<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
For the quarterly period ended September 30, 2000
[ ] 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 November 3, 2000, the registrant had 4,427,975 shares of Class A Common
Stock, no par value, issued and outstanding.
(1)
<PAGE>
AMERIGON INCORPORATED
TABLE OF CONTENTS
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 14
Item 3. Quantitative and Qualitative Disclosures About 17
Market Risk
Part II OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 18
Signatures 19
(2)
<PAGE>
Part I
AMERIGON INCORPORATED
BALANCE SHEET
(In thousands)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 2000 1999
------------- ------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash & cash equivalents $ 5,678 $ 1,647
Accounts receivable less allowance of
$55 at September 30, 2000
and $58 at December 31, 1999 1,397 282
Inventory 1,161 490
Prepaid expenses and other assets 726 251
-------- --------
Total current assets 8,962 2,670
Property and equipment, net 956 1,051
Deferred exclusivity fee 1,239 -
-------- --------
Total assets $ 11,157 $3,721
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable $ 1,140 $ 592
Accrued liabilities 940 597
Deferred Revenue 401 -
-------- --------
Total current liabilities 2,481 1,189
Long term portion of capital lease 7 11
-------- --------
Total liabilities 2,488 1,200
-------- --------
Mandatorily redeemable preferred stock:
Series A - Preferred Stock -
no par value; redeemable and convertible;
9 shares authorized, none and 9
issued and outstanding at
September 30, 2000 and December 31, 1999 - 8,267
-------- --------
Shareholders' equity (deficit):
Preferred Stock:
Series A - no par value; convertible;
9 shares authorized, 9 and none
issued and outstanding at September 30, 2000
and December 31, 1999;
liquidation preference of $9,788 8,267 -
Common Stock;
No par value; 20,000 shares authorized,
4,428 and 1,910 issued and outstanding at
September 30, 2000 and December 31, 1999 37,984 28,149
Paid-in capital 14,719 10,059
Deferred compensation (26) (74)
Accumulated deficit (52,275) (43,880)
-------- --------
Total shareholders' equity (deficit) 8,669 (5,746)
-------- --------
Total liabilities and shareholders' equity
(deficit) $ 11,157 $ 3,721
======== ========
</TABLE>
See accompanying notes to the condensed financial statements
(3)
<PAGE>
AMERIGON INCORPORATED
STATEMENT OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
---------- --------- --------- ----------
(Restated)
<S> <C> <C> <C> <C>
Revenues:
Product sales $ 1,779 $ 20 $ 3,677 $ 47
Development contracts - 82 159 368
-------- ------- ------- --------
Total revenues 1,779 102 3,836 415
Costs and expenses:
Product 1,625 178 3,288 221
Development contracts 458 409 1,283 1,295
Research and development 611 670 1,869 1,676
Selling, general and administrative 1,573 924 4,043 2,525
-------- ------- ------- --------
Total costs and expenses 4,267 2,181 10,483 5,717
-------- ------- ------- --------
Operating loss (2,488) (2,079) (6,647) (5,302)
Interest income 111 85 152 101
Interest expense - - (2,607) (25)
Loss on disposal of assets - - - (19)
-------- ------- ------- --------
Loss before extraordinary item (2,377) (1,994) (9,102) (5,245)
Extraordinary gain from the early extinguishment of debt - - 707 -
-------- ------- ------- --------
Net loss $(2,377) $(1,994) $(8,395) $ (5,245)
======== ======= ======= ========
Net loss available to common shareholders $(2,377) $(1,994) $(8,395) $(13,512)
======== ======= ======= ========
Basic and diluted net loss per share:
Loss before extraordinary gain $(0.54) $(1.04) $ (3.12) $(7.07)
Extraordinary gain from the early
extinguishment of debt .24
-------- ------- ------- --------
Net loss $(0.54) $(1.04) $ (2.88) $(7.07)
======== ======= ======= ========
Weighted average number of common shares outstanding 4,428 1,910 2,913 1,910
======== ======= ======= ========
</TABLE>
See accompanying notes to the condensed financial statements
(4)
<PAGE>
AMERIGON INCORPORATED
STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
2000 1999
------- -------
(Restated)
<S> <C> <C>
Operating Activities:
Net loss $(8,395) $(5,245)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization 393 236
Amortization of debt discount 57 -
Extraordinary gain from the early extinguishment of debt (707) -
Deferred revenue 401 (44)
Non-cash interest 2,500 -
Provision for doubtful accounts (3) (59)
Compensation from grant of non-employee stock options and warrants 1 -
Loss from sale of assets - 19
Change in operating assets and liabilities:
Accounts receivable (1,112) 31
Inventory (671) (383)
Prepaid expenses and other assets (335) (50)
Accounts payable 559 418
Accrued liabilities 343 (21)
------- -------
Net cash used in operating activities (6,969) (5,098)
------- -------
Investing Activities:
Purchase of property and equipment (308) (803)
Short-term investments purchased - (1,854)
------- -------
Net cash used in investing activities (308) (2,657)
------- -------
Financing Activities:
Proceeds from sale of Preferred Stock - 9,001
Proceeds from sale of Common Stock 11,000 -
Cost of equity issuances (1,233) (734)
Proceeds from exercise of stock options 56 -
Repayment of capital lease (15) (14)
Proceeds from bridge financing 2,500 1,200
Repayment of bridge financing (1,000) (1,200)
Sale of shares in consolidated subsidiary - 88
------- -------
Net cash provided by financing activities 11,308 8,341
------- -------
Net increase in cash and cash equivalents 4,031 586
------- -------
Cash and cash equivalents at beginning of period 1,647 1,667
------- -------
Cash and cash equivalents at end of period $ 5,678 $ 2,253
======= =======
</TABLE>
See accompanying notes to condensed financial statements
(5)
<PAGE>
AMERIGON INCORPORATED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 1 - The Company
Amerigon Incorporated (the "Company") was incorporated in California in April
1991 and is a developer, marketer and manufacturer of proprietary, high
technology electronic components and systems for sale to car and truck original
equipment manufacturers ("OEMs"). The Company is currently focusing the
majority of its efforts on the introduction of its primary product, a Climate
Control Seat (TM) ("CCS(TM)"), which provides both heating and cooling to seat
occupants. The Company has one other product under development, the
AmeriGuard(TM) radar-based speed and distance sensor system, which alerts
drivers to the presence of objects near the vehicle.
Note 2 - Basis of Presentation and Summary of Certain Accounting Policies
The accompanying financial statements as of September 30, 2000 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-month
and nine-month periods ended September 30, 2000 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, 1999.
Certain amounts have been reclassified from the prior year Form 10-Q to
conform to current period presentation.
Note 3 - Going Concern
The Company has suffered recurring losses and negative cash flows from
operations since inception and has a significant accumulated deficit. The
Company expects to incur losses for the foreseeable future as current sales
volumes are not sufficient to cover the Company's fixed manufacturing, overhead
and operating costs. Sufficient volume will not be reached in the near term, as
automotive industry development timing tends to be relatively long. Although the
Company is working with many car platforms for future introduction of its CCS
technology, most of these will not introduce the product until the 2003 model
year (2002 calendar year) and beyond. Even with the shipments of volume
production for the Lincoln Navigator SUV, Lexus LS 430 and other platforms to be
introduced in 2001, 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 Company has begun limited production
on its CCS product, larger orders for the CCS product and the ability to begin
production on the AmeriGuard 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 will also require significant capital if it
completes the acquisition of a manufacturer of related automotive products (Note
13). The Company does not intend to pursue any more significant 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. These conditions raise substantial doubt
about the Company's ability to continue as a going concern.
(6)
<PAGE>
On June 14, 2000, the Company completed the sale of 2.2 million of the
Company's common shares in a private placement (the "Private Placement") to
institutional and accredited investors for gross proceeds of $11.0 million, less
$1.2 million in issuance costs. Management will need to seek additional sources
of permanent equity or long-term financing to fund its operations. The outcome
of such efforts to obtain additional financing cannot be assured.
Note 4 - Restatement
The Company determined that it was necessary to revise its unaudited results
of operations as of and for the nine-month period ended September 30, 1999.
A summary of the impact of such restatements on the unaudited financial
statements as of and for the nine-month period ended September 30, 1999 is as
follows (in thousands, except per share information):
<TABLE>
<CAPTION>
Nine Months
Ended September 30, 1999
----------------------------
As Previously
Reported Restated
--------------- -----------
<S> <C> <C>
Shareholders' equity $ 4,944 $ (3,422)
Revenue 514 415
Net loss (5,197) (5,245)
Net loss available to
Common shareholders (5,264) (13,512)
Basic & diluted
net loss per share (2.76) (7.07)
</TABLE>
In June, 1999, the Company issued 9,000 shares of Series A Preferred Stock
for net proceeds of $8,267,000. The revision to Shareholders Equity at
September 30, 1999 included the reclassification of the Preferred Stock from
Shareholders' Equity to Mezzanine Equity due to a provision of the Preferred
Stock that was deemed to be a condition of redemption that is not solely within
the control of the issuer. In addition, the Company increased its net loss
available to Common shareholders by $8,200,000 to reflect the beneficial
difference between the conversion price of $1.675 and the closing price of the
Common Stock on the date of issuance of $4.31. The revision to revenue and net
loss for the nine- month period ended September 30, 1999 includes the
reclassification of $99,000 of revenue recorded in the first quarter of 1999 to
liabilities. The amount related to a research and development arrangement with
the New Mexico Department of Transportation and was offset against development
contract expenses in the quarter ended March 31, 2000. The revision to net loss
for the nine-month period ended September 30, 1999 includes a decrease in
amortization of debt issuance costs of $51,000 due to a change in the estimated
valuation of warrants issued in conjunction with a bridge financing. The
revisions also include a change in the way the Company recorded the disposal of
its Electric Vehicle Unit. In the nine-month period ended September 30, 1999,
the Electric Vehicle Unit disposition was originally classified as a
discontinued operation for historical financial reporting purposes. In the
nine-month period ended 1999 the disposition is no longer reported as a
discontinued operation for historical financial purposes and the Company
reported the loss on disposition of $19,000 as a loss on disposal of assets.
(7)
<PAGE>
In March 2000, the holders of the Series A Preferred Stock entered into an
agreement, subsequently approved by the Company's shareholders, whereby the
holders agreed to amend the Company's Certificate of Determination of the Series
A Preferred Stock to eliminate the provision that defined a merger, acquisition
or sale of assets where there is a change in control as a liquidation event.
Accordingly, the Series A Preferred Stock is no longer considered mandatorily
redeemable and was reclassified from the mezzanine to equity.
Note 5 - 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 three and nine months ended September
30, 2000 and 1999, does not include the effect of:
<TABLE>
<CAPTION>
Three and Nine Months
Ended September 30,
-----------------------
2000 1999
---------- ---------
<S> <C> <C>
Stock options outstanding for:
1993 and 1997 Stock Option Plans 873,447 848,160
Shares of Common Stock
issuable upon the exercise of warrants 2,555,118 1,666,200
Shares of Common Stock
issuable upon the exercise of
contingent warrants 1,653,520 1,229,574
Common Stock issuable upon the
conversion of Series A Preferred Stock 5,373,134 5,373,134
---------- ---------
Total 10,455,219 9,117,068
========== =========
</TABLE>
The net loss available to Common shareholders for the nine months ended
September 30, 1999, represents net loss increased by a non-cash deemed dividend
of $8,267,000 to the holders of the Series A Preferred Stock resulting from the
beneficial difference between the conversion price and the fair market value of
the Common Stock on the date of issuance of the Series A Preferred Stock.
(8)
<PAGE>
Note 6 - Non-cash Supplemental Disclosure (in thousands)
<TABLE>
September 30, September 30,
2000 1999
------------- ------------
<S> <C> <C>
Issuance of warrants to underwriter of
private placement 1,440 -
Exchange of bridge note payable for
Common Stock 1,452 -
Issuance of stock options to non-employees 47 -
Issuance of warrants to underwriter
in conjunction with the bridge loan 173 -
Issuance of warrants to consultants for
exclusivity rights 1,369 -
</TABLE>
Note 7 - Recent Accounting Pronouncements
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No.101 ("SAB 101"), Revenue Recognition, which outlines
the basic criteria that must be met to recognize revenue and provides guidance
for presentation of revenue and for disclosure related to revenue recognition
policies in financial statements filed with the SEC. The Company will adopt SAB
101 in the fourth quarter of 2000. Management believes that adopting SAB 101
will not have a material impact on the Company's financial position or results
of operations.
In March 2000, the Financial Accounting Standards Board ("FASB") issued
Financial Interpretation No.44 ("FIN 44"), "Accounting for Certain Transactions
Involving Stock Compensation", which is an interpretation of Accounting
Principal Board No.25. This interpretation clarifies:
. the definition of employee for purposes of applying Opinion 25, which
deals with stock compensation issues;
. the criteria for determining whether a plan qualifies as a
noncompensatory plan;
. the accounting consequence of various modifications to the terms of a
previously fixed stock option or award; and
. the accounting for an exchange of stock compensation awards in a
business combination.
This interpretation is effective July 1, 2000, but certain conclusions in
this interpretation cover specific events that occur after either December 31,
1998 or January 12, 2000. To the extent that this interpretation covers events
during the period after December 31, 1998 or January 12, 2000, but before the
effective date of July 1, 2000, the effects of applying this interpretation are
recognized on a prospective basis from July 1, 2000. Management believes that
the adoption of FIN 44 did not have a material impact on the financial
statements.
Note 8 - Private Placement
On June 14, 2000, the Company completed the sale of 2.2 million restricted
shares of its Common Stock in the Private Placement to selected institutional
and accredited investors, resulting in total
(9)
<PAGE>
proceeds of $11.0 million, less issuance costs of $1.2 million. The $11.0
million excludes a $1.5 million advance on the Bridge Loan which was exchanged
for 300,000 shares of Common Stock and issued to Westar Capital II LLC
("Westar") and Big Beaver Investments LLC ("Big Beaver"), the owners of Big
Star, the lender on the Bridge Loan. As partial compensation for services
rendered in the Private Placement, Roth Capital Partners, Inc., was granted a
warrant to purchase up to 188,000 shares of the Company's Common Stock at $5 per
share. The value of such warrant of $1.4 million was determined using the Black-
Scholes model and was reflected as non-cash offering expense.
Note 9 - Bridge Loan
On March 16, 2000, the Company obtained a Bridge Loan from Big Star
Investments LLC (a limited liability company owned by Westar and Big Beaver, the
Company's two principal shareholders) for an initial advance of $1.5 million.
The Company took a second advance of $1.0 million on May 10, 2000. The loan
accrued interest at 10% per annum.
The terms of the Bridge Loan specified that the principal and accrued
interest were convertible at any time into Common Stock at a conversion price
(the "Conversion Price") equal to the average daily closing bid price of the
Common Stock during the ten-day period preceding the date of each Bridge Loan
advance. This conversion price was $18.84 and $9.86 per share for the $1.5
million and $1.0 million advances, respectively. The Conversion Price was
contingently adjustable in the event the Company issued in excess of $5 million
of equity securities in an offering at an issuance price less than the initial
Conversion Price with respect to the Bridge Loan. Due to the Company's Private
Placement of equity securities in June 2000 (Note 8) at an issuance price of $5
per share, the Conversion Price of the Bridge Loan was adjusted to $5 per share.
This adjustment of the Conversion Price resulted in a non-cash charge to
interest expense and a credit to additional paid-in capital of $2.5 million,
because it met the definition of a "beneficial conversion feature" in accordance
with Emerging Issues Task Force Consensus 98-5.
In connection with entering into the Bridge Loan, the Company issued warrants
for the right to purchase 7,963 and 10,146 shares of the Company's Common Stock
relating to the $1.5 million and $1.0 million Bridge Loan advances, respectively
(an amount equal to 10% of the principal amount of the advance divided by the
original Conversion Price of $18.84 and $9.86, respectively.) The Conversion
Price of the warrants was adjustable in the same manner as the Bridge Loan. The
proceeds of the Bridge Loan were allocated between the Bridge Loan and the
warrants based upon their estimated relative fair values. The allocated value
of the warrants resulted in a discount of $173,000 to the Bridge Loan, of which
$57,000 was amortized to interest expense, $68,000 was offset against
extraordinary gain and $48,000 was offset againt paid-in capital during the
quarter ended June 30, 2000.
The Company repaid $1.0 million of Bridge Loan principal and accrued interest
of $49,000 on June 16, 2000 with proceeds from the Private Placement (Note 8).
The Company's $1.0 million payment was allocated for accounting purposes between
reacquiring the beneficial conversion feature and the debt. Due to this
allocation, the debt was extinguished for less than its net book value,
resulting in a $707,000 extraordinary gain on the early extinguishment of debt.
The remaining $1.5 million of Bridge Loan principal was exchanged for 300,000
shares of Common Stock, which was issued equally to Westar and Big Beaver.
(10)
<PAGE>
Note 10 - Ford Agreement
On March 27, 2000, the Company entered into a Value Participation Agreement
("VPA") with Ford Motor Company ("Ford"). Pursuant to the VPA, Ford agreed
that, through December 31, 2004, the Company has the exclusive right to
manufacture and supply CCS units to Ford's Tier 1 suppliers for installation in
Ford, Lincoln and Mercury branded vehicles produced and sold in North America
(other than Ford badged vehicles produced by AutoAlliance International, Inc.).
Ford is not obligated to purchase any CCS units under the VPA.
As part of the VPA, the Company will grant to Ford warrants exercisable for
Common Stock. A warrant for the right to purchase 82,197 shares of Common Stock
at an exercise price of $2.75 per share was issued and fully vested on March 27,
2000. The fair value of the warrant of $1,148,000 was determined using the
Black-Scholes valuation model and was recorded as a deferred exclusivity fee on
the balance sheet. This fee is being amortized on a straight-line basis from
April 2000 to December 2004, the initial term of the Agreement. In addition,
Ford received an additional warrant for 26,148 shares of Common Stock due to
certain anti-dilution provisions of the VPA that were triggered by the Company's
Private Placement in June 2000. The fair value of the additional warrant of
$220,000 was determined using the Black-Scholes model and has been accounted for
in the same manner as the deferred exclusivity fee. Additional warrants will be
granted and vested based upon purchases by Ford's Tier 1 suppliers of a
specified number of CCS units throughout the length of the VPA. The exercise
price of these additional warrants depends on when such warrants vest, with the
exercise price increasing each year. If Ford does not achieve specific goals in
any year, the VPA contains provisions for Ford to make up the shortfall in the
next succeeding year. If Ford achieves all of the incentive levels required
under the VPA, warrants will be granted and vested for an additional 1,300,140
shares of Common Stock.
Note 11 - Segment Reporting
The tables below present segment information about the reported revenues and
operating loss of Amerigon for the three and nine months ended September 30,
2000 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 Reconciling As
September 30, CCS Radar Items Reported
----------------------------------------------------------------- --------
<S> <C> <C> <C> <C>
2000
Revenue $1,779 $ - $ - $ 1,779
Operating Loss (724) (191) (1,573)(1) (2,488)
1999
Revenue 102 - - 102
Operating Loss (924) (231) (924)(1) (2,079)
</TABLE>
(1) Represents selling, general and administrative costs of $1,542,000 and
$867,000, respectively, and depreciation expense of $31,000 and $57,000,
respectively, for the three months ended September 30, 2000 and 1999.
(11)
<PAGE>
<TABLE>
<CAPTION>
For the Nine Months Ended Reconciling As
September 30, CCS Radar Items Reported
----------------------------------------------------------------- --------
<S> <C> <C> <C> <C>
2000
Revenue $ 3,836 $ - $ - $ 3,836
Operating Loss (2,149) (455) (4,043)(1) (6,647)
1999
Revenue 415 - - 415
Operating Loss (2,139) (638) (2,525)(1) (5,302)
</TABLE>
(1) Represents selling, general and administrative costs of $3,891,000 and
$2,355,000, respectively, and depreciation expense of $152,000 and $170,000,
respectively, for the nine months ended September 30, 2000 and 1999.
Revenue information by geographic area (in thousands):
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
United States $ 1,053 $ 35 $ 3,050 $ 240
Asia 726 67 785 170
Europe - - 1 5
------- ----- ------- -----
Total Revenues $ 1,779 $ 102 $ 3,836 $ 415
======= ===== ======= =====
</TABLE>
For the three months ended September 30, 2000, one domestic customer and one
foreign customer represented 57% and 41%, respectively, of the Company's sales.
For the three months ended September 30, 1999, one foreign customer represented
50% of the Company's sales. For the nine months ended September 30, 2000, one
domestic customer and one foreign customer represented 75% and 20%,
respectively, of the Company's sales. For the nine months ended September 30,
1999, one domestic customer and one foreign customer represented 29% and 37% of
the Company's sales, respectively.
Note 12 - Class A Warrants
On April 19, 2000, the Company effected a one-for-five reduction in its
outstanding, publicly traded, Class A Warrants. Due to this reduction, only one
Class A Warrant is required to purchase one share of Class A Common Stock. The
total number of publicly traded Class A Warrants outstanding was adjusted to
approximately 1,468,778, down from approximately 7,343,890, prior to the
reduction.
The issuance of 2.5 million shares of Common Stock in June, 2000 triggered
certain anti-dilution provisions in the Class A Warrants which required the
Company to issue additional warrants to purchase 524,486 shares of Common Stock.
As a result, the number of Class A Warrants outstanding increased to 1,993,264.
As a result of the warrant issued to Ford in March, 2000, and the issuance of
the 2.5 million shares of Common Stock in June, the total exercise price for
each publicly traded warrant has been lowered from $25.00 to $17.795. The
Company's Class A Warrants trade under the symbol ARGNW.
(12)
<PAGE>
Note 13 - Subsequent Events
On October 20, 2000, the Company deposited $1 million in escrow in connection
with its discussions to acquire a manufacturer of related automotive products.
The $1 million could either be forfeited or returned under certain
circumstances. Successful completion of a transaction will be dependent upon the
satisfactory completion of due diligence, entering into a definitive acquisition
agreement, final approval by the Amerigon Board of Directors, as well as
financing and other customary closing conditions.
(13)
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Amerigon Incorporated (the "Company"), was incorporated in California in
April 1991, and is a developer, marketer and manufacturer of proprietary, high
technology electronic components and systems for sale to car and truck original
equipment manufacturers ("OEMs"). The Company is currently focusing the majority
of its efforts on the introduction of its primary product, a Climate Control
Seat(TM) ("CCS(TM)"), which provides both heating and cooling to seat occupants.
The Company has one other product under development, the AmeriGuard(TM) radar-
based speed and distance sensor system, which alerts drivers to the presence of
objects near the vehicle.
Results of Operations
Third Quarter 2000 Compared with Third Quarter 1999
---------------------------------------------------
Revenues. Revenues for the three months ended September 30, 2000 (the
"Third Quarter") were $1,779,000. Revenues for the three months ended September
30, 1999 were $102,000. The increase in revenues was due primarily to CCS
product shipments to the Company's two principal customers, Johnson Controls,
Incorporated ("JCI") and NHK Spring Company, LTD ("NHK"). The increase is offset
by an $82,000 decrease in development contract revenue. The decline in
development contract revenue reflects the Company's move away from development
contracts and toward sales of CCS systems to generate revenue.
Product Cost. Product cost increased to $1,625,000 in the Third Quarter
2000 from $178,000 in the Third Quarter 1999. The increase is due to the
shipments to JCI and NHK of CCS units in the Third Quarter 2000. The Company
anticipates product costs to increase in absolute dollars while decreasing as a
percentage of revenue.
Development Contracts. Development contract costs incurred in the Third
Quarter 2000 were $458,000 compared to $409,000 in the Third Quarter 1999. The
increase is due to higher overhead costs incurred in the development of CCS
prototypes for potential customers. The increases were offset in part by a
decrease in outside engineering services for AmeriGuard due to the completion of
the contract with the New Mexico Department of Transportation in 1999.
Research and Development Expenses. Research and development expenses
decreased to $611,000 in Third Quarter 2000 from $670,000 in Third Quarter 1999.
The decrease was due to lower computer aided design costs for CCS.
Selling, General and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses increased to $1,573,000 in Third Quarter 2000
compared to $924,000 in the Third Quarter 1999. The change was due to marketing
costs associated with the Company's pursuit of additional automotive platforms
for the CCS in the U.S., Asia and Europe. The Company also experienced higher
professional fees and $69,000 in amortization for the warrants granted to Ford
Motor Company ("Ford") relating to the Value Participation Agreement ("VPA") the
Company entered into with Ford in March 2000.
(14)
<PAGE>
First Nine Months of 2000 Compared with First Nine Months of 1999
-----------------------------------------------------------------
Revenues. Revenues for the nine months ended September 30, 2000 were
$3,836,000. Revenues for the nine months ended September 30, 1999 were $415,000.
The increase in revenues was due primarily to product shipments to JCI and NHK
of the Company's CCS systems offset by a $209,000 decrease in development
contract revenue. The decline in development contract revenue reflects the
Company's move away from development contracts and toward sales of CCS systems
to generate revenue. Development contract revenue in 2000 is due primarily to
reimbursements from potential customers of a portion of the costs incurred by
the Company to develop CCS prototypes.
Product Cost. Product cost increased to $3,288,000 in the first nine months
of 2000 from $221,000 in the first nine months of 1999. The increase is due to
shipments to JCI and NHK of the Company's CCS units in the first nine months of
2000. The Company anticipates product costs to increase in absolute dollars
while decreasing as a percentage of revenue.
Development Contracts. Development contract costs incurred in the first
nine months of 2000 were $1,283,000 compared to $1,295,000 in the first nine
months of 1999. The decrease is due to a reimbursement of $99,000 by the New
Mexico Department of Transportation recorded in the first quarter of 2000, and
lower travel, materials and tooling in the Radar segment. These decreases were
partially offset by increases in overhead costs relating to the development of
CCS prototypes for potential customers.
Research and Development Expenses. Research and development expenses
increased to $1,869,000 in the first nine months of 2000 from $1,676,000 in the
first nine months of 1999. The increase was due to higher levels of research and
development activity on the Company's CCS.
Selling, General and Administrative Expenses. SG&A expenses increased to
$4,043,000 in the first nine months of 2000 compared to $2,525,000 in the first
nine months of 1999. The change was due to costs associated with the launch of
the Lincoln Navigator and Lexus LS 430 CCS programs and increased marketing
expenses associated with the Company's pursuit of additional automotive
platforms for the CCS in the U.S., Asia and Europe. The Company also experienced
higher professional fees and $130,000 in amortization for the warrants granted
to Ford relating to the VPA the Company entered into with Ford in March 2000.
Liquidity and Capital Resources
As of September 30, 2000, the Company had net working capital of
$6,481,000. The Company also had cash and cash equivalents of $5,678,000 at
September 30, 2000. On June 14, 2000, the Company completed the sale of 2.2
million restricted shares of its Common Stock in a private placement (the
"Private Placement") to selected institutional and accredited investors,
resulting in net proceeds to the Company of $9.8 million.
The Company's principal sources of operating capital have been the proceeds
of its various financing transactions and, to a lesser extent, CCS product
revenues, development contracts and sale of prototypes to customers.
Cash and cash equivalents increased by $4,031,000 in the nine months ended
September 30, 2000 primarily due to the Private Placement. Cash used in
operating activities amounted to $6,969,000, which was mainly attributable to
the net loss of $8,395,000. The loss includes net non-cash charges of
$1,793,000, including the extraordinary
(15)
<PAGE>
gain, relating to the beneficial conversion feature associated with the Bridge
Loan. Investing activities used $308,000 to purchase equipment. Financing
activities provided $11,308,000. The Company received $2.5 million in advances
on its Bridge Loan from Big Star. The owners of Big Star, Westar Capital II LLC
and Big Beaver Investments LLC used $1.5 million of the Bridge Loan to purchase
300,000 Common shares in the Private Placement. The Company received $9,767,000
in net proceeds from the Private Placement, and exchanged $1.5 million from the
Bridge Loan for 300,000 shares of Common Stock. The remaining $1.0 million owed
on the Bridge Loan was repaid with funds from the Private Placement.
On October 20, 2000, the Company deposited $1 million in escrow in
connection with its discussions to acquire a manufacturer of related automotive
products. The $1 million could either be forfeited or returned under certain
circumstances. Successful completion of a transaction will be dependent upon the
satisfactory completion of due diligence, entering into a definitive acquisition
agreement, final approval by the Amerigon Board of Directors, as well as
financing and other customary closing conditions. There is no guarantee that a
transaction will be completed.
The Company has suffered recurring losses and negative cash flows from
operations since inception and has a significant accumulated deficit. The
Company expects to incur losses for the foreseeable future as current sales
volumes are not sufficient to cover the Company's fixed manufacturing, overhead
and operating costs. Sufficient volume will not be reached in the near term, as
automotive industry development timing tends to be relatively long. Although the
Company is working with many car platforms for future introduction of its CCS
technology, most of these will not introduce the product until the 2003 model
year (2002 calendar year) and beyond. Even with the shipments of volume
production for the Lincoln Navigator SUV, Lexus LS 430 and other platforms to be
introduced in 2001, 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 Company has begun limited production
on its CCS product, larger orders for the CCS product and the ability to begin
production on the AmeriGuard 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 will also require significant capital if it
completes the acquisition of a manufacturer of related automotive products. The
Company does not intend to pursue any more significant 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. These conditions raise substantial doubt about the
Company's ability to continue as a going concern.
Other Information
Certain matters discussed or referenced in this report, including the
Company's intention to develop, manufacture and market the CCS and AmeriGuard
products and the Company's expectation of increased revenues and continuing
losses for the foreseeable future, potential acquisitions, and the Company's
prospects for the development of relationships with other major automotive
manufacturers, 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, 1999 and the Registration Statement on Form S-3 filed on July
24, 2000.
(16)
<PAGE>
ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
The Company's exposure to market risk for changes in interest rates relate
primarily to the Company's investment portfolio. The Company places its
investments in debt instruments of the U.S. government and in high-quality
corporate issuers. The Company seeks to ensure the safety and preservation of
its invested funds by limiting default risk and market risk. The Company has no
investments or transactions denominated in foreign country currencies and
therefore is not subject to foreign exchange risk.
There have been no material changes since the Form 10-K was filed for the
Company's year ended December 31, 1999.
(17)
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
None.
(18)
<PAGE>
Signatures
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Amerigon Incorporated
---------------------
Registrant
Date: November 14, 2000 /s/ Richard A. Weisbart
-----------------------
Richard A. Weisbart
Chief Executive Officer
and Chief Financial Officer
/s/ Craig P. Newell
-------------------
Craig P. Newell
Vice President, Finance
(Chief Accounting Officer)
(19)
