<PAGE>
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 Nine Months Ended Commission File Number
September 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 November 14, 1996
<PAGE>
Vector Aeromotive Corporation
Condensed Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Assets
- --------------------------------------------------
Current assets:
Cash and cash equivalents $ 783 $ 12,370
Inventories 1,409,917 801,560
Prepaid expenses 3,620 279,306
Accounts and other receivable 14,745 --
------------ ------------
Total current assets 1,429,066 1,093,236
Property and equipment 768,688 618,083
Other assets 85,744 195,250
------------ ------------
$ 2,283,498 $ 1,906,569
------------ ------------
------------ ------------
Liabilities and Stockholders' Equity
- --------------------------------------------------
Current liabilities:
Accounts payable $ 1,210,519 $ 1,498,667
Accrued expenses 267,446 632,891
Loans payable to related party 487,024 1,178,200
Customer deposits 25,000 40,000
------------ ------------
Total current liabilities 2,189,988 3,349,758
------------ ------------
Contingencies - Note 6
Total liabilities 2,189,988 3,349,758
Stockholders' equity
Common stock, par value $.01 per share, 536,395 426,646
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 36,786,109 31,873,608
Accumulated deficit (37,228,994) (33,743,443)
------------ ------------
Total stockholders' equity 93,510 (1,443,189)
------------ ------------
$ 2,283,498 $ 1,906,569
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to unaudited condensed financial statements.
1
<PAGE>
Vector Aeromotive Corporation
Condensed Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
------------------------ -------------------------
<S> <C> <C> <C> <C>
Sales ($9,483) -- $ 610,878 --
Cost of sales 0 -- 625,638 --
------------------------ -------------------------
Gross profit (loss) (9,483) -- (14,760) --
Costs and expenses:
Manufacturing overhead 164,995 605,132 --
General and administrative 271,252 854,204 1,792,985 2,306,880
Research and development 255,009 1,009,055 1,184,246 2,742,824
------------------------ -------------------------
Total costs and expenses 691,256 1,863,259 3,582,363 5,049,704
------------------------ -------------------------
Operating loss (700,739) (1,863,259) (3,597,123) (5,049,704)
Other income (expense)
Interest and other income 25,929 33,014 111,572 221,228
------------------------ -------------------------
Net loss ($674,809) ($1,830,245) ($3,485,550) ($4,828,476)
------------------------ -------------------------
------------------------ -------------------------
Net loss per share (0.01) ($0.04) ($0.07) ($0.12)
------------------------ -------------------------
------------------------ -------------------------
Weighted average common shares
outstanding 53,609,387 42,379,699 52,559,514 40,851,921
------------------------ -------------------------
------------------------ -------------------------
</TABLE>
See accompanying notes to unaudited condensed financial statements.
2
<PAGE>
Vector Aeromotive Corporation
Condensed Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Capital in Excess Accumulated
----------------------
Shares Amount of Par Value Deficit Total
---------------------------------------------------------------------
<S> <C> <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 605,400 6,249 136,268 142,517
Issuance of common stock as
payment of consulting fees 350,000 3,500 171,500 175,000
Net loss (3,485,550) (3,485,550)
---------------------------------------------------------------------
Balance, September 30, 1996 53,620,099 $536,395 $36,786,109 ($37,228,993) $93,510 93,510
---------------------------------------------------------------------
---------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited condensed financial statements.
3
<PAGE>
Vector Aeromotive Corporation
Condensed Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($3,485,550) ($4,828,476)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 328,865 154,930
Issuance of warrants and options for services 70,240
Increase (decrease) from changes in
Inventories (608,357) (178,180)
Prepaid expenses and other assets 260,941 272,071
Accounts payable (288,148) 209
Accrued expenses (365,445) 347,258
Customer deposits (15,000) (16,100)
------------ ------------
Net cash from operating activities (4,172,695) (4,178,048)
Cash flows used in investing activities:
Acquisition of property and equipment (194,964) (502,888)
------------ ------------
Net cash used in investing activities (194,964) (502,888)
Cash flows from financing activities:
Proceeds from issuance of common stock
and warrants 4,704,733 6,000,000
Proceeds from exercise of warrants 142,517 (430,388)
Proceeds from borrowings 200,000
Repayment of loan payable to related party (691,176) --
------------ ------------
Net cash from financing activities 4,356,074 5,569,612
Net increase (decrease) in cash and cash
equivalents (11,587) 888,676
Cash and cash equivalents, beginning of period 12,370 7,809
------------ ------------
Cash and cash equivalents, end or period $ 783 $ 896,485
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to unaudited condensed financial statements.
4
<PAGE>
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 nine months ended September 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>
September 30, December 31,
1996 1995
------------- ------------
<S> <C> <C>
Raw Material $ 644,314 $447,167
Work-in-Progress 143,548 254,393
Finished Goods 622,055 100,000
---------- --------
Total $1,409,917 $801,560
========== ========
</TABLE>
5
<PAGE>
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
$3,700,000, which was net of stock offering costs and 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 605,400 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. NOTES PAYABLE TO RELATED PARTIES
As of November 14, 1996, the Company had borrowed $489,647 from
Automobili Lamborghini U.S.A., a related party. These loans are
non-interest bearing and are collateralized by two M12 production cars.
5. NOTES PAYABLE TO UNRELATED PARTIES
As of November 14, 1996, the Company has borrowed a total of $230,000,
uncollateralized, from an unrelated party bearing interest at 9%;
principle and interest due and payable December 31, 1996.
6. 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 and organizations who acted with Mr. Wiegert
in defiance of the Company's Board of Directors.
6
<PAGE>
In order to gain undisputed access over and physical possession of the
Companies 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. On September 14, 1993, the court granted the Company's motion
for summary judgment on the cause of action for declaratory relief
contained in an 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 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 cross complaint in the
above case.
7
<PAGE>
In February 1994, Mr. Wiegert filed an amended 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, and the court eliminated all
claims except the claims concerning breach of employment contract by the
Company, unpaid rent, conversion, libel and slander. 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 commencing March 1997.
8
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
GENERAL
After working on improving initial quality, developing and documenting build
procedures, and dealing with product development issues during the first two
quarters of 1996, the Company was forced to reduce its workforce by 60%
during the third quarter. This reduction was essential to preserve operating
capital pending receipt of additional capital or financing. However, the
Company's inability to secure additional capital or financing forced it to
terminate its remaining employees in early November 1996. Discussions
continue between the company and parties who have expressed interest in
providing financing to the Company. However, these discussions are
preliminary and there has been no agreement reached with such potential
investors.
During the first nine months of 1996, the Company has sold four if its M12
Exotic Sports Cars. In addition, it has built an engineering development
vehicle to validate model year 1997 improvements. Two further vehicles are
close to completion, one being a 1997 press demonstrator, the other vehicle
for sale. A further three chassis are partially complete. Without further
capital, it is unlikely these vehicles will be completed and unless
completed, it is unlikely they can be sold.
If the Company is unsuccessful in securing further financing and/or
capital, it will be forced to permanently suspend operations and liquidate
its assets either informally or in bankruptcy.
RESULTS OF OPERATIONS
Net loss for the third quarter of 1996 was $674,809 compared to a net loss of
$1,830,245 for the third quarter of 1995. For the period ended September 30,
1996, the Company had a net loss of $3,485,550 compared to $4,828,476 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.
9
<PAGE>
The Company's manufacturing overhead consists of the costs associated with
its purchasing, quality, manufacturing engineering, and operations
management. Costs related to these departments totaled $164,995 in the third
quarter of 1996 and $605,132 year to date.
General and administrative expenses for the third quarter of 1996, decreased
approximately 68% compared to the third quarter of 1995 and decreased 22%
year to date in 1996, compared to 1995, as a result of the layoffs.
Research and development costs incurred in the third quarter of 1996 were for
continuing development and Model Year 1997 improvements of the M12, including
refining manufacturing and assembly procedures totaled $255,009 and were 75%
lower than the third quarter of 1995. Research and development costs for nine
months ended September 30, 1996, totaled $1,184,246 and were 57% 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
nine months of 1996 was primarily for completion of development and
production system development for the M12s as well as operating expenses.
Having exhausted the available cash to overcome initial quality issues,
develop and document build procedures and overcome product development issues
during the first two quarters of 1996, the company was forced to reduce its
workforce by 60% during the third quarter of 1996 to preserve operating
capital. The Company's inability to secure additional financing forced it to
terminate the remaining employees in early November 1996. Discussions
continue between the company and parties who have expressed interest in
providing financing to the Company. However, these discussions are
preliminary and there has been no agreement reached with such potential
investors. If the Company is unsuccessful in securing further financing
and/or capital, it will be forced to permanently suspend operations and
liquidate its assets either informally or in bankruptcy.
As of October 22, 1996, the company's common stock, units and warrants, which
traded under the symbols VCAR, VCARZ, VCARL and VCARW, were delisted from the
NASDAQ Small Cap Market. This action was taken as a result of the company's
failure to meet the capital & surplus requirement as stated in Marketplace
Rule 4310(c)(03).
10
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON THE FORM 8-K
The Company filed the following Form 8-K's on JULY 15, 1996; NOVEMBER 8,
1996; and NOVEMBER 13, 1996.
EXHIBITS
- --------
27.01 Financial Data Schedule (for SEC use only)
11
<PAGE>
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: November 14, 1996 By: /s/ D. PETER ROSE
----------------------- --------------------------------
D. Peter Rose
President
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 783
<SECURITIES> 0
<RECEIVABLES> 14,745
<ALLOWANCES> 0
<INVENTORY> 1,409,917
<CURRENT-ASSETS> 1,429,066
<PP&E> 1,404,783
<DEPRECIATION> 636,096
<TOTAL-ASSETS> 2,283,498
<CURRENT-LIABILITIES> 2,189,988
<BONDS> 0
0
0
<COMMON> 536,395
<OTHER-SE> 93,510
<TOTAL-LIABILITY-AND-EQUITY> 2,283,498
<SALES> 610,878
<TOTAL-REVENUES> 610,878
<CGS> 625,638
<TOTAL-COSTS> 625,638
<OTHER-EXPENSES> 3,582,363
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,485,550)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,485,550)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,485,550)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> 0
</TABLE>
