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 October 31, 1998
or
(___) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period From ____________ To ____________.
Commission File No. 0-25184
U.S. ELECTRICAR, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-3056150
- ------------------------------- ------------------------------------
(State or other jurisdiction of (IRS employer identification number)
incorporation or organization)
19850 South Magellan Drive
Torrance, CA 90502
-----------------------------------------------------
(Address of Principal Executive Offices and Zip Code)
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 periods 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 (___)
As of December 15, 1998, there were 151,789,681 shares of Common Stock, no par
value, outstanding.
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INDEX
U.S. ELECTRICAR, INC.
Page No.
--------
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)..................................3
Consolidated Balance Sheets:
October 31, 1998 and July 31, 1998................................3
Consolidated Statements of Operations:
Three months ended October 31, 1998 and 1997......................4
Consolidated Statements of Cash Flows:
Three months ended October 31, 1998 and 1997......................5
Notes to Consolidated Financial Statements:
for the Three months ended October 31, 1998 and 1997..............7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..............................10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ...............................................13
Item 2. Changes in Securities............................................13
Item 3. Defaults upon Senior Securities..................................13
Item 4. Submission of Matters to a Vote of Security Holders..............14
Item 5. Other Information................................................14
Item 6. Exhibits and Reports on Form 8-K.................................14
SIGNATURE ................................................................15
EXHIBIT INDEX ............................................................16
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
U.S. ELECTRICAR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share data)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
As of As of
October 31, 1998 July 31, 1998
---------------- -------------
ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 168 $ 266
Accounts receivable, net of allowances of $108 and $108 192 108
Inventory 397 492
Note receivable 0 250
Prepaids and other current assets 96 124
-------- --------
Total Current Assets 853 1,240
PROPERTY, PLANT AND EQUIPMENT - NET 290 318
OTHER ASSETS 100 100
-------- --------
TOTAL ASSETS $ 1,243 $ 1,658
======== ========
LIABILITIES AND SHAREHOLDERS' (DEFICIT)
CURRENT LIABILITES:
Accounts payable $ 2,406 $ 2,448
Accrued payroll and related expense 349 358
Accrued warranty expense 465 474
Accrued Interest 1,442 1,262
Other accrued expenses 275 285
Customer deposits and deferred revenue 358 387
Bonds and notes payable 5,727 5,727
-------- --------
Total Current Liabilities 11,022 10,941
LONG TERM DEBT 3,332 3,332
SHAREHOLDERS' (DEFICIT):
Series A preferred stock - No par value; 30,000,000 shares authorized;
3,301,000 and 3,321,000 shares issued and outstanding at 10/31/98
and 7/31/98 2,233 2,258
Series B preferred stock - No par value; 5,000,000 shares authorized;
1,291,000 shares issued and outstanding at 10/31/98 and 7/31/98 2,584 2,584
Stock notes receivable (1,149) (1,149)
Common Stock - No par value; 300,000,000 shares authorized; 151,787,000
and 151,767,000 shares issued and outstanding at 10/31/98 and 7/31/98 68,767 68,742
Accumulated deficit (85,546) (85,050)
-------- --------
Total Shareholders' (Deficit) (13,111) (12,615)
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT) $ 1,243 $ 1,658
======== ========
<FN>
Note: The balance sheet at July 31, 1998 has been derived from the audited financial statements at that date.
See notes to consolidated financial statements.
</FN>
</TABLE>
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U.S. ELECTRICAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except for per share and share data)
- --------------------------------------------------------------------------------
Three Months Ended October 31,
-------------------------------
1998 1997
------------- -------------
NET SALES $ 417 $ 640
COST OF SALES 357 534
------------- -------------
GROSS MARGIN 60 106
------------- -------------
OTHER COSTS AND EXPENSES:
Research & development 93 141
Selling, general & administrative 283 782
Interest and financing fees 180 161
------------- -------------
Total other costs and expenses 556 1,084
------------- -------------
NET LOSS $ (496) $ (978)
============= =============
NET LOSS PER COMMON SHARE: $ (0.003) $ (0.006)
============= =============
WEIGHTED AVERAGE SHARES
OUTSTANDING 151,773,014 151,182,678
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<TABLE>
U.S. ELECTRICAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Three Months Ended October 31
-----------------------------
1998 1997
----- -----
<S> <C> <C>
OPERATIONS
Net loss $(496) $(978)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation and Amortization 28 95
Provision to reduce inventory values 9 13
Interest income on stock notes receivable 0 (23)
Change in operating assets and liabilities:
Accounts Receivable (84) 243
Inventory 86 (20)
Note receivable 250 0
Prepaids and other assets 28 33
Accounts payable and accrued expenses 110 335
Customer deposits and deferred revenue (29) 143
----- -----
Net cash used by operating activities (98) (159)
----- -----
INVESTING:
Purchases of property, plant and equipment, net of disposals 0 (4)
----- -----
Net cash provided (used) by investing activities 0 (4)
----- -----
FINANCING:
Payments on notes payable 0 0
Payments on capital leases 0 (16)
Borrowings on notes payable 0 0
Proceeds from issuance of common stock 0 0
----- -----
Net cash provided (used) by financing activities 0 (16)
----- -----
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (98) (179)
CASH AND EQUIVALENTS:
Beginning of period 266 333
----- -----
End of period $ 168 $ 154
===== =====
</TABLE>
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U.S. ELECTRICAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(UNAUDITED)
(In thousands)
- --------------------------------------------------------------------------------
Three Months Ended October 31,
------------------------------
1998 1997
---- ----
NONCASH INVESTING AND FINANCING ACTIVITIES:
Conversion of Series A preferred stock
to common stock $ 25 $ --
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U. S. ELECTRICAR, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
For the Three Months Ended October 31, 1998 and 1997
NOTE 1 - Basis of Presentation
The accompanying unaudited financial statements have been prepared from the
records of the Company without audit, and in the opinion of management, include
all adjustments (consisting of only normal recurring accruals) necessary to
present fairly the financial position at October 31, 1998 and the interim
results of operations and cash flows for the three months ended October 31,
1998. The balance sheet at July 31, 1998, presented herein, has been prepared
from the audited financial statements of the Company for the fiscal year then
ended.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the Company to make estimates and assumptions
affecting the reported amounts of assets, liabilities, revenues and expenses,
and the disclosure of contingent assets and liabilities. The July 31, 1998 and
October 31, 1998 inventories are reported at market value. The inventory
valuation adjustments are estimates based on sales of inventory subsequent to
July 31, 1998, and the projected impact of certain economic, marketing and
business factors. Inventories have been valued on the basis that they would be
used, converted and sold in the normal course of business. Warranty reserves and
certain accrual expenses are based upon an analysis of future costs expected to
be incurred in meeting contracted obligations. The amounts estimated for the
above, in addition to other estimates not specifically addressed, could differ
from actual results; and the difference could have a significant impact on the
financial statements.
Accounting policies followed by the Company are described in Note 1 to the
audited financial statements for the fiscal year ended July 31, 1998. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted for purposes of the interim financial statements. The
financial statements should be read in conjunction with the audited financial
statements, including the notes thereto, for the year ended July 31, 1998, which
are included in the Company's Form 10-K Annual Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 as filed with the Securities and
Exchange Commission.
The loss per common share is based on the weighted average of common shares
outstanding. Potential dilution exists in earnings per share for the three
months ended October 31, 1998 if common stock equivalents, consisting of
unexercised stock options and warrants, were included in the calculation. The
resulting dilution in the net loss per share, when compared to the loss of
$0.003 currently reflected in the financial statements for the three months
ended October 31, 1998, would be insignificant and, therefore, has not been
calculated.
The results of operations for the three month period presented herein are not
necessarily indicative of the results to be expected for the full year.
NOTE 2 - Going Concern
The Company has experienced recurring losses from operations and use of cash
from operations and had an accumulated deficit of $85,050,000 at July 31, 1998
and $85,546,000 at October 31, 1998. A substantial portion of the losses are
attributable to investments in research, development and other start-up costs
associated with the Company's original focus on the development and manufacture
of electric vehicles, including electric buses, the conversion of gas powered
cars and light trucks to electric power and off-road electric powered industrial
vehicles. During the three years ended July 31, 1998, the Company obtained
approximately $9 million (net of debt repayments) in cash from financial
activities through private placements of common stock and Series A preferred
stock, the exercise of options and warrants,
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and the issuance of convertible subordinated notes payable and secured
convertible bonds and notes. During the fiscal year ended July 31, 1998, the
Company received $200,000 from a European investor group in the form of a short
term, non-interest bearing promissory note.
It is management's intention to complete its debt restructuring and to seek
additional financing through private placements as well as other means. As of
October 31, 1998, the Company was in negotiations with Hyundai Heavy Industries
of Korea to license further technology regarding its PatherTM Drive System. The
Company anticipates this sale to close during the second quarter.
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. It is possible that the cash flows
from future operations may not be sufficient to enable the Company to meet its
obligations. Market conditions and the Company's financial position may inhibit
its ability to achieve profitable operations.
These factors as well as the future availability or inadequacy of financing to
meet future needs, could force the Company to delay, modify, suspend or cease
some or all aspects of its planned operations, and/or seek protection under
applicable state and federal bankruptcy and insolvency laws.
NOTE 3 - Inventories
Inventories are comprised of the following (in thousands):
October 31, 1998 July 31, 1998
---------------- -------------
(unaudited)
Finished Goods $ 139 $ 120
Work-in-process 64 101
Raw materials 369 437
Valuation adjustment (175) (166)
----- -----
$ 397 $ 492
===== =====
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U.S. ELECTRICAR, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 4 - Notes and Bonds Payable, Long-Term Debt and Other Financing
Notes and bonds payable and long-term debt are comprised of the following (in
thousands):
October 31, 1998 July 31, 1998
---------------- -------------
Convertible secured notes under a
Supplemental Loan Agreement with ITOCHU
Corporation; interest at 10%, principal
and interest due April 1998, secured by
the personal property of the parent
company. $ 3,000 3,000
Secured promissory note - Credit
Managers Association of California
("CMAC") as exclusive agent for
Qualified Creditors; interest at 3%,
with principal and interest due April
1999; secured with an interest in a
sinking fund escrow consisting of 10% of
any financing received subsequent to
April 1996; the Board of Directors may
waive the sinking fund set aside on a
case-by-case basis 307 307
Secured subordinated promissory note -
CMAC as exclusive agent for
Non-Qualified Creditors; interest at 3%
for the first 5 years, 6% for years 6
and 7, and then at prime plus 3% through
date of maturity; interest payments are
made upon payment of principal, with
principal and interest due no later than
April 2016; secured with an interest in
a sinking fund escrow as noted above;
payments on this note are subordinated
to payment in full on all principal and
accrued interest owed on the above
3-year qualified note 3,332 3,332
Convertible secured promissory note
payable to ITOCHU Corporation; interest
at 10%, due December 1997; convertible
into common stock at $0.30 per share. 1,300 1,300
Convertible promissory note payable to
Fontal International, Ltd.; interest at
10%, due July, 1997; convertible into
common stock at $0.30 per share. 800 800
Promissory note payable to a European
investor group; no interest. 200 200
Other. 120 120
-------- --------
9,059 9,059
Less current maturities 5,727 5,727
-------- --------
$ 3,639 $ 3,639
======= =======
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The matters addressed in this report, with the exception of the historical
information presented, incorporate certain forward-looking statements involving
risks and uncertainties, including the risks discussed herein and in the report
under the heading "Certain Factors That May Affect Future Results", as reported
by the Company in the Form 10-K filed with the Commission on October 29, 1998.
GENERAL
U.S. Electricar, Inc. and Subsidiaries (the "Company") originally was
established to develop, convert, assemble, manufacture and distribute
battery-powered electric vehicles, including on-road pick-up trucks, passenger
cars, buses and delivery vehicles, and off-road industrial vehicles. The
Company's product lines originally included converted vehicles (originally built
to be powered by internal combustion engines) and vehicles built specifically to
be battery powered. The Company has refocused and restructured its product base
and is directing its efforts toward the development of electric drive trains and
related components for electric vehicles and hybrid systems, vehicle systems
integration and the performance of various engineering contracts. The Company's
efforts relating to the converted vehicle program were discontinued. The
Company's fiscal year ends July 31. All year references refer to fiscal years.
In September 1996, a substantial portion of the assets of Industrial Electric
Vehicles, Inc., (formerly Nordskog Electric Vehicles, Inc. (Nordskog), prior to
its acquisition by the Company) were sold. Consideration for this sale included
the assumption of, and release of liability for, the note payable that totaled
$1,013,000 at July 31, 1996 to Nordskog.
The Company also acquired substantially all the tangible and intangible assets,
and assumed certain liabilities, of Systronix Corporation (Systronix) for stock,
a note and cash.
In March 1997, the Company completed an agreement with Hyundai Motor Company
("HMC") and Hyundai Electronics Industries Co., Ltd. ("HEI") whereby HMC and HEI
collectively purchased $3.6 million of the Company's common stock for cash and
secured a technology license for an additional payment of $2.0 million. For the
technology license, the Company received $1,850,000 in cash and the remaining
$150,000 is to be received over 6 years.
During the three months ended October 31, 1998, the Company has continued to
concentrate on the reduction of operating costs. Headcount has been reduced from
51 employees at July 31, 1997 to 26 employees as of October 31, 1998. Business
activities have been scaled back, and the Company is now focused primarily on
the development of electric drive trains and related components, vehicle systems
integration and the performance of various engineering contracts. The Company
has several key contracts with the U. S. government's Defense Advanced Research
Project Agency ("DARPA"), including the development of a new AC bus, a new
plastic lithium ion vehicle battery concept and testing of advanced vehicle
batteries. The Company also has several engineering contracts with the Hyundai
Motor Company to design, develop and test electric drive train products and
related products. Hyundai Motor Company is contracting with the Company for the
development of an advanced charging unit and a hybrid vehicle development, as
well as preparing to produce the Panthertm drive system for their electric
vehicles. Furthermore, the Company is in negotiations with Hyundai Heavy
Industries to license its software and hardware for further design and
development of electric drive systems.
The Company is aggressively pursuing various avenues of revenue generation to
increase its cash flow. These include further developing its relationship with
the Hyundai group, as well as, joint venturing with vehicle and bus
manufacturers to utilize its drive train system.
10
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LIQUIDITY AND CAPITAL RESOURCES
The Company has experienced significant recurring cash flow shortages due to
operating losses primarily attributable to research, development, administrative
and other expenses associated with the Company's efforts to become an
international manufacturer and distributor of electric vehicles. Cash flows from
operations have been negative and have not been sufficient to meet the Company's
obligations as they came due. The Company has therefore had to raise funds
through numerous financial transactions and from various resources. At least
until the Company reaches break-even volume in sales and develops and/or
acquires the capability and technology necessary to manufacture and sell its
electric vehicles profitably, it will continue to rely extensively on cash from
debt and equity financing. The Company anticipates that it will require
substantial additional outside financing for at least one more year.
During the three months ended October 31, 1998, the Company spent $98,000 in
cash on operating activities to fund the net loss of $496,000 resulting from
factors explained in the following section of this discussion and analysis.
Accounts receivable decreased by $84,000 as funds were collected on outstanding
receivables and new sales did not replace the accounts receivable balance. Some
of the Company's sales are in the form of prepaid engineering contracts, and
these sales will not be reflected in accounts receivable. The current year's
installment on the unpaid portion of the HEI and HMC technology license was
reclassified from long-term to current receivables. Inventory decreased by
$95,000, net of write-downs.
Another factor was the increase in accrued expenses. Interest accruing on notes
payable has not been paid. Customer deposits decreased due to the further
progress on the completion of prepaid engineering contracts.
The operations of the Company during the three months ended October 31, 1998
were financed entirely by the funds received in the prior fiscal year and funds
received on engineering contracts.
IF THE COMPANY IS UNABLE TO CONTINUE TO RESTRUCTURE ITS DEBT OR OTHERWISE
REFINANCE OR CONVERT SUCH DEBT, AND ADDITIONAL FUNDING IS NOT AVAILABLE, THE
COMPANY WOULD BE FORCED TO SEEK PROTECTION UNDER APPLICABLE STATE AND FEDERAL
BANKRUPTCY AND INSOLVENCY LAWS.
SIGNIFICANT ADDITIONAL FUNDING WILL BE NEEDED IN 1998 AND 1999. AS OF DECEMBER
15, 1998, THE COMPANY HAD NO COMMITMENTS FROM ANY PERSON OR ENTITY TO PROVIDE
CAPITAL, AND THERE CAN BE NO ASSURANCE THAT ADDITIONAL FUNDS WILL BE AVAILABLE
FROM ANY SOURCE AT THE TIME THE COMPANY WILL NEED SUCH FUNDS. THE INABILITY OF
THE COMPANY TO OBTAIN ADDITIONAL FUNDING ON TERMS ACCEPTABLE TO THE COMPANY WILL
HAVE A MATERIAL ADVERSE EFFECT ON ITS BUSINESS. THE FUTURE AVAILABILITY OR
INADEQUACY OF FINANCING TO MEET FUTURE NEEDS COULD FORCE THE COMPANY TO DELAY,
MODIFY, SUSPEND OR CEASE SOME OR ALL ASPECTS OF ITS PLANNED OPERATIONS, AND/OR
SEEK PROTECTION UNDER APPLICABLE STATE AND FEDERAL BANKRUPTCY AND INSOLVENCY
LAWS.
RESULTS OF OPERATIONS
Net sales in 1999 decreased $142,000 from the previous quarter, and decreased
$223,000 in the first three months as compared to the corresponding period of
1998. In the current year there have been no sales of converted vehicles and no
sales of technology licenses, thus far. The Company discontinued the converted
vehicle program in 1998. Development contracts with Hyundai Motor Company and
the U.S. Government account for almost all of the Company's sales for 1999.
11
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Cost of sales in the first quarter of 1999 decreased to $357,000 on sales of
$417,000, compared to cost of sales of $534,000 on sales of $640,000 in the
first quarter of 1998.
Research and development expense decreased in the first quarter of 1999 by
$48,000, from the first quarter of 1998. The Company has reduced its technical
staff and curtailed purchasing engineering services in order to keep costs down.
The efforts expended by the technical staff are directed primarily toward
completion of engineering contracts, such as the contracts for the Hyundai Group
and federal and state government agencies.
Selling, general and administrative expense decreased $509,000 in the first
quarter of 1999 from the previous year's comparable period. The reduction in
expenses was due to actions by the Company to close facilities, reduce headcount
and consolidate operations in Torrance, California during 1998.
Interest and financing fees increased only slightly to $180,000 in the first
quarter of 1999 from $161,000 in the first quarter of 1998. Interest costs have
decreased because of actions taken to reduce the amount of outstanding debt. In
March 1997, the Company converted $3,000,000 of Series S Bonds to common stock.
In March, 1997, the Company repaid convertible promissory notes held by Fontal
International, Ltd. in the amount of $1,150,000 plus accrued interest. In May,
1997, the Company paid $348,000 against the outstanding principal balance on two
secured subordinated promissory notes held by the Credit Managers Association of
California.
The Company incurred a net loss of $496,000 in the first quarter of 1999
compared to a net loss of $978,000 in the first quarter of 1998. The overriding
factor causing the difference was the reduction of selling, general and
administrative expenses as discussed above.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
Future trends for the Company's revenue and profitability remain uncertain. The
Company operates in a rapidly changing and developing market that involves a
number of risks, some of which are beyond the Company's control. In addition, as
previously disclosed in the Form 10-K, the Company's financial condition remains
extremely precarious. The following discussion highlights certain of these
risks.
Going Concern / Net Operating Losses. The Company has experienced recurring
losses from operations and had an accumulated deficit of $85,546,000 at October
31, 1998. There is no assurance, however, that any net operating losses will be
available to the Company in the future as an offset against future profits for
income tax purposes. A substantial portion of the losses are attributable to
product development and other start-up costs associated with the Company's
business focus on the development, production and sale of battery powered
electric vehicles. Cash flows from future operations may not be sufficient to
enable the Company to achieve profitable operations. Market conditions and the
Company's financial position may inhibit its ability to achieve profitable
operations. These factors, as well as others, indicate the Company may be unable
to continue as a going concern unless it is able to obtain significant
additional financing and generate sufficient cash flows to meet its obligations
as they come due and sustain its operations. As of June 10, 1998, the Company
had no firm commitments from any person or entity to provide capital, and there
can be no assurance that additional funds will be available from any source at
the time the Company will need such funds.
Continued Losses. For the fiscal years ended July 31, 1998, 1997 and 1996, the
Company had substantial net losses of $3,525,000, $4,535,000 and $9,354,000
respectively on sales of $1,938,000, $4,484,000 and $4,209,000, respectively,
and the Company incurred a net loss of $496,000 for the three months ended
October 31, 1998.
Nature of Industry. The electric vehicle ("EV") industry is in its infancy.
Although the Company believes that it has manufactured a significant percentage
of the electric vehicles sold in the United States based upon its own knowledge
of the industry, there are many large and small companies, both domestic
12
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and foreign, now in, poised to enter, or entering this industry. This EV
industry is subject to rapid technological change. Most of the major domestic
and foreign automobile manufacturers (1) have produced their own design-concept
electric vehicles, and/or (2) have developed improved electric storage,
propulsion and control systems, and/or (3) have entered or are planning to enter
the field. Various non-automotive companies are also developing improved
electric storage, propulsion and control systems. Growth of the present limited
demand for electric vehicles depends upon (a) continued and future regulation
and legislation requiring more use of non-polluting vehicles, (b) the
environmental consciousness of customers and (c) the ability of electric
vehicles to successfully compete with vehicles powered with internal combustion
engines on price and performance.
Changed Legislative Climate. Because vehicles powered by internal combustion
engines cause pollution, there has been significant public pressure in Europe
and Asia, and enacted or pending legislation in the United States at the federal
level and in certain states, to promote or mandate the use of vehicles with no
tailpipe emissions ("zero emission vehicles") or reduced tailpipe emissions
("low emission vehicles"), such as hybrid vehicles. Legislation requiring or
promoting zero emission vehicles is necessary to create a significant market for
electric vehicles. There can be no assurance, however, that further legislation
will be enacted or that current legislation or state mandates will not be
repealed or amended (as recently occurred in California), or that a different
form of zero emission or low emission vehicle will not be invented, developed
and produced, and achieve greater market acceptance than electric vehicles. For
example, the State of California recently extended the deadline for compliance
with mandates for implementation of zero emission vehicle requirements from 1998
to 2003. Extensions, modifications or reductions of current federal and state
legislation, mandates and potential tax incentives could adversely affect the
Company's business prospects if implemented.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings:
On June 23, 1997, fourteen shareholders and former shareholders of the
Company filed a lawsuit in a federal district court in California,
alleging violations of the securities laws and asserting eleven federal
and state law claims. On September 29, 1997, the district court
dismissed all of the claims asserted in the plaintiffs' complaint, but
allowed leave to amend with respect to all but one of the claims. On
October 20, 1997, the plaintiffs filed an amended complaint which added
several additional shareholders and asserted nine federal and state law
claims. On February 6, 1998, the district court dismissed all of the
federal claims without leave to amend. The plaintiffs have the right to
refile the claims in state court.
Item 2. Changes in Securities:
None.
Item 3. Defaults Upon Senior Securities:
The Company has outstanding secured notes under a Supplemental Loan
Agreement with Itochu Corporation in the principal amount of
$3,000,000, with principal and interest due April 17, 1998. The notes
are secured by personal property of the Company. The interest rate is
ten percent (10%) per annum, and the notes are convertible into shares
of the Company's common stock at the rate of $0.30 per share. As of
June 10, 1998, the principal and interest due under the notes have not
been paid, causing an event of default under the terms of the notes.
Discussions about extending the maturity date of the notes are
underway. As of December 15, 1998, the holder of the notes had not yet
exercised any of its remedies with respect to the notes.
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During the period from January 1997 through April 1997, the Company and
Fontal International, Ltd. executed several loan agreements whereby
Fontal extended loans to the Company in the aggregate amount of
$800,000. The loans were evidenced by promissory notes which provide
for a due date of July 9, 1997, an interest rate of ten percent (10%)
per annum, and the right to convert principal and accrued interest at
any time into shares of the Company's common stock at the rate of $0.30
per share. As of December 15, 1998, the principal and accrued interest
due under the notes have not been paid, causing an event of default
under the terms of the notes. Discussions about extending the maturity
date of the notes are underway. As of December 15, 1998, the holder of
the notes had not yet exercised any of its remedies with respect to the
notes.
During the period from December 1996 through February 1997, the Company
and Itochu Corporation executed several loan agreements whereby Itochu
extended loans to the Company in the aggregate amount of $1,300,000.
The loans were evidenced by promissory notes which provide for a due
date of December 26, 1997, an interest rate of ten percent (10%) per
annum, and the right to convert principal and accrued interest at any
time into shares of the Company's common stock at the rate of $0.30 per
share. As of June 10, 1998, the principal and accrued interest due
under the notes have not been paid, causing an event of default under
the terms of the notes. Discussions about extending the maturity date
of the notes are underway. As of December 15, 1998, the holder of the
notes had not yet exercised any of its remedies with respect to the
notes.
Item 4. Submission of Matters to a Vote of Securities Holders:
None
Item 5. Other Information:
None
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits:
None
(b) Reports on Form 8-K
None.
14
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SIGNATURE
Pursuant to the requirements of Section 13 or 15 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 on December 15, 1998.
U.S. ELECTRICAR, INC.
(Registrant)
/s/ Carl D. Perry
- -----------------------------------------------------------------------------
By: Carl D. Perry, Chief Executive Officer and Acting Chief Financial Officer
15
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No.
- --------------------------------------------------------------------------------
27 FDS
16
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-01-1998
<PERIOD-END> OCT-31-1998
<CASH> 168
<SECURITIES> 0
<RECEIVABLES> 192
<ALLOWANCES> 0
<INVENTORY> 397
<CURRENT-ASSETS> 96
<PP&E> 1,420
<DEPRECIATION> 1,130
<TOTAL-ASSETS> 1,243
<CURRENT-LIABILITIES> 11,022
<BONDS> 0
0
4,817
<COMMON> 67,618
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,243
<SALES> 417
<TOTAL-REVENUES> 417
<CGS> 357
<TOTAL-COSTS> 357
<OTHER-EXPENSES> 376
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 180
<INCOME-PRETAX> (496)
<INCOME-TAX> 0
<INCOME-CONTINUING> (496)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (496)
<EPS-PRIMARY> (0.003)
<EPS-DILUTED> (0.003)
</TABLE>
