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 January 31, 1999
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 March 15, 1999, 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:
January 31, 1999 and July 31, 1998.......................3
Consolidated Statements of Operations:
Three and Six months ended January 31, 1999 and 1998.....4
Consolidated Statements of Cash Flows:
Six months ended January 31, 1999 and 1998...............5
Notes to Consolidated Financial Statements:
for the Six months ended January 31, 1999 and 1998.......7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.....................10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ......................................14
Item 2. Changes in Securities...................................14
Item 3. Defaults upon Senior Securities.........................14
Item 4. Submission of Matters to a Vote of Security Holders.....15
Item 5. Other Information.......................................15
Item 6. Exhibits and Reports on Form 8-K........................15
SIGNATURE.................................................................16
EXHIBIT INDEX.............................................................17
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
U.S. ELECTRICAR, INC.
BALANCE SHEET
(In thousands, except for share and per share data)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
As of As of
January 31, July 31,
1999 1998
------- -------
ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash 77 266
Accounts receivable, net of allowances of $108 and $108 477 108
Inventory 285 492
Note receivable 0 250
Prepaids and other current assets 62 124
------- -------
Total Current Assets 901 1,240
PROPERTY, PLANT AND EQUIPMENT - NET 262 318
OTHER ASSETS 100 100
------- -------
TOTAL ASSETS 1,263 1,658
======= =======
LIABILITIES AND SHAREHOLDERS' (DEFICIT)
CURRENT LIABILITES:
Accounts payable 2,391 2,448
Accrued payroll and related expense 347 358
Accrued warranty expense 465 474
Accrued Interest 1,600 1,262
Other accrued expenses 243 285
Customer deposits and deferred revenue 358 387
Bonds and notes payable 5,727 5,727
------- -------
Total Current Liabilities 11,131 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 1/31/99
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 1/31/99 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 1/31/99 and 7/31/98 68,767 68,742
Accumulated deficit (85,635) (85,050)
------- -------
Total Shareholders' (Deficit) (13,200) (12,615)
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT) 1,263 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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<TABLE>
U.S. ELECTRICAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except for per share and share data)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Three Months Ended January 31, Six Months Ended January 31,
--------------------------------- ---------------------------------
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET SALES $ 753 $ 360 $ 1,170 $ 1,000
COST OF SALES 349 1,171 706 1,705
------------- ------------- ------------- -------------
GROSS MARGIN 404 (811) 464 (705)
------------- ------------- ------------- -------------
OTHER COSTS AND EXPENSES:
Research & development 85 69 178 210
Selling, general & administrative 250 770 533 1,552
Interest and financing fees 158 159 338 320
------------- ------------- ------------- -------------
Total other costs and expenses 493 998 1,049 2,082
------------- ------------- ------------- -------------
NET LOSS $ (89) $ (1,809) $ (585) $ (2,787)
============= ============= ============= =============
NET LOSS PER COMMON SHARE: $ (0.001) $ (0.012) $ (0.004) $ (0.018)
============= ============= ============= =============
WEIGHTED AVERAGE SHARES
OUTSTANDING 151,789,681 151,194,173 151,789,681 151,194,173
</TABLE>
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<TABLE>
U.S. ELECTRICAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
<CAPTION>
Six Months Ended January 31
--------------------------
1999 1998
------ ------
<S> <C> <C>
OPERATIONS
Net loss (585) (2,787)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation and Amortization 28 137
Provision to reduce inventory values 0 734
Loss on disposal of equipment 28 319
Interest income on stock notes receivable 0 (45)
Change in operating assets and liabilities:
Accounts Receivable (369) 365
Inventory 207 87
Note receivable 250 0
Prepaids and other assets 62 145
Accounts payable and accrued expenses 219 530
Customer deposits and deferred revenue (29) 94
------ ------
Net cash used by operating activities (189) (421)
------ ------
INVESTING:
Purchases of property, plant and equipment, net of disposals 0 (8)
------ ------
Net cash provided (used) by investing activities 0 (8)
------ ------
FINANCING:
Payments on notes payable 0 0
Payments on capital leases 0 (16)
Borrowings on notes payable 0 200
Proceeds from issuance of common stock 0 0
------ ------
Net cash provided (used) by financing activities 0 184
------ ------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (189) (245)
CASH AND EQUIVALENTS:
Beginning of period 266 333
------ ------
End of period 77 88
====== ======
</TABLE>
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U.S. ELECTRICAR, INC, AND SUBSIDIARIES
CONSOLIDATED STSTEMENTS OF CASH FLOWS (Continued)
(UNAUDITED)
(In thousands)
- --------------------------------------------------------------------------------
Six Months Ended
January 31,
-----------------
1999 1998
---- ----
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 Six Months Ended January 31, 1999 and 1998
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 January 31, 1999 and the interim
results of operations and cash flows for the six months ended January 31, 1999.
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
January 31, 1999 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 six months
ended January 31, 1999 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 $0.004
currently reflected in the financial statements for the six months ended January
31, 1999, would be insignificant and, therefore, has not been calculated.
The results of operations for the six 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 $85,635,000 at January 31, 1999. A substantial portion of the losses are
attributable to investments in research, development and
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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, 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. In
February, 1999, the Company completed a sale of a license of certain technology
to Hyundai Heavy Industries of Korea regarding its PantherTM Drive System. The
Company received the initial payment on this sale and is scheduled to receive
additional payment during the third and fourth fiscal quarters. Furthermore, the
Company has begun to aggressively pursue options to reduce its outstanding debt
and initiate discussions with outside investors to re-invigorate the Company and
allow it to further develop its current drive systems and expand these
technologies into new markets.
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):
January 31, July 31,
1999 1998
----- -----
(unaudited)
Finished Goods $ 98 $ 120
Work-in-process 84 101
Raw materials 278 437
Valuation adjustment (175) (166)
----- -----
$ 285 $ 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):
January 31, July 31,
1999 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 1996, the Company acquired substantially all the tangible and intangible
assets, and assumed certain liabilities, of Systronix Corporation (Systronix), a
leading developer of proprietary electric propulsion drive systems, for stock, a
note and cash in the amount of $2,686,000. This purchase led to the re-focus of
the Company's strategic thrust into electric drive systems and their components.
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 six months ended January 31, 1999, the Company has continued to
concentrate on the reduction of operating costs and outstanding debt. 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.
The Company has completed the sale of a license to certain proprietary PantherTM
Drive System software and hardware, for the Republic of Korea, to Hyundai Heavy
Industries ("HHI") for further design and development of electric drive systems.
The Company anticipates deriving further development contracts from this new
relationship with Hyundai Heavy Industries as well as utilizing HHI to
manufacture the Company's drive systems for international sales.
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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, joint venturing with vehicle and bus manufacturers to utilize
its drive train system, and developing a comprehensive marketing plan to
penetrate various alternate niche markets for its drive system and its
components.
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 six months ended January 31, 1999, the Company spent $189,000 in cash
on operating activities to fund the net loss of $585,000 resulting from factors
explained in the following section of this discussion and analysis. Accounts
receivable increased by $369,000 primarily due to the sale of the technology to
Hyundai Heavy Industries. 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 HMC
technology license was reclassified from long-term to current receivables.
Inventory decreased by $207,000, net of write-downs.
Another factor in the net loss 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 six months ended January 31, 1999 were
financed entirely by the funds received in the prior fiscal year and funds
received on engineering contracts and technology licensing.
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 1999 AND 2000. AS OF MARCH 15,
1999, 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. 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.
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RESULTS OF OPERATIONS
Net sales increased $393,000 from the second quarter of 1998, and increased
$170,000 in the first six months as compared to the corresponding period of
1998. The increase was due mainly to the sale of the technology license to
Hyundai Heavy Industries and the completion of certain milestones in the
Company's Hyundai Motor Company and U.S. Government contracts. Development
contracts with Hyundai Motor Company and the U.S. Government account for almost
all of the Company's sales for 1999. The Company has effectively discontinued
its converted vehicle program.
Cost of sales in the second quarter of 1999 decreased to $349,000 on sales of
$753,000, compared to cost of sales of $1,171,000 on sales of $360,000 in the
second quarter of 1998.
Research and development expense increased in the second quarter of 1999 by
$16,000, from the second quarter of 1998. The Company has begun to hire new
technical staff in anticipation of additional contracts during fiscal 1999. 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 $520,000 in the second
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 decreased only slightly to $158,000 in the second
quarter of 1999 from $159,000 in the second quarter of 1998. Interest costs have
decreased because of actions taken to reduce the amount of outstanding debt. The
Company is currently negotiating with various debt holders regarding reducing
the debt levels of the Company.
The Company incurred a net loss of $89,000 in the second quarter of 1999
compared to a net loss of $1,809,000 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 $85,635,000 at January 31,
1999. 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 March 15, 1998, the Company
had no firm commitments from any person or
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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.
For the past twelve months, the Company has been continually improving its
ability to maintain operations from current revenues. At present, the Company is
able to generate sufficient cash flow to support its operations on a monthly
basis and we believe we should be able to do so indefinitely based on current
cash flow projections. The Company has streamlined its operations sufficiently
and has forecast sales and/or research and development contracts which will
provide income adequate to fulfill these projections. The Company has signed a
software licensing agreement with Hyundai Heavy Industries which will provide
the Company with additional cash flow for the current fiscal year and the near
future. Furthermore, as part of this software license agreement, the Company
will acquire additional research and development contracts from Hyundai Heavy
Industries as well as Hyundai Motor Company. The Company is also in the process
of finding new capital sources to expand its operations along the lines of its
main product line. The Company is in discussions with various strategic partners
to develop commercially viable vehicles for the various state and government
agencies. The Company believes that within six months, it will have completed
negotiations with a manufacturer of buses to incorporate the Company's drive
systems into a new line of electric transportation vehicles.
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 $585,000 for the six months ended January
31, 1999.
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 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.
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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.
In 1995, the Company restructured approximately 22 million
dollars in debt to vendors and lenders. A creditor's committee
was formed of substantially all the vendors and lenders at
that time. Nineteen creditors, at that time, chose not to join
the creditor's committee, instead opting to pursue their legal
remedies individually. The total outstanding dollar value of
these lawsuits is approximately $650,000.00. As of September
24, 1998, nine of these unsecured creditors have obtained
judgement totaling approximately $450,000.00. The remaining
suits are either pending resolution or have been discontinued.
At this time, the Company anticipates minimal impact from the
resolution of any of these lawsuits or judgements as all
assets of the Company are collateralized against a priority
security interest
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 March 15, 1999, 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 March 15, 1999, the holder of the notes had
not yet exercised any of its remedies with respect to the
notes.
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 March 15, 1999, 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 March 15, 1999, the holder of the notes had not yet
exercised any of its remedies with respect to the notes.
14
<PAGE>
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 March 15, 1999, 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 March 15, 1999, 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:
Year 2000 Compliance
The Company is currently reviewing and upgrading, when
necessary, all software and hardware systems to verify Year
2000 compliance. The Company has converted its accounting
software to a system which is Y2K compliant. All engineering
information systems have been analyzed and are deemed to be
Y2K compliant. The Company is upgrading hardware systems as
necessary to be Y2K compliant and projects that all systems
will be Y2K ready by June, 1999. Non-IT systems are currently
Y2K compliant. Historical costs associated with the Y2K issue
including analysis and upgrades have been approximately
$4,500.00. Due to nature of the Company's operations, the
Company does not believe its exposure to disruptions as a
result of the Y2K issues at the Company's suppliers and
customers will be material. The Company has had verbal
discussions with its major customer and is confident that it
will be in compliance prior to the year 2000. In as much as
the Company does not have a "major" supplier of goods or
services, we do not feel that a disruption at any particular
vendor will materially affect the Company's operations. At
this time, the Company has not begun a full-scale assessment
of suppliers and customers Y2K compliance; however, we have
had informal discussions regarding the issue with various
suppliers.
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits:
None
(b) Reports on Form 8-K
None.
15
<PAGE>
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 March 15, 1999.
U.S. ELECTRICAR, INC.
(Registrant)
/s/ Carl D. Perry
- --------------------------------------------------------------------------------
By: Carl D. Perry, Chief Executive Officer and Acting Chief Financial Officer
16
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No.
- --------------------------------------------------------------------------------
27 FDS 17
17
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-01-1998
<PERIOD-END> JAN-31-1999
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0
4,817
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