<PAGE> 1
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
For the Six Months Ended Commission File Number
June 30, 1996 00-17303
VECTOR AEROMOTIVE CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA 33-025-4334
(State of Incorporation) (I.R.S. Employer Identification No.)
7601 CENTURION PARKWAY
JACKSONVILLE, FLORIDA 32256
(Address of principal executive offices)
(904) 645-0505
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 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[ ]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Common Stock, $.01 par value per share; 53,609,387 shares
outstanding as of August 6, 1996
<PAGE> 2
Vector Aeromotive Corporation
Condensed Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- ------------
<S> <C> <C>
Assets
- ---------------------------------------------
Current assets:
Cash and cash equivalents $ 3,400 $ 12,370
Inventories 1,207,757 801,560
Prepaid expenses 84,201 279,306
Accounts and other receivable 15,251 -
----------- -----------
Total current assets 1,310,609 1,093,236
Property and equipment 813,345 618,083
Other assets 179,594 195,250
----------- -----------
$ 2,303,549 $ 1,906,569
=========== ===========
Liabilities and Stockholders' Equity
- ---------------------------------------------
Current liabilities:
Accounts payable $ 852,794 $ 1,498,667
Accrued expenses 487,443 632,891
Loans payable to related party 178,200 1,178,200
Customer deposits 25,000 40,000
----------- -----------
Total current liabilities 1,543,437 3,349,758
----------- -----------
Contingencies - Note 4
Total liabilities 1,543,437 3,349,758
Stockholders' equity
Common stock, par value $.01 per share, 536,179 426,646
600,000,000 shares authorized; issued and
outstanding: 53,609,387 in 1996 and 42,664,699
in 1995
Capital in excess of par value 36,778,117 31,873,608
Accumulated deficit (36,554,184) (33,743,443)
----------- -----------
Total stockholders' equity 760,112 (1,443,189)
----------- -----------
$ 2,303,549 $ 1,906,569
=========== ===========
</TABLE>
See accompanying notes to unaudited condensed financial statements.
1
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Vector Aeromotive Corporation
Condensed Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
------------------------ ------------------------
<S> <C> <C> <C> <C>
Sales $ 470,891 - $ 620,361 -
Cost of sales 458,225 - 625,638 -
------------------------ ------------------------
Gross profit (loss) 12,666 - (5,277) -
Costs and expenses:
Manufacturing overhead 245,238 440,137 -
General and administrative 908,842 771,648 1,521,733 1,396,163
Research and development 449,593 948,588 929,237 1,733,769
------------------------ ------------------------
Total costs and expenses 1,603,673 1,720,236 2,891,107 3,129,932
------------------------ ------------------------
Operating loss (1,591,006) (1,720,236) (2,896,384) (3,129,932)
Other income (expense)
Interest and other income 49,641 107,467 85,643 188,214
------------------------ ------------------------
Net loss ($1,541,366) ($1,612,769) ($2,810,741) ($2,941,718)
======================== ========================
Net loss per share ($0.03) ($0.04) ($0.05) ($0.07)
======================== ========================
Weighted average common shares
outstanding 53,477,754 42,379,699 52,034,578 40,851,921
======================== ========================
</TABLE>
See accompanying notes to unaudited condensed financial statements.
2
<PAGE> 4
Vector Aeromotive Corporation
Condensed Statement of Shareholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Common Stock
---------------------- Capital in Excess Accumulated
Shares Amount of Par Value Deficit Total
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 42,664,699 $426,646 $31,873,608 ($33,743,443) ($1,443,189)
Issuance of shares for cash 10,000,000 100,000 4,604,733 4,704,733
Exercise of stock options and
warrants 603,300 6,033 128,276 134,309
Issuance of common stock as
payment of consulting fees 350,000 3,500 171,500 175,000
Net loss (2,810,741) (2,810,741)
-----------------------------------------------------------------------
Balance, June 30, 1996 53,617,999 $536,179 $36,778,117 ($36,554,184) $ 760,112
=======================================================================
</TABLE>
See accompanying notes to unaudited condensed financial statements.
3
<PAGE> 5
Vector Aeromotive Corporation
Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
June 30, 1996 June 30, 1995
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($2,810,741) ($2,941,718)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 235,015 88,106
Increase (decrease) from changes in
Inventories (406,197) (178,180)
Prepaid expenses and other assets 179,854 220,146
Accounts payable (645,873) (78,888)
Accrued expenses (145,448) 159,573
Customer deposits (15,000) (16,100)
----------- -----------
Net cash from operating activities (3,608,390) (2,747,061)
Cash flows used in investing activities:
Acquisition of property and equipment (239,622) (315,196)
----------- -----------
Net cash used in investing activities (239,622) (315,196)
Cash flows from financing activities:
Proceeds from issuance of common stock
and warrants 4,704,733 6,000,000
Proceeds from exercise of warrants 134,309 (409,092)
Repayment of loan payable to related party (1,000,000) -
----------- -----------
Net cash from financing activities 3,839,042 5,590,908
Net increase (decrease) in cash and cash
equivalents (8,970) 2,528,651
Cash and cash equivalents, beginning of period 12,370 7,809
----------- -----------
Cash and cash equivalents, end of period $ 3,400 $ 2,536,460
=========== ===========
</TABLE>
See accompanying notes to unaudited condensed financial statements.
4
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-Q and Article 10 of the Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements and
should be read in conjunction with the Notes to Financial Statements
contained in the Company's Annual Report on form 10-K for the year
ended December 31, 1995. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating
results for the six months ended June 30, 1996 are not necessarily
indicative of the results that may be expected for the year ended
December 31, 1996.
2. Inventories
The components of inventory consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---------- -----------
<S> <C> <C> <C>
Raw Material $ 644,314 $447,167
Work-in-Progress 214,136 254,393
Finished Goods 349,307 100,000
---------- --------
Total $1,207,757 $801,560
========== ========
</TABLE>
5
<PAGE> 7
3. Stock Offerings
On January 24, 1996, the Company completed a Share Purchase Agreement
with V'Power Corporation which provided for the Company's issuance of
10,000,000 common shares to V'Power Corporation at a price of $.45 per
share. The Share Purchase Agreement also provided that the Company,
in exchange for $500,000, enter into an option agreement whereby the
Company issued to V'Power Corporation an option to acquire 50,000,000
additional common shares at a price of $.45 per share expiring on
January 24, 1997. The Company received cash proceeds under this Share
Purchase Agreement of $4,000,000, which was net of the payment of a
$1,000,000 note payable to V'Power Corporation that was outstanding at
December 31, 1995. V'Power currently owns 37,333,333 shares, or
approximately 70%, of the Company's common stock.
During 1996, the Company issued 603,300 shares upon exercise of
options and warrants outstanding at exercise prices ranging from $.22
to $.38 per share.
Pursuant to an agreement entered into in October 1995, with a
consulting firm, the Company issued 350,000 shares of common stock to
the firm in April 1996.
4. Contingencies
As described below, the Company and Gerald A. Wiegert are parties to
certain legal proceedings which arose principally in connection with
the termination in 1993 of Mr. Wiegert as the Company's Chairman,
President and Chief Executive Officer. The Company is also a party to
certain legal proceedings against persons who acted with Mr. Wiegert
in defiance of the Company's Board of Directors.
In order to gain undisputed access and control over the Company's
facilities, assets and business operations, on March 24, 1993, the
Company filed an action in the Superior Court of California, Los
Angeles County captioned as Vector Aeromotive Corporation v. Gerald A.
Wiegert, requesting declaratory relief and a temporary restraining
order. On September 14, 1993, the court granted the Company's motion
for summary judgment on the declaratory judgment contained in the
amended complaint. Specifically, the court entered an order (i)
declaring that the Board properly exercised its authority to remove
Mr. Wiegert as an officer of the Company; (ii) enjoining Mr. Wiegert
from any further dealing with the property or interests of the
Company; and (iii) calling for an orderly transfer of day-to-day
management of the Company to the
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Board. To date, the Company believes that Mr. Wiegert has complied
with the September 14, 1993 court order by refraining from
participation in Company affairs and by transferring day-to-day
management of the Company to the Board.
Although the court granted summary judgment in favor of the Company on
its claim for declaratory relief and undisputed, physical control of
the Company has been returned to the Board, all other claims in the
Company's amended complaint are pending. These claims seek monetary
damages in an amount to be proven at trial. Mr. Wiegert has asserted
various claims against the Company, including claims for unpaid rent
on the Company's former principal facility, which was leased by the
Company from Mr. Wiegert; breach of employment agreement; and for the
return of business assets which Mr. Wiegert alleges are owned by him
rather than by the Company. These claims have been asserted in a
separate action filed in the Superior Court of California for Los
Angeles County on September 27, 1993 captioned Gerald A. Wiegert v.
Vector Aeromotive Corporation. Mr. Wiegert's complaint was dismissed
by the court because it contained claims which should have been
asserted as cross-claims within the Company's original action against
Mr. Wiegert.
In February 1994, Mr. Wiegert filed a cross-complaint against the
Company, its directors, and its outside securities counsel alleging,
among other things, breach of employment contract; breach of covenant
of good faith and fair dealing; intentional and negligent
misrepresentation; interference with contractual advantage and
business interest; negligent and intentional infliction of emotional
distress; and libel and slander. The Company has challenged the legal
sufficiency of the cross-complaint, including subsequent amendments
thereof, resulting in elimination of all claims except the claims
concerning breach of employment contract by the Company, unpaid rent,
conversion, libel and slander. The Company plans to file a motion for
summary judgment for the purpose of eliminating Mr. Wiegert's causes
of action for conversion, libel, slander and conspiracy. In another
action filed by Mr. Wiegert as general partner of Vector Car entitled
Vector Car v. Vector Aeromotive Corporation, et al., Mr. Wiegert
alleges that the Company assumed a Vector Car debt owed to him of
approximately $325,000 and that the Company is obligated to Vector Car
under the terms of a $250,000 promissory note payable to Vector Car.
The Company intends to vigorously defend this action.
The three aforementioned actions between the Company and Mr. Wiegert
are expected to be tried in late 1996.
7
<PAGE> 9
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
General
Early in the year, the Company rapidly increased its number of employees
to facilitate an aggressive start up in the manufacture of the Vector M12.
However, developmental issues threatened product quality. These development
issues were overcome, but the Company subsequently needed to implement a plan
to increase its production efficiency and reduce operating costs. In July,
1996, the Company reduced its work force from 78 to 30 employees, limiting its
production capacity to one car per month. In order to ensure that the M12
continues to meet the Company's strict quality standards, production rates
will be increased carefully and may now grow slower than originally planned.
The Company currently plans to produce the Ml2 at a rate of 1 car per week in
mid 1997; however, no assurances can be given that the Company will be able to
meet this targeted rate of build.
During the first six months of 1996, the Company has sold four of the newly
launched Vector Ml2 exotic sports cars and market interest remains strong.
Results of Operations
Net loss for the second quarter of 1996 was $1,541,366 compared to a net loss
of $1,612,769 for the second quarter of 1995. For the period ended June 30,
1996, the Company had a net loss of $2,810,741 compared to $2,941,718 for the
comparable period of 1995.
Cost of sales related to the sale of the four M12s was significantly higher
than costs per vehicle anticipated later this year when production efficiencies
are expected to increase substantially.
The Company's manufacturing overhead consists of the costs associated with its
purchasing, quality, manufacturing engineering, and operations management
departments. Costs related to these departments totaled $245,238 in the second
quarter of 1996 and $440,137 year to date.
General and administrative expenses for the second quarter of 1996 increased
approximately 18% compared to the second quarter of 1995 and increased 9% year
to date in 1996, compared to 1995 as a result of new staffing and related costs
of the Company's sales and marketing department. Additionally
8
<PAGE> 10
compensation expense of $87,500 was recorded in the second quarter relating to
the issuance of 350,000 shares of common stock pursuant to an agreement entered
into in October, 1995 with a consulting firm.
Research and development costs in the second quarter of 1996 for continuing
development of the M12, including refining manufacturing and assembly
procedures totaled $449,593 and were 53% lower than the second quarter of 1995.
Research and development costs for six months ended June 30, 1996, totaled
$929,237 and were 46% lower than the previous year.
Liquidity and Capital Resources
As previously reported, the Company entered into an agreement in January 1996
from which $3.7 million, net of stock offering costs, and the repayment of
$1,000,000 previously loaned in 1995 was received. Cash used during the first
six months of 1996 was primarily for completion of development and production
of the M12s and operating expenses.
Although the Company anticipates generating an increasing revenue stream from
M12 sales, the Company expects continued losses and negative cash flow through
the remainder of 1996. Because of the delay in production start up and the
resulting delay in vehicle sales a further cash infusion to sustain operations
is necessary. The Company has reached a preliminary agreement with an
individual investor for a $1 million equity infusion over the next six months
($100,000 of which was funded in July, 1996) in exchange for newly issued
common stock of the Company. The Company is also evaluating various additional
financing alternatives, however, there are no other commitments to provide
additional capital; and there can be no assurance that such funding will be
available when needed, or if available, that its terms will be favorable or
acceptable to the Company. Should the Company be unable to obtain additional
capital, when and if needed it could be forced to either curtail operations or
cease business activities altogether.
At June 30, 1996, the Company was not in compliance with the minimum listing
standards of the Nasdaq Small Cap Market and faces the possibility of
delisting. The Company is, however, in the process of formulating a definitive
plan to meet its continued Nasdaq listing requirements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of the Company was held on May 22, 1996.
The following matters were voted on and approved by a majority of the Company's
shareholders:
1. Election of five board of directors:
a. Sudjaswin E.L. - 46,137,509 votes in favor, 134,914 votes withheld
b. D. Peter Rose - 46,144,472 votes in favor, 127, 951 votes withheld
c. Michael J. Kimberley - 46,136,602 votes in favor, 135,821 votes
withheld
d. George J. Fencl - 46,140,901 votes in favor, 131,522 votes withheld
e. Richard J. Aprahamian - 46,140,387 votes in favor, 132,036 votes
withheld;
2. Amend the Company's 1994 Omnibus Stock Plan to increase the total number of
Common Shares authorized to be issued thereunder from 1,000,000 to 2,500,000;
45,527,872 shares voted in favor, 380,695 shares voted against, 62,057 shares
abstained;
3. Ratify the appointment of BDO Seidman as independent auditors for the
Company for fiscal year 1996; 46,103,495 shares voted in favor, 112,410 shares
voted against, 56,554 shares abstained.
ITEM 6. EXHIBITS AND REPORTS ON THE FORM 8-K
The Company filed a Form 8-K on April 18, 1996 reporting under Item 5.
9
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Exhibits
27.01 Financial Data Schedule (for SEC use only)
10
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
VECTOR AEROMOTIVE CORPORATION
Date: August 14, 1996 By: /s/ D. PETER ROSE
--------------------------------------
D. Peter Rose
President
Date: August 14, 1996 By: /s/ JANNA L. CONNOLLY
--------------------------------------
Janna L. Connolly
Chief Accounting Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 3,400
<SECURITIES> 0
<RECEIVABLES> 15,251
<ALLOWANCES> 0
<INVENTORY> 1,207,757
<CURRENT-ASSETS> 1,310,609
<PP&E> 1,403,983
<DEPRECIATION> 590,638
<TOTAL-ASSETS> 2,303,549
<CURRENT-LIABILITIES> 1,543,437
<BONDS> 0
0
0
<COMMON> 536,179
<OTHER-SE> 223,933
<TOTAL-LIABILITY-AND-EQUITY> 2,303,549
<SALES> 620,361
<TOTAL-REVENUES> 620,361
<CGS> 625,638
<TOTAL-COSTS> 625,638
<OTHER-EXPENSES> 2,891,107
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,810,741)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,810,741)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,810,741)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> 0
</TABLE>
