<PAGE>
UNITED STATES
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 September 30, 1999
[ ] 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
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)
5462 Irwindale Avenue, Irwindale, California 91706
- -------------------------------------------- ------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (626) 815-7400
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 October 26, 1999 the registrant had 1,910,089 shares of Class A Common
Stock, no par value; and 9,000 shares of Convertible Preferred Stock, no par
value, issued and outstanding.
<PAGE>
AMERIGON INCORPORATED
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet 3
Statement of Operations 4
Statement of Cash Flows 5
Notes to Unaudited Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About 16
Market Risk
Part II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 17
Signature 18
</TABLE>
<PAGE>
PART 1
ITEM 1.
FINANCIAL STATEMENTS
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
December 31, September 30,
ASSETS 1998 1999
------------ -------------
<S> <C> <C>
Current Assets:
Cash & cash equivalents $ 1,667 $ 2,253
Short-term investments -- 1,854
Accounts receivable less allowance of $101 and $42, respectively 174 202
Inventory 105 488
Prepaid expenses and other assets 136 186
------------ -------------
Total current assets 2,082 4,983
Property and equipment, net 562 1,120
------------ -------------
Total Assets $ 2,644 $ 6,103
------------ -------------
------------ -------------
LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities:
Accounts payable $ 363 $ 781
Deferred revenue 44 --
Accrued liabilities 485 366
------------ -------------
Total current liabilities 892 1,147
Long term portion of capital lease 26 12
------------ -------------
Shareholders' Equity:
Convertible Preferred Stock;
Series A - no par value; 9,000 shares authorized,
none and 9,000 issued and outstanding at
December 31, 1998 and September 30, 1999 -- 8,267
Common stock;
Class A - no par value; 20,000 shares authorized,
1,910 issued and outstanding at
December 31, 1998 and September 30, 1999 28,149 28,149
Contributed capital 9,882 10,031
Deficit accumulated during development stage (36,305) (41,503)
------------ -------------
Total shareholders' equity 1,726 4,944
Total Liabilities and Shareholders' Equity $ 2,644 $ 6,103
------------ -------------
------------ -------------
</TABLE>
See accompanying notes to the condensed financial statements
<PAGE>
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
FROM
APRIL 23, 1991
THREE MONTHS ENDED NINE MONTHS ENDED (INCEPTION)
SEPTEMBER 30, SEPTEMBER 30, TO SEPTEMBER 30,
1998 1999 1998 1999 1999
------- ------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C>
Revenues:
Product $11 $20 $18 $47 $65
Development contracts and
related grants 273 82 585 467 4,988
Grants - - - - 2,572
------- ------- ------- ------- --------
Total revenues 284 102 603 514 7,625
Costs and expenses:
Product 13 178 48 221 269
Direct development contract
and related grant costs 361 409 953 1,295 17,164
Direct grant costs - - - - 1,980
Research and development 650 670 1,753 1,677 3,874
Selling, general and administrative,
Including reimbursable expense 885 924 2,842 2,524 21,189
------- ------- ------- ------- --------
Total costs and expenses 1,909 2,181 5,596 5,717 44,476
------- ------- ------- ------- --------
Operating Loss (1,625) (2,079) (4,993) (5,203) (36,851)
Interest income 47 84 221 101 1,400
Interest expense - - - (76) (377)
Gain on disposal of assets (29) - 20 - 2,363
------- ------- ------- ------- --------
Net loss from continuing operations and
before extraordinary item ($1,607) ($1,995) ($4,752) ($5,178) ($33,465)
Loss from discontinued operations (108) - (495) (19) (7,698)
------- ------- ------- ------- --------
Net loss before extraordinary item (1,715) (1,995) (5,247) (5,197) (41,163)
Extraordinary loss from extinguishment
of indebtedness - - - - (340)
------- ------- ------- ------- --------
Net loss ($1,715) ($1,995) ($5,247) ($5,197) ($41,503)
------- ------- ------- ------- --------
------- ------- ------- ------- --------
Net loss available to common shareholders ($1,715) ($1,995) ($5,247) ($5,264)
------- ------- ------- -------
------- ------- ------- -------
Basic and diluted net loss per share:
Loss from continuing operations ($0.84) ($1.04) ($2.49) ($2.75)
Discontinued operations ($0.06) $0.00 ($0.26) ($0.01)
------- ------- ------- -------
Available to common shareholders ($0.90) ($1.04) ($2.75) ($2.76)
------- ------- ------- -------
------- ------- ------- -------
Weighted average number of shares outstanding 1,910 1,910 1,910 1,910
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
See accompanying notes to the condensed financial statements
<PAGE>
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
From
April 23, 1991
Nine Months (inception) to
Ending September 30, September 30,
1998 1999 1999
--------- ---------- -------------
<S> <C> <C> <C>
Operating Activities:
Net Loss ($ 5,247) ($ 5,197) ($41,503)
Adjustments to reconcile net loss to cash used in
operating activities:
Loss from discontinued operations 495 19 7,698
Depreciation and amortization 397 287 1,943
Provision for doubtful accounts -- (59) 152
Stock option compensation -- -- 712
Gain from sale of assets (33) -- (2,363)
Contributed capital-founders' services without
cash compensation -- -- 300
Change in operating assets and liabilities:
Accounts receivable 93 31 (354)
Inventory (86) (383) (508)
Prepaid expenses and other assets 86 (50) (186)
Accounts payable (408) 418 434
Deferred revenue (54) (44) --
Accrued liabilities (20) (119) 431
--------- ---------- -------------
Net cash (used in) operating activities of continuing operations (4,777) (5,097) (33,244)
--------- ---------- -------------
Investing Activities:
Purchase of property and equipment (447) (784) (2,979)
Proceeds from sale of assets -- -- 2,800
Receivable from sale of assets 1,000 -- (1,000)
Proceeds from receivable from sale of assets -- -- 971
Short term investments purchased -- (1,854) (1,854)
Short term investments sold 2,400 -- --
--------- ---------- -------------
Net cash (used in) provided by investment activities of
continuing operations 2,953 (2,638) (2,062)
--------- ---------- -------------
Financing Activities:
Proceeds sales of preferred stock units, net -- 8,267 8,267
Proceeds sale of common stock units, net -- -- 34,772
Proceeds from exercise of stock options -- -- 160
Repurchase of common stock -- -- (15)
Borrowing under line of credit -- -- 6,280
Repayment of line of credit -- -- (6,280)
Repayment of capital lease (8) (15) (117)
Proceeds from Bridge Financing -- 1,200 4,200
Repayment of Bridge Financing -- (1,200) (4,200)
Proceeds of notes payable to shareholder -- -- 450
Repayment of notes payable to shareholder -- -- (450)
Contributed to capital -- 88 2,190
--------- ---------- -------------
Net cash (used in) provided by financing activities of
continuing operations (8) 8,340 45,257
--------- ---------- -------------
Cash used in discontinued operations (495) (19) (7,698)
--------- ---------- -------------
Net (decrease) increase in cash and cash equivalents (2,327) 586 2,253
--------- ---------- -------------
Cash and cash equivalents at beginning of period 6,037 1,667 --
--------- ---------- -------------
Cash and cash equivalents at end of period $ 3,710 $ 2,253 $ 2,253
--------- ---------- -------------
--------- ---------- -------------
</TABLE>
See accompanying notes to the condensed financial statements
<PAGE>
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY:
Amerigon Incorporated (the "Company") is in the business of developing
and manufacturing vehicle components for automotive original equipment
manufacturers ("OEMs"). The Company was incorporated in California on April 23,
1991 as a research and development entity focused on creating electric vehicles
("EV"). During 1998, the Company decided to suspend funding activities
associated with EV and directed its resources to developing and commercializing
the Climate Control Seat ("CCS-TM-") and Radar for Maneuvering and Safety
("AmeriGard-TM-"), which are both products of the Company's research. On May 26,
1999, the shareholders of the Company voted to discontinue EV operations. As a
result, the Company is now principally positioned to bring to market the CCS and
AmeriGard product lines and accordingly has incurred significant sales and
marketing, prototype and engineering expenses to gain orders for production
vehicles.
NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF CERTAIN ACCOUNTING POLICIES:
The accompanying financial statements as of September 30, 1999 have
been prepared by the Company without audit. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) necessary for fair
presentation have been included. The results of operations for the three and
nine month periods ended September 30, 1999 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, 1998.
Certain amounts have been reclassified from the prior year Form 10-Q to
conform with current period presentation.
On January 28, 1999, the Company effected a 1 for 5 reverse stock
split. Share information for all periods has been retroactively adjusted to
reflect the split.
NOTE 3 - EV SUBSIDIARY
On March 23, 1999, the Company's Board of Directors agreed to form a
subsidiary to hold the Company's EV operations. Pursuant to discussions held
among the Company's Board of Directors and Dr. Bell, Vice Chairman of the Board
and a significant shareholder of the Company, the Company agreed to sell to Dr.
Bell a 15% interest in the EV subsidiary for $88,000. On March 29, 1999, the 15%
was sold to Dr. Bell and was reflected as contributed capital.
On May 26, 1999, the shareholders voted to sell the remaining interest,
85%, of the EV subsidiary to Dr. Bell in exchange for all of his Class B Common
Stock (see Note 6). The financial statements of the Company have been
reclassified to reflect the dispositions of the EV operations as
<PAGE>
NOTE 3 - EV SUBSIDIARY (CONT.)
a discontinued operation. Accordingly, the revenues, costs and expenses, and
cash flows of the EV operations have been excluded from the respective captions
in the Statements of Operations and Statements of Cash Flows. The results of the
EV operations have been reported separately as discontinued operations in such
statements. The EV related assets were nil at December 31, 1998 and September
30,1999 and sales were nil for the three and nine months ended September 30,
1999 and 1998.
NOTE 4 - GOING CONCERN
The Company has suffered recurring losses and negative cash flows from
operations since inception and has a significant accumulated deficit.
Consequently, in order to fund continuing operations and complete product
development, the Company will need to raise additional financing. In this
regard, the Company completed the sale of 9,000 shares of Series A Convertible
Preferred Stock on June 8, 1999 with an investor group (Note 5). Management
believes that the proceeds from the equity financing, together with existing
cash balances will be sufficient to meet its cash needs of the Company through
the end of 1999.
To fund its operations, the Company will need to raise additional cash
from financing sources before the Company can achieve profitability from its
operations. The Company's ability to raise additional financing or achieve
profitability cannot be assured. As such, there is substantial doubt about the
Company's ability to continue as a going concern.
NOTE 5 -CONVERTIBLE PREFERRED STOCK
On March 29, 1999, the Company entered into a Securities Purchase
Agreement (the "Financing") with an investor group. Under the terms of the
Financing, on June 8, 1999, the Company issued 9,000 shares of Series A
Convertible Preferred Stock and warrants to purchase up to 1,214,814 shares of
Class A Common Stock in exchange for $9,001,000. The Series A Convertible
Preferred Stock will initially be convertible into 5,373,134 shares of Class A
Common Stock. The warrants can only be exercised to the extent that certain
other warrants to purchase Class A Common Stock are exercised by existing
warrant holders and then only in the proportion of the Company's equity
purchased and at the same exercise price as the exercising warrant holders.
In connection with the above Financing, the Company granted to
financial advisors warrants to purchase 45,000 shares of Class A Common Stock at
exercise prices ranging from $2.67 to $5.30. The warrants are exercisable at
various dates ranging from March to June 2004.
Also in conjunction with the above Financing, the Company recorded a
dividend to the Series A Convertible Preferred Stockholders of $67,000 or $0.04
per weighted average common shares outstanding resulting from the beneficial
difference between the conversion price and the fair market value of Class A
Common Stock on the date of commitment, May 26, 1999.
CONVERSION
Each issued share of Series A Convertible Preferred Stock is
immediately convertible, in full and not in part, into shares of Class A Common
Stock equal to $1,000 divided by the Conversion Price. The Conversion Price is
$1.675, subject to proportional adjustments for certain dilutive
<PAGE>
NOTE 5 -CONVERTIBLE PREFERRED STOCK (CONT.)
issuance, splits and combinations and other recapitalizations or
reorganizations. A total of 5,373,134 shares of Class A Common Stock has been
reserved for issuance in the event of the conversion of Series A Convertible
Preferred Stock.
VOTING RIGHTS
The holder of each share of Series A Convertible Preferred Stock will
have the right to one vote for each share of Class A Common Stock into which
such Series A Convertible Preferred Stock could then be converted.
DIVIDENDS
The Series A Convertible Preferred Stock will receive dividends on an
"as-converted" basis with the Class A Common Stock when and if declared by the
Board of Directors. The dividends are noncumulative and are payable in
preference to any dividends on common stock.
LIQUIDATION PREFERENCE
Upon liquidation, dissolution or winding up of Amerigon, each share of
Series A Convertible Preferred Stock is entitled to a liquidation preference of
$1,000 plus 7% of the original issue price ($1,000) annually for up to four
years after issuance plus any declared but unpaid dividends in priority to any
distribution to the Class A Common Stock, which will receive the remaining
assets of Amerigon. On September 30, 1999, the liquidation preference was
$9,000,000.
REDEMPTION
On or after January 1, 2003, if the closing price of the Class A Common
Stock for the past 60 days has been at least four times the then Conversion
Price ($1.675 per share at September 30, 1999), Amerigon may redeem the Series A
Convertible Preferred Stock for an amount equal to the liquidation preference.
<PAGE>
NOTE 6 - 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. Because their
effects are anti-dilutive, net loss per share for the periods ended September
30, 1998 and 1999 do not include the effect of:
<TABLE>
<CAPTION>
Three and Nine Months Ended
September 30,
----------------------------
1998 1999
--------- ----------
<S> <C> <C>
Stock options outstanding for:
1993 Stock Option Plan 92,976 77,147
1997 Stock Option Plan 114,334 777,934
(as amended)
Options granted by Lon Bell
to directors and officers 118,422 17,058
Warrants to purchase outstanding
shares of Class A Common Stock 1,471,751 2,731,565
Series A Preferred Stock -- 5,373,134
---------- ----------
Total 1,797,483 8,976,838
---------- ----------
</TABLE>
NOTE 7 - SEGMENT REPORTING
The following tables present segment information about the reported
revenues and operating loss of Amerigon for the three and nine months ended
September 30, 1998 and 1999 (in thousands). Asset information by reportable
segment is not reported since management does not produce such information.
<TABLE>
<CAPTION>
For The Three Months Ended Climate Control Seats Radar Reconciling Items As Reported
September 30,
- ------------------------------ --------------------- ------ ------------------- -----------
<S> <C> <C> <C> <C>
1998
Revenue $94 $190 $ - $284
Operating Profit (Loss) (771) 31 1 (885) (1,625)
1999
Revenue 102 - - 102
Operating Profit (Loss) (924) (231) 1 (924) (2,079)
</TABLE>
- -----------------------------
(1) Represents selling, general and administrative costs of $803,000 and
$867,000, respectively, and depreciation expense of $82,000 and $57,000,
respectively, for the three months ended September 30, 1998 and 1999.
<PAGE>
NOTE 7 - SEGMENT REPORTING (CONT.)
<TABLE>
<CAPTION>
For The Nine Months Ended Climate Control Seats Radar Reconciling Items As Reported
September 30,
- ---------------------------------- ---------------------- -------- ------------------ ------------
<S> <C> <C> <C> <C>
1998
Revenue $333 $270 $ - $603
Operating Profit (Loss) (1,865) (286) 1 (2,842) (4,993)
1999
Revenue 415 99 - 514
Operating Profit (Loss) (2,138) (541) 1 (2,524) (5,203)
</TABLE>
- ----------------------------------
(1) Represents selling, general and administrative costs of $2,596,000 and
$2,355,000, respectively, and depreciation expense of $246,000 and
$169,000, respectively, for the nine months ended September 30, 1998 and
1999.
Revenue information by geographic area (in thousands);
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine months Ended September 30,
1998 1999 1998 1999
----------------------------------- -------------------------------
<S> <C> <C> <C> <C>
United States - Commercial $ 25 $ 35 $ 47 $127
United States - Government 80 - 104 99
Asia 128 67 387 170
Europe 51 - 65 118
------- ------- -------- --------
Total Revenues $284 $102 $603 $514
------- ------- -------- --------
------- ------- -------- --------
</TABLE>
For the three months ended September 30, 1998, two foreign customers represented
23% and 28% of the Company's sales. For the three months ended September 30,
1999, one foreign customer represented 51% of the Company's sales. For the nine
months ended September 30, 1998, one foreign customer represented 39% of the
Company's sales. For the nine months ended September 30, 1999, two foreign
customers represented 30% and 22% of the Company's sales.
<PAGE>
PART 1
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Amerigon Incorporated (the "Company") is in the business of developing
and manufacturing vehicle components for automotive original equipment
manufacturers ("OEMs"). The Company was incorporated in California on April 23,
1991 as a research and development entity focused on creating electric vehicles
("EV"). During 1998, the Company decided to suspend funding activities
associated with EV and directed its resources to developing and commercializing
the Climate Control Seat ("CCS-TM-") and Radar for Maneuvering and Safety
("AmeriGard-TM-"), which are both products of the Company's research. On May 26,
1999, the shareholders of the Company voted to discontinue EV operations. As a
result, the Company is now principally positioned to bring to market the CCS and
AmeriGard product lines and accordingly has incurred significant sales and
marketing, prototype and engineering expenses to gain orders for production
vehicles.
AUTO INDUSTRY. The Company is now operating as a supplier to the auto
industry. Inherent in this market are costs and expenses well in advance of the
receipt of orders (and resulting revenues) from customers. This is due in part
to the OEM requiring the coordination and testing of proposed new components and
sub-systems. Revenues from these expenditures may not be realized for 2 to 3
years as the OEMs tend to group new components and enhancements into annual or
every 2 to 3 year vehicle model introductions.
RESULTS OF OPERATIONS
THIRD QUARTER 1999 COMPARED WITH THIRD QUARTER 1998
REVENUES. Revenues for the three months ended September 30, 1999
("Third Quarter 1999") were $102,000 as compared with revenues of $284,000 in
the three months ended September 30, 1998 ("Third Quarter 1998"). The decrease
in revenues was due primarily to the decrease in development programs associated
with the AmeriGard system. This decrease was slightly offset by increased sales
of the Company's CCS units. The Company anticipates increased product revenues
as it begins shipment of its CCS units to Johnson Controls Incorporated in the
Fourth Quarter 1999.
PRODUCT COSTS. Product costs increased from $13,000 in the Third
Quarter 1998 to $178,000 in the Third Quarter 1999. During Third Quarter 1999,
the Company continued to incur costs related to the ramp-up of production of the
Company's CCS units which are anticipated to be shipped in mass-volumes starting
in the Fourth Quarter 1999. The Company anticipates product costs to increase in
absolute dollars while decreasing as a percentage of revenue.
DIRECT DEVELOPMENT CONTRACT AND RELATED GRANT COSTS. Direct development
contract and related grant costs incurred in the Third Quarter 1999 were
$409,000 compared to $361,000 in the Third Quarter 1998. This is primarily due
to the costs incurred in conjunction with the pre-
<PAGE>
RESULTS OF OPERATIONS (CONT.)
production of the Climate Control Systems for a major automotive supplier which
is anticipated to be in production by mid 2000.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
increased to $670,000 in Third Quarter 1999 from $650,000 in Third Quarter 1998.
The increase was primarily due to an increase in computer aided design services
related to various CCS platforms somewhat offset by a decrease in prototype
tooling associated with the CCS systems.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses increased to $924,000 in Third Quarter 1999
compared to $885,000 in Third Quarter 1998. The change was due to the increase
in liability insurance premiums and outside services/consultants in the Third
Quarter 1999. The Company expects SG&A expenses to increase as it hires
additional employees in connection with the development of Radar products and
the commencement of production and marketing of CCS systems.
INTEREST INCOME. Net interest income in 1999 increased due to increased
cash balances provided by the Financing (see note 5) on June 8, 1999.
NINE MONTHS 1999 COMPARED WITH NINE MONTHS 1998
REVENUES. Revenues for the nine months ended September 30, 1999
("1999") were $514,000 as compared with revenues of $603,000 in the nine months
ended September 30, 1998 ("1998"). The change was due to a decrease in revenues
generated by the direct development contracts associated with the Radar program
of $118,000 somewhat offset by the increase in product shipments for the Climate
Control Seat program of $29,000.
PRODUCT COSTS. Product costs increased from $48,000 in 1998 to $221,000
in 1999. During 1999, the Company continued to incur costs related to the
ramp-up of production of the Company's CCS units which are anticipated to be
shipped in mass-volumes starting in the Fourth Quarter 1999. The Company
anticipates product costs to increase in absolute dollars while decreasing as a
percentage of revenue.
DIRECT DEVELOPMENT CONTRACT AND RELATED GRANT COSTS. Direct development
contract and related grant costs increased to $1,295,000 in 1999 from $953,000
in 1998. This is primarily due to the costs incurred in conjunction with the
pre-production of the Climate Control Systems for a major automotive supplier
which are anticipated to be in production by mid 2000.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
decreased to $1,677,000 in 1999 from $1,753,000 in 1998. The decrease was due to
the Company's shift of emphasis from research and development to direct
development contracts and pre-production efforts associated with the anticipated
contracts with Climate Control Seats.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses decreased to $2,524,000 in 1999 compared to
$2,842,000 in 1998. The change was due to a decrease in recruiting expenses and
other outside services/consultants in 1999. The Company expects SG&A expenses to
increase as it hires additional employees in connection with
<PAGE>
RESULTS OF OPERATIONS (CONT.)
the development of Radar products and the commencement of production and
marketing of Climate Control Seats.
INTEREST INCOME. Net interest income in 1999 decreased to $25,000 due
to a decline in cash balances before the 1999 Financing (see note 5). The
Company also incurred interest expense of $14,000 as a result of a bridge loan
of $1,200,000 and $62,000 associated with the amortization of deferred financing
costs.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1999, the Company had working capital of $3,836,000.
On June 8, 1999 the Company completed a financing (the "1999 Financing") with an
investor group pursuant to which the Company sold 9,000 shares of Series A
Convertible Preferred Stock for $9,000,000. The Preferred Stock is convertible
into Class A Common Stock. In addition, the Company issued warrants to purchase
up to 1,214,814 shares of Class A Common Stock. The warrants are exercisable
only to the extent certain other warrants to purchase Class A Common Stock are
exercised and then only in an amount that will enable the Investors to maintain
the same percentage interest in the Company that they have in the Company after
the initial investment on a fully converted basis. This transaction was approved
by the shareholders at the 1999 Annual Meeting.
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 contracts and sale of prototypes to customers.
The Company has entered into a production contract with Johnson
Controls Incorporated for Climate Control Seats with the initial shipments
anticipated in the Fourth Quarter of 1999. The Company has spent to date
$1,676,000 for tooling, equipment and materials related to this contract. The
Company expects to spend an additional $296,000 for tooling, equipment and
materials for this product line in the Fourth Quarter of 1999. These expenses
have been offset by reimbursements of $159,000 from Johnson Controls, to date.
Additionally, the Company has been building inventory in anticipation of the
program launching which has reduced the Company's cash balance.
Cash and cash equivalents increased by $586,000 in 1999 primarily due
to the cash raised by the 1999 Financing offset by the cash used in operating
activities of $5,097,000, which was mainly attributable to the net loss of
$5,178,000 before loss from discontinued operations of $19,000 associated with
the electric vehicle program. Investing activities used $2,638,000 as the
Company made short term investments in government securities of $1,854,000 and
purchased production equipment and tooling of $784,000. Financing activities
provided $8,340,000 due primarily to $8,267,000 from net proceeds of the 1999
Financing.
Until the Company is selling units in the automotive market with an
appropriate margin and volume, the Company expects to incur losses for the
foreseeable future. Even with the anticipation of volume production for a model
2000 luxury SUV platform, the revenue generated from the initial orders will not
be sufficient to meet the Company's operating needs. The Company will need to
raise additional cash from financing sources before the Company can achieve
profitability from its operations. There can be no assurance that profitability
can be achieved in the future. Although the
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES (CONT.)
Company has begun limited production on its Climate Control Seat product,
larger orders for the seat product and the ability to begin production on the
AmeriGard product will require significant expenses for tooling 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. The Company does not intend to pursue any more significant grants
or development contracts to fund operations and therefore is highly dependent
on its current working capital sources. Future financing will be required and
there can be no assurance that additional financing will be available in the
future or that it will be available on favorable terms.
IMPACT OF YEAR 2000
The Company has implemented a comprehensive Year 2000 ("Y2K") initiative to
identify and address issues associated with the Year 2000. A team of internal
staff is managing the initiative with the assistance of some outside
consultants. The team's activities are designed to ensure that there are no
material adverse effects of the Company.
The Company has completed the assessment phase of its internal information
services computer systems associated with the Year 2000. In response to this
assessment, the Company has modified, upgraded or replaced portions of its
software and hardware so that these computer systems will function properly with
respect to dates in the year 2000 and thereafter. To date, the Company has
completed upgrading and testing all of the affected internal computer systems
related to its information and non-information technology systems used in
product development, engineering, manufacturing and facilities.
The Company is also working with its significant suppliers and financial
institutions to ensure that those parties have appropriate plans to address Y2K
issues where their systems interface with the Company's systems or otherwise
impact its operations. The Company has communicated in writing with all of its
principal suppliers to confirm their status in regards to Y2K issues. The
Company has assessed the extent to which its operations are vulnerable should
those organizations fail to properly remedy their computer systems. The Company
does not anticipate that potential Y2K issues at the customer level will have a
material adverse effect on its ability to conduct normal business.
While the Company believes its efforts have been adequate to address its
Y2K concerns, there can be no assurance that the systems of other companies on
which the Company's systems and operations rely will be converted on a timely
basis and will not have a material adverse effect on the Company. Therefore, the
Company will continue to monitor Year 2000 issues throughout the remainder of
1999 and into 2000 to ensure that any additional or previously unidentified
issues are properly addressed. The Company has not identified a need to develop
an extensive contingency plan for non-remediation issues at this time. The need
for such a plan is evaluated on an ongoing basis as part of the Company's
overall Year 2000 initiative.
Based on the Company's assessment to date, the costs of the Year 2000
initiative (which are expensed as incurred) have been approximately $20,000.
<PAGE>
IMPACT OF YEAR 2000 (CONT.)
The cost of the project and the date on which the Company completed its
Year 2000 initiative are based on management's best estimate, according to
information available through the Company's assessments to date. However,
there can be no assurance that these estimates will be achieved, and actual
results could differ materially from those anticipated. Specific factors that
might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the retention of
these professions, the ability to locate and correct all relevant computer
codes, and similar uncertainties. At present, the Company has not experienced
any significant problems in these areas.
OTHER INFORMATION
Certain matters discussed or referenced in this report, including the
Company's intention to develop, manufacture and market Climate Control Seats and
Radar products and the Company's expectation of reduced revenues and continuing
losses for the foreseeable future, are forward looking statements. Other forward
looking statements may be identified by the use of forward looking terminology
such as "may", "will", "expect", "believe", "estimate", "anticipate",
"continue", or similar terms, variations of such terms or the negative of such
terms. Such statements are based upon management's current expectations and are
subject to a number of risks and uncertainties which could cause actual results
to differ materially from those described in the forward looking statements.
Such risks and uncertainties include the market demand for and performance of
the Company's products, the Company's ability to develop, market and manufacture
such products successfully, the viability and protection of the Company's
patents and other proprietary rights, and the Company's ability to obtain new
sources of financing. Additional risks associated with the Company and its
business and prospects are described in the Company's Annual Report on Form 10-K
for the year ended December 31, 1998.
<PAGE>
PART 1
ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
There have been no material changes since the Form 10-K was filed for
the Company's year ended December 31, 1998.
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.01 Amendment to the Amerigon Incorporated 1997
Stock Option Plan
27 Financial Data Schedule
(b) Reports on Form 8-K
none
- ----------------------------
<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: November 12, 1999 /s/ Richard A. Weisbart
--------------------------------------------
Richard A. Weisbart
Chief Executive Officer
/s/ Sandra L. Grouf
--------------------------------------------
Sandra L. Grouf
Controller
(Principal Accounting Officer)
<PAGE>
AMENDMENT TO
THE AMERIGON INCORPORATED
1997 STOCK OPTION PLAN
Section 1.4(b) of The Amerigon Incorporated 1997 Stock Option Plan is
hereby amended and restated in its entirety to read as follows:
(B) SHARE LIMITS. The maximum number of shares of Common Stock that
may be delivered pursuant to all Options (including both Nonqualified
Stock Options and Incentive Stock Options) granted under this Plan
shall not exceed 1,300,000 shares (the "SHARE LIMIT"). The maximum
number of shares of Common Stock that may be delivered pursuant to
options qualified as Incentive Stock Options granted under this Plan
is 1,240,000 shares. The maximum number of shares of Common Stock that
may be delivered to Non-Employee Directors under the provisions of
Article 3 shall not exceed 60,000 shares. The maximum number of shares
subject to those options that are granted during any calendar year to
any Eligible Employee shall be limited to 250,000. Each of the four
foregoing numerical limits shall be subject to adjustment as
contemplated by this Section 1.4 and Section 4.2.
This amendment shall be effective as of June 23, 1999, the date of Board
approval, subject to shareholder approval within 12 months thereafter.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 2,253
<SECURITIES> 1,854
<RECEIVABLES> 244
<ALLOWANCES> (42)
<INVENTORY> 488
<CURRENT-ASSETS> 186
<PP&E> 2854
<DEPRECIATION> (1734)
<TOTAL-ASSETS> 6103
<CURRENT-LIABILITIES> 1147
<BONDS> 0
0
8267
<COMMON> 28149
<OTHER-SE> (31472)
<TOTAL-LIABILITY-AND-EQUITY> 6103
<SALES> 47
<TOTAL-REVENUES> 514
<CGS> 221
<TOTAL-COSTS> 5717
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (5178)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5178)
<DISCONTINUED> (19)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5197)
<EPS-BASIC> (2.72)
<EPS-DILUTED> (2.72)
</TABLE>
