<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
[ ] 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 - 21810
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AMERIGON INCORPORATED
---------------------
(Exact name of registrant as specified in its charter)
California 95-4318554
- ---------------------------------------- --------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
404 East Huntington Drive,
Monrovia, California 91016
- ---------------------------------------- --------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 932-1200
- -------------------------------------------------------------------------------
(Former Name or Former Address, if Changed 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
-- --
At May 9, 1997 the registrant had 12,542,500 shares of Class A Common Stock;
no par value; no shares of Class B Common Stock, no par value; and no shares
Preferred Stock, no par value, issued and outstanding.
(1)
<PAGE>
AMERIGON INCORPORATED
TABLE OF CONTENTS
Part I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
Condensed Balance Sheet 3
Condensed Statement of Operations 4
Condensed Statement of Shareholders' Equity 5
Condensed Statement of Cash Flows 6
Notes to Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Part II. OTHER INFORMATION 14
Signature 15
(2)
<PAGE>
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE DATA)
December 31, March 31,
1996 1997
-------------------------------
ASSETS (unaudited)
Current Assets:
Cash and cash equivalents $203 $11,741
Accounts receivable less allowance of $80 1,188 1,809
Unbilled revenue 1,157 242
Inventories, primarily raw materials 20 20
Prepaid expenses and other assets 744 215
-------------------------------
Total current assets 3,312 14,027
Property and Equipment, net 610 543
-------------------------------
Total Assets $3,922 $14,570
-------------------------------
-------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $1,567 $509
Deferred revenue 154 239
Accrued liabilities 519 618
Note payable to shareholder 200 -
Bridge Notes and debentures payable 3,000 -
Bank loan payable 1,187 -
-------------------------------
Total current liabilities 6,627 1,366
-------------------------------
Long Term Portion of Lease Liability 43 39
-------------------------------
Shareholders' Equity:
Preferred stock, no par value; 5,000,000
shares authorized, none issued and
outstanding
Common stock:
Class A -no par value; 40,000,000
shares authorized, 9,542,500, and
4,069,000 issued and outstanding at
March 31, 1997 and December 31,
1996, respectively (An additional
3,000,000 shares held in escrow) 17,321 28,408
Class B -no par value; 3,000,000
shares authorized, none issued and
outstanding
Class A Warrants - 6,767
Contributed capital 3,115 3,115
Deficit accumulated during development
stage (23,184) (25,125)
-------------------------------
Total shareholders' equity (2,748) 13,165
-------------------------------
Total Liabilities and Shareholders'
Equity $3,922 $14,570
-------------------------------
-------------------------------
See accompanying notes to the condensed financial statements.
(3)
<PAGE>
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
April 23, 1991
Three Months (inception)
Ended March 31, to March 31,
1996 1997 1997
--------------- --------------
(unaudited) (unaudited)
Revenues:
Development contracts and
related grants $3,054 $384 $16,313
Grants - 12 6,168
--------------- --------------
Total revenues 3,054 396 22,481
--------------- --------------
Costs And Expenses:
Direct development contract
and related grant costs 2,771 869 19,187
Direct grant costs - 28 4,760
Research and development 384 256 9,043
Selling, general and
administrative, including
reimbursable expenses 555 794 14,581
--------------- --------------
Total Costs and Expenses 3,710 1,947 47,571
Operating Loss (656) (1,551) (25,090)
Interest Income 36 67 633
Interest Expense - (117) (328)
--------------- --------------
Loss Before Extraordinary
Item ($620) ($1,601) ($24,785)
Extraordinary loss from
extinguishment of
indebtedness - (340) (340)
--------------- --------------
Net loss ($620) ($1,941) ($25,125)
--------------- --------------
--------------- --------------
Loss per share before
extraordinary item ($0.15) ($0.25)
---------------
---------------
Net loss per share ($0.15) ($0.30)
---------------
---------------
Weighted average number of
shares outstanding 4,050 6,488
---------------
---------------
See accompanying notes to the condensed financial statements.
(4)
<PAGE>
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Deficit
Preferred --------------------------------- Accumulated
Stock Class A Class B During the
--------------- --------------- --------------- Class A Contributed Development
Shares Amount Shares Amount Shares Amount Warrants Capital Stage Total
------ ------ ------ ------ ------ ------ -------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at April 23, 1991
(Inception) - - 1,000 $100 - - - - - $100
Contributed capital-founders'
services provided without
compensation $111 111
Net loss $(616) (616)
------ ------ ------ ------- ------ ------ -------- ----------- ----------- ---------
Balance at December 31, 1991 - - 1,000 100 - - - 111 (616) 405
Transfer of common stock to
employee by principal
shareholder for services 150 150
Contributed capital-founders'
services provided without
compensation 189 189
Net loss (1,459) (1,459)
------ ------ ------ ------- ------ ------ -------- ----------- ----------- ---------
Balance at December 31, 1992 - - 1,000 100 - - - 450 (2,075) (1,525)
Issuance of common stock
(public offering) 2,300 11,534 11,534
Options granted by principal
shareholder for services 549 549
Contribution of notes payable to
contributed capital 2,102 2,102
Net loss (3,640) (3,640)
------ ------ ------ ------- ------ ------ -------- ----------- ----------- ---------
Balance at December 31, 1993 - - 3,300 11,634 - - - 3,101 (5,715) 9,020
Compensation recorded for
variable plan stock option 1 1
Net Loss (4,235) (4,235)
------ ------ ------ ------- ------ ------ -------- ----------- ----------- ---------
Balance at December 31, 1994 - - 3,300 11,634 - - - 3,102 (9,950) 4,786
Private placement of common
stock 750 5,636 1 5,637
Compensation recorded for
variable plan stock option 12 12
Net loss (3,237) (3,237)
------ ------ ------ ------- ------ ------ -------- ----------- ----------- ---------
Balance at December 31, 1995 - - 4,050 17,270 - - - 3,115 (13,187) 7,198
Exercise of stock options 20 160 160
Repurchase of common stock (1) (15) (15)
Expenses of sale of stock (94) (94)
Net loss (9,997) (9,997)
------ ------ ------ ------- ------ ------ -------- ----------- ----------- ---------
Balance at December 31, 1996 - - 4,069 17,321 - - - 3,115 (23,184) (2,748)
Follow on Public Offering 5,474 11,087 6,617 17,704
Conversion of Bridge
Debeuntures into Class A
Warrants 150 150
Net loss (1,941) (1,941)
------ ------ ------ ------- ------ ------ -------- ----------- ----------- ---------
Balance at March 31, 1997 9,543 $28,408 $6,767 $3,115 $(25,125) $13,165
</TABLE>
See accompanying notes to the condensed financial statements.
(5)
<PAGE>
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
From
April 23, 1991
Three Months (inception) To
Ended March 31, March 31,
1996 1997 1997
------------------------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C>
Operating Activities:
Net loss ($620) ($1,941) ($25,125)
Adjustments to reconcile net loss to
cash used in operating activites:
Depreciation and amortization 90 97 1,009
Provision for doubtful accounts 190
Stock option compensation 712
Contributed capital-founders'
services provided without cash compensation 300
Change in operating assets and liablilities:
Accounts receivable (221) (621) (1,999)
Unbilled revenue (1,816) 915 (242)
Inventory 2 (20)
Deferred Contract Costs (550) -
Prepaid expenses and other assets 134 529 (215)
Accounts payable (62) (1,058) 509
Deferred revenue (7) 85 239
Accrued liabilities (61) 99 618
------------------------- -----------
Net cash used in operating activities (3,111) (1,895) (24,024)
------------------------- -----------
Investing Activities:
Purchase of property and equipment (148) (30) (1,474)
Short term investments
------------------------- -----------
Net cash used in investing activities (148) (30) (1,474)
------------------------- -----------
Financing Activities:
Proceeds (expenses) from sale of common
stock and warrants, net (94) 17,704 34,881
Proceeds from exercise of stock options 160
Repurchase of common stock (15)
Borrowing under line of credit 6,280
Repayment of line of credit (1,187) (6,280)
Repayment of capital lease (4) (4) (39)
Proceeds from Bridge Financing 3,000
Repayment of Bridge Financing (2,850) (2,850)
Proceeds from notes payable to shareholder 250 450
Repayment of notes payable to shareholder (450) (450)
Notes payable to shareholders contributed
to Capital 2,102
------------------------- -----------
Net cash (used in) provided by financing
activities (98) 13,463 37,239
------------------------- -----------
Net (decrease) increase in cash and cash
equivalents (3,357) 11,538 11,741
Cash and cash equivalents at beginning of
period 4,486 203 -
------------------------- -----------
Cash and cash equivalents at end of period $1,129 $11,741 $11,741
------------------------- -----------
------------------------- -----------
Supplemental Disclosure of Cash Flow
Information:
Cash paid for:
Interest - $113 $271
------------------------- -----------
------------------------- -----------
Supplemental Disclosure of NonCash
Transaction:
Conversion of Bridge Debentures into
warrants - $150 $150
------------------------- -----------
------------------------- -----------
</TABLE>
See accompanying notes to the condensed financial statements.
(6)
<PAGE>
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY:
Amerigon Incorporated (the "Company") is a development stage enterprise,
which was incorporated in California on April 23, 1991 primarily to develop,
manufacture and market proprietary, high technology automotive components and
systems for gasoline-powered and electric vehicles.
NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF CERTAIN ACCOUNTING POLICIES:
The accompanying condensed balance sheet as of March 31, 1997 and the
condensed statements of operations, shareholders' equity and cash flows for
the three months ended March 31, 1997 and for the period from April 23, 1991
(inception) to March 31, 1997 have been prepared by the Company without
audit. In the opinion of management, all adjustments (consisting of normal
recurring adjustments) necessary for fair presentation have been included.
The results of operations for the three month period ended March 31, 1997 are
not necessarily indicative of the operating results for the full year.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These condensed
financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Form 10-K for the year
ended December 31, 1996.
DEVELOPMENT CONTRACT REVENUES AND RELATED GRANTS. The Company has
entered into a number of fixed price contracts under which revenue is
recognized using the percentage of completion method, or in the case of short
duration contracts, when the prototype or services are delivered.
Development contract revenues earned are recorded on the balance sheet as
Unbilled Revenue until billed. The Company has received government grants,
which parallel one of its development contracts. These grants are included
in development contract and related grant revenues.
GRANT REVENUES. Revenue from government agency grants and other sources
pursuant to cost-sharing arrangements is recognized when reimbursable costs
have been incurred. Grant revenues earned are recorded on the balance sheet
as Unbilled Revenue until billed.
(7)
<PAGE>
NOTE 3 - NET LOSS PER SHARE:
The Company's net loss per share calculations are based upon the weighted
average number of shares of common stock outstanding. Excluded from this
calculation are the 3,000,000 Escrowed Contingent Shares (Note 4). Common
stock equivalents (stock options and stock warrants) are anti-dilutive in
both periods and are excluded from the net loss per share calculation.
NOTE 4 - ESCROW AGREEMENT:
Prior to the effective date of the June 1993 initial public offering,
3,000,000 shares of the Company's Class A Common Stock ("Escrowed Contingent
Shares") were deposited into escrow by the then existing shareholders in
proportion to their then current holdings. These shares are not transferable
(but may be voted) and will be released from escrow in the event the Company
attains certain pre-tax earnings levels during the period through December
31, 1998.
The Company expects that the release of the Escrowed Contingent Shares,
if any, will be deemed compensatory and, accordingly, will result in charges
to earnings equal to the fair market value of the Escrowed Contingent Shares
recorded ratably over the period beginning on the date when management
determines that any of the specified events are probable of being attained
and ending on the date on which the Escrowed Contingent Shares are released.
At the time a goal is attained, previously unrecognized compensation expense
will be adjusted by a one-time charge based on the then fair market value of
the shares released from Escrow. Such charges could substantially reduce the
Company's net income or increase the Company's loss for financial reporting
purposes in the periods such charges are recorded. The specified events are
not considered probable of attainment at this time.
On April 30, 1999, all shares that have not been released from Escrow
will automatically be exchanged for shares of Class B Common Stock, which
will then be released from Escrow. Any dividends or other distributions made
with respect to Escrowed Contingent Shares that have not been released from
Escrow as Class A Common Stock will be forfeited and contributed to the
capital of the Company on April 30, 1999.
NOTE 5 - 1997 PUBLIC STOCK OFFERING:
On February 18, 1997, the Company completed an offering of 17,000 Units,
each consisting of 280 shares of Class A Common Stock and 280 Class A
Warrants to purchase, at $5.00 per share, an equal number of shares of Class
A Common Stock. Proceeds to the Company, net of the underwriter's fees and
commissions and expenses of the Offering, were approximately $15,300,000. In
addition, on March 7, 1997, the underwriter exercised an option to purchase
an additional 2,550 Units to cover over-allotments. Additional proceeds from
the sale of the Units pursuant to the underwriter's exercise of the
over-allotment option, net of the underwriter's fees and commissions and all
expenses, were approximately $2,400,000. (Hereinafter, the Company's offering
of a total of 19,550 Units as described above is collectively referred to as
the "1997 Public Offering.")
(8)
<PAGE>
NOTE 6 - EXTRAORDINARY LOSS ON EXTINGUISHMENT OF INDEBTEDNESS:
On October 31, 1996, the Company completed a private placement (the "1996
Bridge Financing") of 60 bridge units (each a "Bridge Unit"), each consisting
of one $47,500 principal amount 10% unsecured promissory note made by the
Company (each a "Bridge Note") and one $2,500 principal amount 10% convertible
subordinated debenture (each a "Bridge Debenture"). Upon the completion of
the 1997 Public Offering, the Bridge Notes were repaid and the Bridge Debentures
were converted into a total of 1,620,000 warrants to purchase Class A Common
Stock. In the First Quarter of 1997, the Company recorded a non-cash charge
resulting from the elimination of the remaining unamortized portion of the
deferred debt issuance costs totaling approximately $340,000.
NOTE 7 - STOCK WARRANTS:
In connection with the 1997 Public Offering, the Company issued 4,760,000
Class A Warrants to purchase Class A Common Stock. Each Class A Warrant
entitles the registered holder thereof to purchase, at any time until
February 12, 2002, one share of the Company's Class A Common Stock at an
exercise price of $5.00, subject to adjustment. In addition, on March 7,
1997, the underwriter exercised an over-allotment option which resulted in
the issuance of an additional 714,000 Class A Warrants.
(9)
<PAGE>
PART 1
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FIRST QUARTER 1997 COMPARED WITH FIRST QUARTER 1996
REVENUES. Revenues for the three months ended March 31, 1997 ("First
Quarter 1997") were $396,000 as compared with revenues of $3,054,000 in the
three months ended March 31, 1996 ("First Quarter 1996"). Approximately
$83,000 of First Quarter 1997 revenue related to a single electric vehicle
development contract and related grants, which was a decrease of approximately
$2,183,000 compared to the corresponding amount attributable to such contract
and grants in First Quarter 1996. The decrease in development contract and
related grant revenues was due principally to the fact that the Company
substantially completed its major electric vehicle development contract with
Samsung Heavy Industries Co., Ltd. in 1996 and did not obtain any comparable
replacement development contracts during First Quarter 1997. The percentage of
completion method of accounting is used for this contract and, accordingly,
revenues and gross profit are recognized as work is performed based on the
relationship between actual costs incurred and total estimated costs at
completion. Revenues and gross profit are recognized prospectively after
taking into account revisions in estimated total contract costs and contract
values, and estimated losses are recorded when identified. Grant revenue is
recorded when reimbursable costs are incurred. No replacement for the Samsung
contract is currently scheduled to follow or expected to be obtained.
All other development contract revenue (relating to the Company's climate
controlled seats, radar and IVS-TM- products) increased to $301,000 in First
Quarter 1997, an increase of $19,000, or approximately 6.7%, from the $282,000
in such revenue recorded for First Quarter 1996. The increase in First Quarter
1997 principally reflects the Company's completion of work on several
development contracts relating to the climate controlled seats, radar products
and IVS-TM-. As of March 31, 1997, the Company had only minor development
contracts in place, under which a total of not more than approximately $317,000
potentially remains to be earned by the Company (although no assurance can be
given that all or any portion of such amount will ultimately be earned or
received).
During First Quarter 1997, development continued on the climate control
seat systems and the radar systems, which was funded in part by development
contracts. The revenues recognized for the development of the climate
control seat and radar systems, and for the development contract and sales of
interactive voice navigation systems ("IVS-TM-") in First Quarter 1997,
was $301,000 compared to $282,000 in First Quarter 1996. Demand for the
IVS-TM-product continues to be weak. The Company has previously announced
that it has entered into a conditional letter of intent with Yazaki
Corporation and Technology Strategies and Alliances to form a joint venture
to develop and market the IVS-TM- product in the automotive aftermarket.
(See the Company's Annual Report on Form 10-K for the year ended December
31, 1996 for further information.)
Grant revenues from activities not related to development contracts
totaled $12,000 in First Quarter 1997. There were no grant activities in
First Quarter 1996 related to the Company's other products. The Company does
not obtain grants on a regular basis, and those grants that are obtained vary
as to amount and as to the nature and duration of the work (and type of
product) covered. As of March 31, 1997, no more than approximately $615,000
remained to be earned under existing grants (although no assurance can be given
that all or any portion will of such amount will ultimately be earned or
received). The Company has previously announced its intention to reduce its
efforts to obtain new grants and to focus on working toward production
contracts for climate controlled seats and radar sensor systems.
(10)
<PAGE>
DIRECT DEVELOPMENT CONTRACT AND RELATED GRANT COSTS. Direct development
contract and related grant costs decreased to $869,000 in First Quarter 1997
compared to $2,771,000 in First Quarter 1996. Included in these costs are
costs related to commercial sales of IVS-TM- products totaling $5,000 in First
Quarter 1997 and $221,000 in First Quarter 1996. Direct development contract
and related grant costs decreased significantly in First Quarter 1997 relative
to First Quarter 1996 due to the decreased activity in the Company's electric
vehicle program, as discussed above.
DIRECT GRANT COSTS. Direct grant costs were $28,000 in First Quarter
1997. There were no direct grant costs in First Quarter 1996. These costs are
related to the projects for which grant revenues are reported. The Company
anticipates that direct grant costs will decrease during the remainder of 1997
as the Company completes work on the remaining active grants and focuses its
efforts on working toward production contracts for climate controlled seats and
radar sensor systems. The Company anticipates that certain of these grant
costs will be reimbursable to the Company during the remainder of 1997 as the
Company achieves certain billing milestones under the respective grants.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
decreased to $256,000 in First Quarter 1997 from $384,000 in First Quarter
1996. These expenses represent research and development expenses for which no
development contract or grant funding has been obtained. Expenses of research
and development projects that are specifically funded by development
contracts from customers are classified under direct development contract and
related grant costs of direct grant costs. Due to the Company's significant
cash shortfalls at the beginning of First Quarter 1997, the Company was
constrained in its ability to undertake research and development activities.
Research and development activities are expected to increase in Second
Quarter 1997 as the Company's ability to finance such activities has improved
since the completion of the 1997 Public Offering. The Company's research and
development expenses fluctuate significantly from period to period, due to
both changing levels of activity and changes in the amount of such activities
that are covered by customer contracts or grants. Where possible, the
Company seeks funding from third parties for its research and development
activities.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses increased to $794,000 in First Quarter 1997
compared to $555,000 in First Quarter 1996. The increase in First Quarter
1997 was due principally to the fact that fewer SG&A expenses were allocated
to development contracts. Direct and indirect overhead expenses included in
SG&A that are associated with development contracts are allocated to such
contracts. As the Company has not obtained any replacement development
contracts, the Company anticipates that SG&A expenses may continue to
increase in 1997.
INTEREST EXPENSE. The interest expense in First Quarter 1997 was related
to the bank line of credit obtained to finance work on the Samsung electric
vehicle contract, the 1996 Bridge Financing, and loans from the Company's Chief
Executive Officer and principal shareholder. There were no such loans in First
Quarter 1996. Interest income increased to $67,000 in First Quarter 1997 from
$36,000 in First Quarter 1996, reflecting higher cash balances upon the
completion of the 1997 Public Offering. Net interest income (loss) during
First Quarter 1997 was ($50,000) compared with $36,000 in First Quarter 1996.
(11)
<PAGE>
EXTRAORDINARY ITEM. Extraordinary loss on extinguishment of debt was
$340,000 in First Quarter 1997. These expenses were related to the
elimination of the remaining unamortized portion of the deferred 1996 Bridge
Financing costs.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company had working capital of $12,661,000. In
First Quarter 1997, the Company completed the 1997 Public Offering and raised
approximately $17,700,000 of net proceeds. Approximately $4,100,000 of such
proceeds were used in part to pay off most of the Company's indebtedness,
including a bank line of credit, which was terminated effective February 18,
1997. The Company's principal sources of operating capital have been the
proceeds of its various financing transactions and, to a lesser extent,
revenues from grants, development contacts and the sales of prototype to
customers. As of March 31, 1997, the Company had approximately $11,247,000 in
remaining proceeds from the 1997 Public Offering. Other than such remaining
Offering proceeds, the Company has virtually no sources of liquidity.
Cash and cash equivalents increased by $11,538,000 during First Quarter
1997. Operating activities used $1,895,000, which primarily as a result of
the operating loss of $1,941,000. Reductions in unbilled revenues of
$915,000 (related to billings under the electric vehicle program) and in
prepaid expenses and other assets of $529,000, together with increases in
deferred revenue and accrued liabilities of $184,000 were offset by the
decrease in accounts payable of $1,058,000, the increase in accounts
receivable of $621,000 and the other uses of cash for operating activities.
Investing activities used $30,000 related to the purchase of property and
equipment.
Financing activities provided $13,463,000 of which approximately
$17,704,000 was from the 1997 Public Offering. $1,187,000 was used for the
repayment of the bank line of credit, $2,850,000 was used for repayment of the
1996 Bridge Financing, and $450,000 was used for repayment of loans from the
Company's Chief Executive Officer and principal shareholder.
The Company expects to incur losses for the foreseeable future due to
the continuing cost of its product development and marketing activities. To
fund its operations, the Company will continue to need cash from financing
sources unless and until such time as sufficient profitable production
contracts are obtained. Unless the Company obtained one or more additional
significant development contracts or grants (as to which there can be no
assurance), the Company would not be able to obtain bank financing to fund
its operations. Moreover, even if such additional development contracts are
obtained, there still cannot be any assurance that the Company would be able
to obtain bank financing on terms affordable to the Company or on any terms.
Cash inflows during the development and early stage production period are
dependent upon achieving certain billing milestones under existing
development contracts and grants, and on obtaining new production and/or
development contracts. Cash outflows are dependent upon the level and timing
(12)
<PAGE>
of production and/or development work and the amount of research and
development and overhead expenses. Cash inflows must be supplemented by cash
from debt and/or equity financing, the availability of which can not be
assured.
If and when the Company is able to commence commercial production of its
heated and cooled seat or radar products, the Company will incur significant
expenses for tooling product parts and to set up manufacturing and/or
assembly processes. The Company also expects to require significant capital
to fund other near-term production engineering and manufacturing, as well as
research and development and marketing, of these products. While the Company
believes that the remaining proceeds from the Offering will be sufficient to
meet its expected capital needs through approximately the end of 1997, no
assurance can be given that unanticipated needs for capital will not develop
that would exceed the Company's capital resources or that, even in the
absence of any such unanticipated needs, the Company's current working
capital will prove sufficient to fund its capital needs through the end of
1997 as currently anticipated.
Over the long-term, the Company expects to continue to expend
substantial funds to continue its development efforts. The Company has
experienced negative cash flow from operating activities since its inception
and has not generated, and does not expect to generate in the foreseeable
future, sufficient revenues from the sales of its principal products to cover
its operating expenses or to finance such further development efforts.
Accordingly, the Company expects that significant additional financing will
be necessary to fund the Company's long-term operations.
(13)
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits
10.1 Letter of Intent, together with Addendum thereto, among
the Company, Yazaki Corporation, and Technology Strategies
and Alliances
27 Financial Data Schedule
b. Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated
January 31, 1997 reporting information under Item 5.
(14)
<PAGE>
SIGNATURE
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.
Amerigon Incorporated
---------------------
Registrant
Date: May 14, 1997 /s/ Lon E. Bell
----------------
Lon E. Bell
Chief Executive Officer
and Chairman of the Board
and Acting Principal Financial
and Accounting Officer
<PAGE>
AMERIGON INCORPORATED
MARCH 3, 1997
CONFIDENTIAL
------------
Mr. Kenzo Matsuzaki
Managing Director, General Manager
International Operations
Yazaki Corporation
Mita-Kokusai Building
Tokyo, Japan
Re: Letter of Intent and Firm Offer to Form Proposed New Company
------------------------------------------------------------
Dear Matsuzaki-San:
This letter sets forth a firm proposal from Amerigon Incorporated, a
California corporation ("Amerigon"), to Yazaki Corp., a Japanese company
("Yazaki"), to form a new company in conjunction with Technology Strategies
and Alliances, a California corporation ("TSA"). After this letter is
initially executed by both parties, this letter will have no binding effect
and will function as a letter of intent. Amerigon will then rapidly prepare a
draft Definitive Agreement for the formation of the New Company. Within three
business days of receiving this Draft Definitive Agreement, Yazaki shall
consider signing Addendum A to this letter. If Yazaki elects not to sign and
return Addendum A within three days, this letter shall automatically expire
and be withdrawn. Once Addendum A is signed by Yazaki and countersigned and
returned by Amerigon, this letter of intent will become a binding agreement
on both parties.
1. FUNDING FOR THE EXCLUSIVE RIGHTS TO NEGOTIATE WITH AMERIGON;
DEFINITIVE AGREEMENT.
a. Within 7 Business days, 1 month, and 2 months, respectively,
after Yazaki's and Amerigon's countersignature of Addendum A of this
letter, Yazaki shall pay to Amerigon $300,000, $350,000 and $350,000 of
funding in consideration for Yazaki's exclusive rights to negotiate for a
period of three months with Amerigon to acquire a stock or equity interest
in the IVS project (as defined below) for a period of three months by wire
transfer of immediately available funds. The parties shall negotiate in
good faith during the three-month period following the effective date of
Addendum A of this letter to arrive at a definitive agreement for the
consummation of the transactions contemplated by this letter, with the
parties making a good faith effort to complete the negotiations within 30
to 45 days, in order to take advantage of market opportunities.
<PAGE>
b. Until the consummation of the transactions contemplated by this
letter, the expiration of such three month period or the time at which
Yazaki shall determine not to go forward with the transactions
contemplated by this letter, whichever is earlier, Amerigon shall apply
funds from Yazaki's funding only for the research and development of the
IVS business, and shall account to Yazaki in a mutually agreed manner on
the use of these funds to verify that they are used only for this
specified purpose. With the delivery of the draft definitive agreement,
Amerigon shall provide Yazaki a preliminary 3 month budget for the
funding, detailing the expenditures on people, equipment, outside
contracts, leases and other expenses. During the three month period,
Amerigon will report monthly with documentation of expenditures on the
actual expenditures compared to this budget, and will inform Yazaki of any
required changes in the budget prior to receiving the next funding
payment. The $1,000,000 to be provided by Yazaki to Amerigon during the
above three month period shall be spent on direct costs and itemized
indirect costs with the understanding that the goal will be to minimize
the indirect costs.
c. In the event that at the end of such three month period no
definitive agreement has been executed and delivered, Amerigon shall be
entitled to retain the entire amount of the funding. In the event that at
any time during such three month period Yazaki shall notify Amerigon that
Yazaki will not go forward with the transactions contemplated by this
letter, Amerigon shall be entitled to retain the portion of the funding
that Amerigon has received to date.
d. In the event that a definitive agreement is reached during such
three month period, and the transactions contemplated by this letter are
eventually consummated, the intellectual and tangible property developed
or acquired with Yazaki's funding with be fully transferred and assigned
to SVE (as defined below), which shall be its sole owner in fee title. In
the event that no definitive agreement is reached during this period
Amerigon shall retain full ownership and control of all the intellectual
and tangible property related to IVS developed with the funding.
e. Amerigon will return 100% of all funding received if Yazaki
decides not to consummate the transaction envisioned by this letter ONLY
in the event of either of one or more of the following three causes:
(1) Yazaki found while undertaking due diligence during such three
month period that Amerigon had either: (1) materially
misrepresented the ownership of its technology or the validity
thereof; (2) materially misrepresented its contract and license
rights relating to four companies: the Settlement and License
Agreement with Audio Navigation Systems LLC, and the license
agreements with Navigation Technologies, ETAK and Lernout &
Hauspie Speech Products; or (3) that these same contracts do
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<PAGE>
not remain valid and in force. In determining whether Amerigon
has made any such material misrepresentations, Yazaki shall rely
solely on: (i) whether Amerigon has provided true, correct and
complete copies of the 4 contracts and any relevant
correspondence that may modify or affect the contracts with
these companies; and (ii) written communications from Joshua
Newman of Amerigon that have been or are made to Yazaki to help
explain these contracts. Prior to sending the draft definitive
agreement to Yazaki, Joshua Newman will forward an official copy
of the 4 licenses, any relevant correspondence that may modify
or affect the contracts, and previous written communications
from Amerigon that Yazaki may relay on to help explain these
contracts.
(2) Yazaki found that Amerigon, as of the date of signing the
definitive agreement has any threatened or pending lawsuits or
disputes that will materially diminish the value of the IVS
business, except that Yazaki understands that Amerigon is in
arrears in paying advance royalties due Lernout & Hauspie Speech
Products, per a letter received from them dated February 4, 1997
(a copy of which was faxed to Yazaki) and that Amerigon is in
breach of this license, making it subject to immediate
cancellation. In recognition of this, Addendum A will not be
effective until Amerigon countersigns it, representing that it
has paid $75,000 in overdue advance royalties to Lernout &
Hauspie from Amerigon's own funds, separate from the funding
that Yazaki will provide for the IVS program. This $75,000
payment, combined with a prior $30,000 payment, constitutes a
credit that can be used to reduce future royalty obligations,
and is one of the assets that Amerigon will assign to SVE as
part of this contemplated transaction. SVE will be responsible
for the outstanding $95,000 payment to Lernout & Hauspie out of
the $200,000 contract concluded between Amerigon and Lernout &
Hauspie.
(3) Amerigon has failed to obtain the employment services of (i)
Mr. Bob Diller and (ii) Messrs. Mark Eggleston, Mark Ross and
James Douma or their equivalent technical staff for the SVE. It
is understood that the business plan will encompass the salary,
benefits and company location, reasonable to both the employees
and SVE, to be provided to the above four (4) employees
including the stock option offers.
f. As an alternative to the payment schedule contemplated by 1.a
above, the parties may enter into a separate agreement pursuant to which
Yazaki shall deposit $1,000,000 in a Yazaki account in Japan during the
three month period. The funds in the account shall be distributed to
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<PAGE>
Amerigon upon the earlier of (i) the closing of the transactions
contemplated herein or (ii) the end of the three month period, unless
Amerigon has declared bankruptcy during the three month period.
g. If no definitive agreement is reached during the three month
period, Yazaki is not obligated to pay Amerigon any additional moneys
except those contemplated in this agreement, including no obligation to
pay Amerigon any damages or other type of relief.
2. BASIC PLAN. On the terms and conditions to be set forth in a
definitive agreement, Amerigon and Yazaki will establish a new company
(tentatively named "Smart Vehicle Electronics," or "SVE") that would carry
forward Amerigon's Interactive Voice Systems ("IVS") products business. SVE
will focus on selling only to the automotive industry aftermarket. Yazaki is
to provide SVE's financial and other resources, and to receive a specified
equity interest in, and managerial oversight of, SVE, as well as certain
technology transfer, exclusive licenses and other rights. The exact amount
and type of resources that Yazaki will provide will be determined during the
three month period through joint business planning between Amerigon, Yazaki
and TSA, with the understanding that necessary funds will be provided by
Yazaki to pursue the aftermarket product and OEM strategy. The mutual
agreement on SVE resources will be included in the definitive agreement.
Although the exact structure of the transactions by which SVE is to be formed
will be negotiated as part of the definitive agreement, it is generally
contemplated that (a) in exchange for a specified equity interest in SVE and
cash, Amerigon will transfer to SVE or Yazaki in a merger or similar
transaction an equity interest in an entity which owns all of Amerigon's
assets relating to the IVS project including all IVS technology, transferable
licenses, designs know-how and equipment that is unique to the IVS project
such as computers, sound studio and production and test equipment and IVS
inventory), and (b) that upon completion of the transactions, all such assets
relating to the IVS will be owned by SVE, and that the stock or equity
interests in SVE will be owned by Yazaki and Amerigon. Amerigon will not
transfer any IVS liabilities (such as accounts payable or product warranties)
to SVE with the exceptions of the obligation to respond to help desk
inquiries from current end-user purchasers of the IVS and the obligation to
complete the AISIN Seiki and Real-Time Traffic Data contracts on the
condition that sufficient engineers necessary to complete the above contracts
are transferred to SVE (SVE will collect any cash payments received under
these contracts from revenues that accrue after the effective date of
Addendum A). It is also contemplated that all of Amerigon's professional
personnel devoted to the IVS business would be employed by SVE.
3. GENERAL INTENT. It is the general intent of the parties, that the
establishment of SVE will result in an on-going, cooperative enterprise that
will:
a. Strengthen Yazaki's core automotive business;
b. Provide a technology transfer to Yazaki that will enable
Yazaki to diversify into new business beyond its current strategic
directions; and
c. Insure SVE's success and enable it to grow into a substantial
business by exploiting Amerigon's IVS technology and by developing new
technologies for the future.
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<PAGE>
4. CONTRIBUTIONS, EQUITY INTERESTS AND OTHER RIGHTS.
a. AMERIGON.
(1) Amerigon will transfer in a merger or other transaction,
as set forth in the definitive agreement, to SVE all of its IVS assets and
certain limited liabilities as specified in paragraph 2, including all IVS
technology, transferable licenses, designs, know-how and products, the
resultant technologies, G-4 navigator inventory, capital equipment, and
customer relationships. Amerigon will make its best efforts to transfer to
SVE all of the then existing engineers relating to IVS technology and
business.
(2) Amerigon will receive 4,062,000 shares in SVE with an
assumed predilution market value of $1.00 per share, representing a 16.25%
(fully diluted) equity interest.
(3) Amerigon will receive from SVE U.S. $2 million in cash
from SVE. The timing and terms of payment of such amount is to be negotiated
among the parties and specified in a definitive agreement. The first U.S. $1
million in cash from SVE to Amerigon will be paid upon within 30 days after
SVE's receipt of the certificate of incorporation. The second U.S. $1 million
will be paid by SVE to Amerigon twelve (12) months after the execution of the
definitive agreement.
b. YAZAKI
(1) Yazaki will contribute to SVE the necessary funds to
pursue SVE's business plan, per paragraph 2.
(2) Yazaki will receive 15,000,000 shares in SVE, representing
a 60% (fully diluted) equity interest in SVE.
(3) Yazaki will receive exclusive rights to market and sell
and manufacture all SVE products to OEMs world-wide, whether to automotive or
other industries.
(4) Yazaki will receive royalty-free (other than existing
required "pass-through" royalties, including, but not limited to, those for
maps, speech and voice licenses) world-wide licenses to SVE's "hands free,
eyes free" technology for application to products that are outside the scope
of SVE's strategic plan, and shall be entitled to apply these technologies to
new Yazaki products.
(5) Yazaki may manufacture product for SVE per mutual
agreement between SVE and Yazaki, provided Yazaki is competitive.
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<PAGE>
5. RESERVED EQUITY. 5,937,000 shares in SVE, representing 23.75%
(fully diluted) of SVE's total equity, will be reserved for key officers,
employees, "working" directors and TSA (see Section 8 below) through a stock
option plan. Such options will be awarded as incentive to key employees,
"working" directors and TSA (as contemplated by Section 8 below). The details
of the plan and the participants therein will be determined by the SVE CEO,
subject to the approval of the SVE Board of Directors.
6. (a) Both Yazaki and Amerigon shall not transfer their shares of
SVE to any party within the first seven (7) years except through appropriate
mergers or acquisitions of Amerigon's stock provided always that in the event
of such mergers or acquisitions, Yazaki shall have the option to purchase all
of Amerigon's shares of SVE for whichever is the lower price between (i)
$4,000,000 or (ii) the price determined in accordance with 6(a)ii) below.
After the above seven (7) years have elapsed, Amerigon shall have the right
to liquidate its stocks through the following two mechanisms;
i) The sale of Amerigon's shares in SVE to any third party which
does not compete with or harm the interests of SVE provided always that
Yazaki shall have the first refusal right to purchase the above shares on the
same terms and conditions extended to the said third party.
ii) The sale (put option) of Amerigon's shares in SVE to Yazaki
based on the average of the two lowest figures to be calculated by three
appraisers consisting of one appraiser selected by Yazaki, one appraiser
selected by Amerigon and a final appraiser to be selected by the two
appraisers selected by Yazaki and Amerigon respectively. The above mentioned
appraisers should be selected among international, reputable investment banks
or accounting firms.
(b) In the event of an IPO of SVE, Amerigon shall have the right
to register its shares for liquidation purposes and Amerigon's rights
mentioned above in 6(a)i) and ii) shall be forfeited.
7. GOVERNANCE.
a. SVE's Board of Directors shall initially include five seats.
It is the intent that Yazaki, through its Board majority, shall exercise full
operating control over SVE while appropriately protecting the rights of
minority shareholders and stock option holders. To help protect these rights,
the definitive agreement will specify Board actions that require a consensus
(80%) vote which will be limited to i) changes in by-laws and articles of
incorporation which will be consistent with this letter, including this
section, ii) actions related to mergers with Yazaki's affiliates or
substantial assets sales and licenses to Yazaki's affiliates either of which
may be detrimental to the purposes of SVE's activities in the aftermarket
business and iii) changes in the number of Board of Directors. All other Board
actions (such as approval of stock options, appointment or removal of
officers, approval of financial reports, audit, increase of capital and
distribution of dividends) will require only a simple majority vote.
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<PAGE>
b. Amerigon shall be entitled to one seat on the SVE Board of
Directors.
c. Yazaki will be entitled to three seats on the SVE Board of
Directors. Futhermore, should the size of the Board be increased, the number
of seats to which Yazaki and Amerigon will be entitled will remain in
proportion to their equity ownership in SVE.
d. The SVE CEO will be a member of the Board of Directors.
e. In the event that SVE wishes to increase its capital, SVE
shall give preemptive rights to subscribe newly issued shares to
each shareholders in accordance with its percentage shares
provided always that if any party declines to participate in the
increase of capital, the other party shall be permitted to
increase the capital on its own and the percentage shares of the
declining party will be diluted accordingly.
8. MATTERS RELATING-TO-TSA-
a. TSA partner Bob O. Evans will be the initial CEO of SVE. It is
intended that Mr. Evans will remain in this capacity and work in Monrovia,
California until approximately Dec. 31, 1997, at which time a successor CEO
is expected to be in place. Thereafter, Mr. Evans will serve SVE at the
pleasure of the Board of Directors.
b. In recognition of the foregoing services, TSA will receive
options to purchase 624,975 shares in SVE, representing a 2.5% (fully diluted)
equity interest in SVE, pursuant to and on the same terms and conditions
afforded to other participants in the stock option plan referred to in
Section 5 above.
9. DEFINITIVE AGREEMENT; APPROVALS AND CONSENTS. The definitive
agreement will contain terms, conditions, representations, warranties and
covenants customary and appropriate for a transaction of the type
contemplated hereby. The agreement will contemplate that the parties will
need to obtain all required regulatory approvals and third party consents.
Furthermore, the definitive agreement shall be entirely consistent and
conform with this letter of intent and such definitive agreement shall not
contain any provisions which will unreasonably work against the interests of
Yazaki.
10. CONFIDENTIALITY. The parties have previously entered into a
binding confidentiality agreement which shall remain in full force and effect.
11. PUBLICITY. The parties shall coordinate all publicity, if any,
relating to this proposal. No party shall issue any press release, publicity
statement or other public notice relating to the new company or this letter
without the prior consent of the other party unless required to do so under
applicable securities laws. The parties shall consult with one another as to
the content of any communication to their respective shareholders or any
governmental authority, relating to the new company.
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<PAGE>
12. ENFORCEABILITY; SEVERABILITY. This letter is intended to be a
firm offer to form SVE, enforceable in accordance with its terms. If any
provision of this agreement shall be held invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions hereof
shall not in any way be affected or impaired thereby. Any provision of this
agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
13. GOVERNING LAW. This letter shall be governed by and construed
in accordance with the laws of the State of California, without regard to
doctrines of conflicts of laws.
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<PAGE>
If this letter is satisfactory to you as a proposal to form SVE,
please so signify by executing this letter on behalf of Yazaki where
indicated below and returning it to me.
We look forward to working with you to consummate the formation of
SVE and to making it a success.
AMERIGON INCORPORATED
By: /s/ Joshua M. Newman
-------------------------------
Name: Joshua M. Newman
Title: President/CEO
Advanced Technology Group
TECHNOLOGY STRATEGIES
AND ALLIANCES
By: /s/ Joshua M. Newman for Bob O. Evans
--------------------------------
Name: Bob O. Evans /s/ Bob O. Evans
Title: Managing Partner 3/4/97
ACCEPTED AND AGREED:
YAZAKI CORP.
By: /s/ Kenzo Matsuzaki
-------------------------------
Name: Kenzo Matsuzaki
Title: Managing Director
Date: March 3, 1997
-----------------------------
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<PAGE>
ADDENDUM A
CONVERSION OF LETTER OF INTENT INTO AGREEMENT
Once executed and returned by both parties below, this letter
agreement is fully binding as a firm offer to create SVE. Futhermore,
Amerigon, by signing below, represents and warrants that it has paid $75,000
to Lernout & Hauspie, per paragraph 1.e.2.
In addition, by signing below, Amerigon offers Yazaki a three-month
option from the date of signing this Addendum A to purchase Amerigon's 16.25%
ownership in SVE and TSA's 2.5% stock options both for $20,500,000, or a
mutually-agreed lower amount. If this option is exercised, the parties agree
that: (1) Amerigon will transfer or otherwise provide SVE all of Amerigon's
rights and property described in this letter and (2) Yazaki establishes SVE
as a new private company with comparable stock options as envisioned herein.
Both parties shall agree neither to discuss nor negotiate with any
other party during the period beginning from the signing of this letter of
intent until the earlier of the signing of the definitive agreement; when
Yazaki stops payment mentioned in Section 1(a), or the three months after the
countersigning of this Addendum A.
YAZAKI CORP. TECHNOLOGY STRATEGIES
AND ALLIANCES
By: /s/ Kenzo Matsuzaki By: /s/ Bob O. Evans
------------------------- ------------------------------
Name: Kenzo Matsuzaki Name: Bob O. Evans
Title: Managing Director Title: Managing Partner
Date: March 21, 1997 Date: March 24, 1997
----------------------- ----------------------------
AMERIGON INCORPORATED
By: /s/ Joshua M. Newman
------------------------
Name: Joshua M. Newman
Title: Vice President
---------------------
Date: March 24, 1997
----------------------
10
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