 Consultant shall restrict the disclosure of
Electrosource's confidential and/or proprietary
technical and business information to those of his
employees who need to know the same for purposes of
carrying out this contract. Consultant shall advise
all such employees of Consultant's obligations of
confidentiality under this Agreement.
5.3 In event of termination or cancellation of this
Agreement for any reason whatsoever, Consultant agrees
promptly to deliver to Electrosource all written
information of any sort made available to Consultant or
created by it under the terms of this Agreement.
5.4 Work product created by Consultant shall under
this agreement become the confidential proprietary
property of Electrosource. Consultant agrees to treat
such work product in the same manner as confidential
proprietary information of Electrosource. Consultant
agrees that any remedy at law would be inadequate or a
violation of this provision; consequently, Consultant
agrees that Electrosource is entitled to obtain an
injunction against Consultant's disclosure of any
confidential proprietary information.
5.5 Neither expiration of this Agreement nor its
earlier termination for any reason shall release
Consultant from its obligations under this Section 5.
6. Classified Information
6.1 Except in connection with authorized visits,
classified materials shall not be possessed by the
Consultant off the premises of the Company. The
Company shall not furnish classified material to the
Consultant at any other location than the premises of
the Company and performance of the consulting services
by the Consultant shall be accomplished at the premises
of the Company; and classification guidance will be
provided by the Company.
6.2 The Consultant and his certifying employees shall
not disclose classified information to unauthorized
persons.
6.3 Electrosource shall brief the Consultant as to the
security controls and procedures applicable to the
Consultant's performance.
7. Works of Authorship and Inventions
7.1 Consultant shall convey to Electrosource all
rights to each work of authorship, whether or not
patentable, which is conceived, developed, written, or
reduced to practice by Consultant in performing the
requirements of this Agreement. Consultant agrees to
execute all necessary patent and copyright
applications, assignments and other instruments at
Electrosource's expense and to give all lawful and
proper testimony in aid of Electrosource obtaining and
maintaining in its name full and complete patent
protection on any such invention. Before final payment
is made under this Agreement, Consultant shall furnish
Electrosource complete information with respect to any
invention and all work product subject to this Section.
7.2 Consultant hereby irrevocably appoints each
officer and director of Electrosource as his attorney-
in-fact for purposes of filing any applications or
assignments necessary to properly reflect the sole
ownership by Electrosource of any invention or work of
authorship subject to this Section.
8. Assignment and Subcontracting
Neither this Agreement nor its performance, either in whole
or in part, shall be assigned or subcontracted by Consultant
to a third party or performed by anyone except Richard J.
Blanyer without, in each case, the prior written consent of
Electrosource.
9. No Conflicts
9.1 Consultant represents and warrants that:
(a) He has full authority to enter into this
Agreement and to perform his obligations
hereunder; and
(b) Performance by Consultant of his
obligations hereunder will not be in conflict with
any other of his obligations.
9.2 Consultant shall advise Electrosource's General
Counsel of all clients under similar agreement to him
within five (5) days after execution of this Agreement.
Consultant shall notify Electrosource within five days
of any subsequent contract for additional clients.
9.3 Notwithstanding any other provision of this
Agreement, Electrosource shall have the right to
terminate this Agreement if, in Electrosource's sole
opinion, a conflict of interest rises or may arise
between Consultant's representation of Electrosource
and its representation of its other clients. Such
termination shall become effective upon five (5) days
written notification by Electrosource.
10. Independent Contractor
Consultant's relationship to Electrosource shall be solely
to provide personal services on an independent contractor
basis. In this capacity, Consultant will not be a regular
employee of Electrosource and will not be entitled to
worker's compensation coverage, unemployment insurance, or
any other type or form of insurance or benefit normally
provided by Electrosource for its employees, and
Electrosource will not be responsible for withholding
federal income or social security taxes from the fees paid
to Consultant. The Consultant will be solely responsible
for reporting and paying all Federal, State and Local taxes
arising from his performance of this Agreement. The
consultant is generally free to perform the services
hereunder in any manner desired, subject to satisfactory
completion of the subject task.
11. Notice
A notice communicated to Electrosource shall be sent to
James M. Rosel, Vice President, General Counsel,
Electrosource, Inc., 2809 IN 35 South, San Marcos, Texas
78666, or to such other place or places as Electrosource by
notice in writing shall specify. Any notice to be served
shall be sent to Richard Blanyer at Rt. 2, Box 171AC,
Smithville, Texas 78957. Any notice to be served shall be
deemed to be served if the same be sent by registered or
certified mail through the United States mail, addressed to
the party on which service is to be effected at the address
stated in the immediately preceding sentences and shall be
deemed to have been received on the day indicated on the
return receipt relating thereto.
12. Binding Agreement
This Agreement shall be binding upon and inure to the
benefit of the successors and assigns of Electrosource and
to the successors and assigns of Consultant.
13. Modification
This Agreement supersedes all prior agreements or
understandings between Consultant and Electrosource relating
to the subject matter hereof, and no change, termination or
attempted waiver of any of the provisions hereof shall be
binding unless reduced to writing and signed by duly
authorized officers of Electrosource and by Consultant.
14. Construction
This Agreement shall be construed in accordance with the
laws of the State of Texas. Consultant hereby submits to
the continuing jurisdiction of the laws and the courts of
the State of Texas in the prosecution of any interpretation
or dispute under or arising out of this Agreement. Should
any portion of this Agreement be adjudged or held to be
invalid, unenforceable or void, such judgment shall not have
the effect of invalidating or voiding the remainder of this
Agreement, and the parties hereto agree that the portion to
be held invalid, unenforceable or void shall, if possible be
deemed amended or reduced in scope or to otherwise be
stricken from this Agreement to the extent required for the
purposes of validity and enforcement thereof.
IN WITNESS WHEREOF, this Agreement is dated and is effective
the date and year first above written.
ELECTROSOURCE, INC. CONSULTANT
By: /s/ By: /s/
James M. Rosel Richard J. Blanyer
Vice President, General Counsel
Date: 10-3-1996 Date: 01 Oct 96
SOCIAL SECURITY NUMBER OR
FEDERAL IDENTIFICATION NUMBER:
###-##-####
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