-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Tpym9wMqE6Y9RYRQBVrPGSPaHmy5/bjh/W7AiYi5h3E6eOEm/AVJzEYrOx7EW/T5 7L6U7KehXbsGbwRINi0XGw== 0000315449-97-000015.txt : 19971117 0000315449-97-000015.hdr.sgml : 19971117 ACCESSION NUMBER: 0000315449-97-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: AMEX SROS: BSE SROS: CSX SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNIQUE MOBILITY INC CENTRAL INDEX KEY: 0000315449 STANDARD INDUSTRIAL CLASSIFICATION: MOTORS & GENERATORS [3621] IRS NUMBER: 840579156 STATE OF INCORPORATION: CO FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10869 FILM NUMBER: 97717946 BUSINESS ADDRESS: STREET 1: 425 CORPORATE CIRCLE CITY: GOLDEN STATE: CO ZIP: 80401 BUSINESS PHONE: 3032782002 MAIL ADDRESS: STREET 1: 425 CORPORATE CIRCLE CITY: GOLDEN STATE: CO ZIP: 80401 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] Quarterly report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 [ ] Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 1997 Commission file number 1-10869 UNIQUE MOBILITY, INC. (Exact name of registrant as specified in its charter) Colorado 84-0579156 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 425 Corporate Circle Golden, Colorado 80401 (Address of principal executive offices) (zip code) (303) 278-2002 (Registrant's telephone number, including area 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 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 . The number of shares outstanding (including shares held by affiliates) of the registrant's common stock, par value $0.01 per share at November 10, 1997 was 14,141,562. PART I - FINANCIAL INFORMATION UNIQUE MOBILITY, INC. AND SUBSIDIARIES Consolidated Balance Sheets September 30, March 31, Assets 1997 1997 (unaudited) Current assets: Cash and cash equivalents $ 3,505,215 5,713,557 Accounts receivable (note 9) 252,597 389,314 Costs and estimated earnings in excess of billings on uncompleted contracts (note 3) 810,391 191,885 Inventories (note 4) 353,347 425,391 Prepaid expenses 121,505 115,260 Other current assets 34,513 17,675 Total current assets 5,077,568 6,853,082 Property and equipment, at cost: Land 335,500 335,500 Building 1,438,090 1,438,090 Molds 102,113 102,113 Transportation equipment 235,575 258,675 Machinery and equipment 2,160,610 1,963,146 4,271,888 4,097,524 Less accumulated depreciation (1,934,226) (1,764,288) Net property and equipment 2,337,662 2,333,236 Investment in Taiwan joint venture (note 5) 2,548,308 2,677,730 Other investments (note 5) 1,000,000 - Patent and trademark costs, net of accumulated amortization of $53,216 and $45,551 608,386 502,297 Other assets 1,714 4,354 $ 11,573,638 12,370,699 (Continued) UNIQUE MOBILITY, INC. AND SUBSIDIARIES Consolidated Balance Sheets, Continued September 30, March 31, Liabilities and Stockholders' Equity 1997 1997 (unaudited) Current liabilities: Accounts payable $ 222,950 169,403 Note payable to Taiwan joint venture - 1,345,285 Other current liabilities (note 6) 285,611 459,223 Current portion of long-term debt 47,322 45,180 Billings in excess of costs and estimated earnings on uncompleted contracts (note 3) 34,751 659,807 Total current liabilities 590,634 2,678,898 Long-term debt, less current portion 702,112 726,218 Total liabilities 1,292,746 3,405,116 Minority interest in consolidated subsidiary 390,229 390,784 Stockholders' equity (note 7): Common stock, $.01 par value, 50,000,000 shares authorized; 14,011,152 and 13,042,964 shares issued 140,111 130,430 Additional paid-in capital 29,332,809 27,094,170 Accumulated deficit (19,386,812) (18,532,364) Notes receivable from officers (63,665) (83,646) Cumulative translation adjustment (131,780) (33,791) Total stockholders' equity 9,890,663 8,574,799 Commitments (note 10) $ 11,573,638 12,370,699 See accompanying notes to consolidated financial statements. UNIQUE MOBILITY, INC. AND SUBSIDIARIES Consolidated Statements of Operations (unaudited)
Quarter Ended September 30,Six Months Ended September 30, 1997 1996 1997 1996 Revenue: Contract services (note 9) $ 673,759 539,193 1,703,370 983,474 Product sales 118,870 184,081 346,421 375,387 792,629 723,274 2,049,791 1,358,861 Operating costs and expenses: Cost of contract services 708,279 353,762 1,578,270 672,588 Cost of product sales 98,356 138,683 266,138 313,381 Research and development 167,899 484,366 256,737 880,488 General and administrative 371,551 265,850 688,311 531,654 Depreciation and amortization 52,869 55,096 104,593 108,048 Royalty (2,231) 3,470 3,805 9,028 1,396,723 1,301,227 2,897,854 2,515,187 Operating loss (604,094) (577,953) (848,063) (1,156,326) Other income (expense): Interest income 46,296 26,856 97,969 52,826 Interest expense (17,735) (55,489) (41,814) (110,101) Equity in loss of Taiwan joint venture (note 5) (16,905) (13,643) (31,433) (23,282) Minority interest share of earnings of consolidated subsidiary (16,671) (17,878) (33,119) (35,079) Other 10 4,006 2,012 4,363 (5,005) (56,148) (6,385) (111,273) Net loss $ (609,099) (634,101) (854,448) (1,267,599) Net loss per common share $ (.04) (.05) (.06) (.11) Weighted average number of shares of common stock outstanding (note 8) 13,701,823 11,246,061 13,393,582 11,155,189
See accompanying notes to consolidated financial statements. UNIQUE MOBILITY, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (unaudited) Six Months Ended September 30, 1997 1996 Cash flows used by operating activities: Net loss $ (854,448) (1,267,599) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 180,243 189,892 Minority interest share of earnings of consolidated subsidiary 33,119 35,079 Noncash compensation expense for common stock issued for services 38,520 21,925 Equity in loss of Taiwan joint venture 31,433 23,282 Loss (Gain) on sale of property and equipment 23,100 (350) Change in operating assets and liabilities: Accounts receivable and costs and estimated earnings in excess of billings on uncompleted contracts (481,789) (62,660) Inventories 72,044 (8,283) Prepaid expenses and other current assets (23,083) 31,728 Accounts payable and other current liabilities(120,065) 147,889 Billings in excess of costs and estimated earnings on uncompleted contracts (625,056) (73,952) Net cash used by operating activities (1,725,982) (963,049) Cash provided by (used by) investing activities: Acquisition of property and equipment (197,464) (149,287) Increase in patent and trademark costs (113,754) (42,499) Investment in Taiwan joint venture (1,345,285) - Proceeds from sale of assets - 350 Proceeds from sale of certificates of deposit and other investments - 319,107 Net cash provided by (used by) investing activities $(1,656,503) 127,671 (Continued) UNIQUE MOBILITY, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows, Continued (unaudited) Six Months Ended September 30, 1997 1996 Cash provided by (used by) financing activities: Repayment of debt $ (21,964) (46,302) Repayment of notes receivable from officers 574 - Proceeds from sale of common stock, net - 2,609,152 Issuance of common stock upon exercise of employee and non-employee options 749,913 106,976 Issuance of common stock under employee stock purchase plan 19,294 14,338 Issuance of common stock upon exercise of underwriter warrants 460,000 - Distributions paid to holders of minority interest (33,674) (33,673) Net cash provided by financing activities 1,174,143 2,650,491 Increase (decrease) in cash and cash equivalents (2,208,342) 1,815,113 Cash and cash equivalents at beginning of period 5,713,557 2,001,028 Cash and cash equivalents at end of period $ 3,505,215 3,816,141 Interest paid in cash during the period $ 74,939 41,753 Non-cash investing and financing transactions: During the six months ended September 30, 1997 and 1996 the Company recorded unrealized foreign currency losses related to its investment in Taiwan UQM in the amount of $97,989 and $5,257, respectively. In June, July and August, 1997, warrant holders exercised warrants to acquire 790,000 shares of common stock on a cashless exchange basis resulting in the issuance of 556,276 shares of common stock based upon a fair market value of the common stock on the dates of exchange of $6.50, $6.75, $7.13 and $7.25 per share. See also note 7 to the Consolidated Financial Statements. In June, 1997 the Company exchanged 200,000 shares of its common stock for 400,000 shares of EV Global Motors Company. The aggregate value of the shares on the date of exchange was $1,000,000. (Continued) UNIQUE MOBILITY, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows, Continued (unaudited) In accordance with the provisions of the Company's stock option plans, the Company accepts as payment of the exercise price mature shares of the Company's common stock held by the option holder for a period of six months prior to the date of the option exercise. The Company may, and has, accepted promissory notes from officers of the Company in satisfaction of the exercise price of options exercised. These notes receivable are recorded as a reduction of shareholder's equity in the Consolidated Financial Statements. In addition, the Company, may and has, accepted mature shares from officers. During the six months ended September 30, 1997, the Company accepted 2,654 shares of common stock with an aggregate value of $19,407 as payment against amounts due under promissory notes from officers. The shares received thereunder were canceled pursuant to Colorado law. See accompanying notes to consolidated financial statements. UNIQUE MOBILITY, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (unaudited) (1) The accompanying financial statements are unaudited; however, in the opinion of management, all adjustments which were solely of a normal recurring nature, necessary to a fair statement of the results for the interim period, have been made. The results for the interim period are not necessarily indicative of results to be expected for the fiscal year. (2) Certain prior year amounts have been reclassified to conform to the current period financial statement presentation. (3) The estimated period to complete contracts in process ranged from one to nine months at September 30, 1997, and from one to fifteen months at March 31, 1997. The Company expects to collect substantially all related accounts receivable and costs and estimated earnings in excess of billings on uncompleted contracts within one year. Contracts in process consist of the following: September 30, 1997 March 31, 1997 (unaudited) Costs incurred on uncompleted contracts $ 2,412,568 3,158,704 Estimated earnings 463,570 490,407 2,876,138 3,649,111 Less billings to date (2,100,498) (4,117,033) $ 775,640 (467,922) Included in the accompanying balance sheets as follows: Costs and estimated earnings in excess of billings on uncompleted contracts $ 810,391 191,885 Billings in excess of costs and estimated earnings on uncompleted contracts (34,751) (659,807) $ 775,640 (467,922) UNIQUE MOBILITY, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (unaudited) (4) Inventories consist of: September 30, 1997 March 31, 1997 (unaudited) Raw materials $ 206,569 283,155 Work in process 37,973 69,460 Finished products 108,805 72,776 $ 353,347 425,391 (5) In January 1994, the Company, Kwang Yang Motor Co. Ltd. ("KYMCO"), and Turn Luckily Technology Co. Ltd. ("TLT"), entered into a joint venture agreement (the "Joint Venture Agreement") providing for the formation, funding, and operation of Taiwan UQM Electric Co. Ltd., a company organized under the laws of the Republic of China ("Taiwan UQM"). Taiwan UQM was incorporated in April 1995. In 1994, the Company purchased 39 percent of the initial equity capital of Taiwan UQM and agreed to invest 39 percent of any additional capital calls. Pursuant to the Joint Venture Agreement, the venturers are required to invest additional funds in Taiwan UQM, as the board of directors of Taiwan UQM by unanimous vote determines to be required. In December 1996, Taiwan UQM made an additional capital call which was payable in two equal installments due March 1, 1997, and June 1, 1997, with interest accruing at 10% per annum. The Company's 39% share of the December 1996 capital call was $1,345,285. Although 50% of the Company's obligation was payable March 1, 1997, it was not paid until April 17, 1997, at which time the entire obligation plus accrued interest was paid. The Company's investment in Taiwan UQM is accounted for under the equity method of accounting. Under this method, the investment originally recorded at cost, is adjusted to recognize the Company's share of the net earnings or losses of the joint venture. Income or loss recognition is limited to the extent of the Company's investment in, advances to and guarantees of the joint venture. Due to timing considerations, the Financial Position and Results of Operations for the joint venture are included in the Company's Consolidated Financial Statements on a three month time lag. UNIQUE MOBILITY, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (unaudited) Summarized financial information for Taiwan UQM is as follows: Financial Position June 30, 1997 December 31, 1996 Current assets $ 2,662,486 889,881 Noncurrent assets- property and equipment 6,607,286 4,542,142 Total assets 9,269,772 5,432,023 Current liabilities 189,327 607,453 Noncurrent liabilities 2,546,321 - Stockholders' equity 6,534,124 4,824,570 Total liabilities and equity $ 9,269,772 5,432,023 Six Months Ended Six Months Ended Results of Operations June 30, 1997 June 30, 1996 Revenue $ 65,408 5,254 Expenses (146,005) (64,951) Net loss $ (80,597) (59,697) In June, 1997, the Company entered into a strategic relationship with EV Global Motors Company (EVG) to develop and market light electrical transportation products. EVG purchased 1,151,925 shares of the Company's common stock and warrants to acquire, on a cashless exercise basis an additional 350,000 shares of common stock. Separately, the Company and EVG completed a stock purchase transaction pursuant to which the Company purchased 400,000 shares of EVG common stock in exchange for 200,000 shares of the Company's common stock. The aggregate value of the shares on the date of exchange was $1,000,000. The investment in EVG is accounted for under the cost method of accounting. Under this method, the investment is carried at acquistion cost and dividends received that are distributed from net accumulated earnings of the investee are recognized as income. Dividends received in excess of earnings of the investee are considered a return of investment and are accounted for as a reduction of the carrying value of the investment. On July 31, 1997, EVG exercised warrants to acquire 175,000 shares of common stock on a cashless basis resulting in the issuance of 116,053 shares of common stock based upon a fair market value of the common stock on the date of exchange of $7.13 per share. On August 5, 1997, EVG exercised warrants to acquire an additional 175,000 shares of common stock on a cashless basis resulting in the issuance of 117,069 shares of common stock based upon a fair market value of the common stock on the date of exchange of $7.25 per share. UNIQUE MOBILITY, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (unaudited) (6) Other current liabilities consist of: September 30, 1997 March 31, 1997 (unaudited) Accrued interest $ 6,064 39,218 Accrued legal and accounting fees 22,745 37,171 Accrued payroll, consulting, personal property and real estate taxes 74,663 67,207 Equipment purchase commitment 100,769 - Refund of overpayment - 250,005 Other 81,370 65,622 $ 285,611 459,223 (7) The Company reserved 5,104,000 shares of common stock for key employees, consultants and key supplier under its Incentive and Non-Qualified Option Plans of 1992 and 1982. Under these option plans the exercise price of each option is set at the fair market value of the common stock on the date of grant and the maximum term of the options is 10 years from the date of grant. Options granted to employees vest ratably over a three year period. The maximum number of shares that may be granted to any eligible employee during the term of the 1982 and 1992 plans is 1,000,000 shares. Options granted under the Company's plans to employees require the option holder to abide by certain Company policies which restrict their ability to sell the underlying common stock. The following table summarizes activity under the plans during the six months ended September 30, 1997: Shares Under Weighted Average Option Exercise Price Outstanding at March 31, 1997 2,451,456 $ 4.66 Exercised (154,224) $ 4.61 Forfeited (9,983) $ 3.59 Outstanding at September 30, 1997 2,287,249 $ 4.67 Exercisable at September 30, 1997 1,531,206 $ 5.21 UNIQUE MOBILITY, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (unaudited) The following table presents summarized information about stock options outstanding at September 30, 1997:
Options Outstanding Options Exercisable Weighted Number Average Weighted Number Weighted Range of Outstanding Remaining Average Exercisable Average Exercise Prices at 9/30/97 Contractual Life Exercise Price at 9/30/97 Exercise Price $0.50 - 1.00 112,117 1.8 years $0.79 112,117 $0.79 2.25 - 3.31 623,256 8.8 years $3.08 134,000 $2.25 3.50 - 5.00 831,994 7.0 years $4.05 565,207 $4.02 5.38 - 8.13 719,882 6.3 years $7.38 719,882 $7.38 0.50 - 8.13 2,287,249 7.0 years $4.67 1,531,206 $5.21
In February 1994, the Company's Board of Directors ratified a Stock Option Plan for Non-Employee Directors pursuant to which Directors may elect to receive stock options in lieu of cash compensation for their services as directors. The Company has reserved 250,000 shares of common stock for issuance pursuant to the exercise of options under the Plan. The options vest ratably over a three-year period beginning one year from the date of grant and are exercisable for 10 years from the date of grant. Option prices are equal to the fair market value of common shares at the date of grant. The following table presents summarized activity under the plan during the six months ended September 30, 1997: Weighted Shares Under Average Option Exercise Price Outstanding at March 31, 1997 141,333 $ 5.22 Granted 64,000 $ 7.13 Exercised (12,000) $ 5.38 Outstanding at September 30, 1997 193,333 $ 5.85 Exercisable at September 30, 1997 87,556 $ 5.45 The following table presents summarized information about stock options outstanding for non-employee directors: Options Outstanding Options Exercisable Weighted Number Average Weighted Number Weighted Range of Outstanding Remaining Average Exercisable Average Exercise Prices at 9/30/97 Contractual Life Exercise Price at 9/30/97 Exercise Price $4.38 - 6.00 97,333 7.8 years $4.88 55,556 $4.98 6.25 - 7.13 96,000 8.8 years $6.84 32,000 $6.25 193,333 8.3 years $5.85 87,556 $5.45
UNIQUE MOBILITY, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (unaudited) Directors fees paid through the grant of stock options under the Stock Option Plan for Non-employee Directors are recorded as compensation expense based on the fair value of such services. In connection with the original issuance of certain subordinated convertible term notes to Advent and Techno, the Company granted Advent and Techno warrants to acquire 790,000 shares of the Company's common stock at the lower of $2.40 per share, being the market value of the Company's stock at the time of issuance or the market price of the common stock averaged over the 30 trading days immediately preceding the date of exercise. The warrants allowed for a cashless exercise of the warrants into common shares based on the spread between the market price of the common stock on the date of exercise and the $2.40 exercise price and expired in August 1997. On June 19, 1997, warrants to acquire 395,000 shares of common stock were exercised on a cashless basis resulting in the issuance of 249,154 shares of common stock. On July 31, 1997, warrants to acquire 45,000 shares of common stock were exercised on a cashless basis resulting in the issuance of 29,000 shares of common stock. On August 5, 1997, warrants to acquire 175,000 shares of common stock were exercised on a cashless basis resulting in the issuance of 116,053 shares of common stock. The remaining warrants to acquire 175,000 shares of the Company's common stock were exercised on a cashless basis on August 15, 1997, resulting in the issuance of 117,069 shares of common stock. The Company has reserved 300,000 shares of common stock for issuance pursuant to a warrant agreement with an investment banking company. The warrants are exercisable at a price of $6.00 per share and expire in January, 1999. The warrants contain transfer restrictions and provisions for the adjustment of the exercise price and the number and type of securities issuable upon exercise based on the occurrence of certain events. All of these warrants remain outstanding at September 30, 1997. In connection with the 1995 common stock issuance, the placement agent was issued warrants expiring July, 1998, to acquire 150,000 shares of the Company's common stock at $5.75 per share. During September 1997, warrants to acquire 80,000 shares of the Company's common stock were exercised, resulting in cash proceeds to the Company of $460,000. The remaining warrants to acquire 70,000 shares of the Company's common stock remain outstanding as of September 30, 1997. In connection with the 1996 private placements, the placement agents were issued warrants to acquire 50,000 shares of the Company's common stock at $4.75 per share in February, 1996, 38,100 shares of the Company's common stock at $5.00 per share in May, 1996, and 50,000 shares at $4.25 per share in September, 1996. The warrants expire three years from the date of issuance. All of these warrants remain outstanding at September 30, 1997. In connection with the 1997 private placement, the placement agents were issued warrants in February 1997, to acquire 225,625 shares of the Company's stock at an exercise price of $3.50 per share and warrants to acquire 50,000 shares at an exercise price of $4.20 per share. The warrants expire three years from the date of issuance. All of these warrants remain outstanding at September 30, 1997. UNIQUE MOBILITY, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (unaudited) (8) Net loss per common share amounts are based on the weighted average number of common shares outstanding during the quarter and six months ended September 30, 1997 and 1996. Outstanding common stock options and warrants were not included in the computation because the effect of such inclusion would be antidilutive. (9) The Company has historically derived significant revenue from contract services from a few key customers. The customers from which this revenue has been derived and the percentage of this revenue as a percentage of total contract services revenue is summarized as follows: Quarter Ended Six Months Ended September 30, September 30, Customers: 1997 1996 1997 1996 Defense Advance Research Project Agency $ 102,698 - $ 150,055 - Deere & Company 117,903 - 207,194 - Houston Metropolitan Transit Authority 161,124 - 246,878 - Kia Motors Corporation 87,905 - 512,786 - Koyo Seiko Company 47,326 - 170,200 - Asia Pacific Technology Co., Ltd. 35,076 - 182,651 - Ford Motor Company - 50,451 - 197,558 Hyundai Motor Company - 135,950 - 135,950 Kwang Yang Motor Co., Ltd. - 24,305 - 150,447 Pentastar Electronics, Inc. - 194,600 - 194,600 $ 552,032 405,306 1,469,764 678,555 Percentage of contract services revenue 82% 75% 86% 69% These customers, in total, also represented 53% and 85% of total accounts receivable at September 30, 1997, and 1996, respectively. Contract services revenue derived from contracts with agencies of the U.S. Government and from sub-contracts with U.S. Government prime contractors, certain portions of which are included in revenue from other key customers above, totaled $280,320 and $350,346 for the quarter ended September 30, 1997 and 1996, respectively, and $413,941 and $468,717 for the six months ended September 30, 1997, and 1996, respectively. (10)The Company has entered into employment agreements with three of its officers which expire December 31, 1999. The aggregate annual future compensation under these agreements through the expiration date is $962,625. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Report contains forward-looking statements that involve risks and uncertainties. The Company's actual results could differ materially from those discussed in this report. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this report and any documents incorporated herein by reference, as well as, in the Company's Registration Statement on Form S-3 (file no. 23843). These forward-looking statements represent the Company's judgment as of the date of this Report. The Company disclaims, however, any intent or obligation to update these forward-looking statements. Financial Condition During the second quarter, the Company executed a license and supply agreement to build electric motors for Invacare Corporation, the world's leading manufacturer and distributor of home health care products and mobility products for people with disabilities, including power wheelchairs. The motors will be manufactured pursuant to a renewable two-year supply agreement with Unique Power Products, Inc., a newly formed, wholly owned subsidiary of the Company. Concurrent with the supply agreement, Unique granted Invacare an exclusive worldwide license covering the commercial use of other Unique designed motors for application in the general field of medical and health care products. The Company's financial condition remained satisfactory throughout the six months ended September 30, 1997. Cash and cash equivalents declined $2,208,342 to $3,505,215 at September 30, 1997 from $5,713,557 at March 31, 1997 due principally to the application of cash to operations during the quarter of $1,725,982 and the Company's additional equity investment in Taiwan UQM in the amount of $1,345,285. Financing activities throughout the first half, consisting primarily of issuances of common stock upon the exercise of stock options and warrants, resulted in cash proceeds to the Company of $1,209,913. Working capital ( the excess of current assets over current liabilities) rose from $4,174,184 at March 31, 1997 to $4,486,934 at September 30, 1997. Accounts receivable declined to $252,597 at September 30, 1997 from $389,314 at March 31, 1997 reflecting collections of certain past due billings during the second quarter. The accounts receivable balance at September 30, 1997, represented approximately 37 days revenue compared to 35 days revenue at June 30, 1997 and 69 days revenue at March 31, 1997. Costs and estimated earnings on uncompleted contracts rose $618,506 to $810,391 at the end of the first half due to milestone billing arrangements on certain commercial and government projects. Estimated earnings on contracts in process were $463,570 at September 30, 1997 on total contracts in process of $2,876,138, representing estimated average margins on contracts in process of 16.1 percent compared to estimated earnings on contracts in process of $490,407 at March 31, 1997 on total contracts in process of $3,649,111, representing estimated average margins on contracts in process of 13.4 percent at March 31, 1997. The increase in estimated average margins is attributable to a greater proportion of contracts with commercial customers and a decline in services applied to "cost-share" type contracts with the U.S. Government. Finished product inventories rose while raw materials and work in process inventories declined resulting in an overall decline in inventory levels from $425,391 at the beginning of the fiscal year to $353,347 at September 30, 1997. The decrease in raw materials and work in process inventories is primarily attributable to higher levels of production activities during the period directed toward increased stocking of finished good inventories on hand for resale. During the second quarter and first half of fiscal 1998 the Company invested $146,372 and $197,464, respectively, for the acquisition of property and equipment and $54,101 and $113,754, respectively, in the prosecution of its trademarks and patent applications throughout the world. Investments for the acquisition of property and equipment and prosecution of trademark and patent applications were $149,287 and $42,499, respectively, for the comparable six month period last year. The increase in expenditures on property and equipment during the first half of fiscal 1998 over that for the comparable prior year period was primarily attributable to the construction of a new high power dynamometer test laboratory at the Company's Golden, Colorado facility. The increase in patent and trademark expenditures during the first half of fiscal 1998 over that for the comparable prior year period is primarily attributable to prosecution of the mark "PowerPhase" throughout the world, ongoing patent continuation fees and prosecution of foreign patent applications. Investment in Taiwan joint venture declined to $2,548,308 at September 30, 1997 reflecting the Company's recording of its proportionate share of the operating losses of Taiwan UQM and translation adjustments associated with the devaluation of the NT dollar against the US dollar. Other investments rose to $1,000,000 at September 30, 1997 due to the Company's acquisition of 400,000 shares of the common stock of EVG in exchange for 200,000 shares of the Company's common stock in June. Accounts payable rose to $222,950 at September 30, 1997 compared to $169,403 at March 31, 1997. The increase is primarily attributable to increased component purchases for sponsored development programs and the construction of a new dynamometer test laboratory. Note payable to Taiwan joint venture declined $1,345,285 reflecting the Company's funding of its capital call obligation to Taiwan UQM in April. Other current liabilities declined to $285,611 at September 30,1997 compared to $459,223 at March 31, 1997. The decrease was primarily attributable to the repayment during the first quarter of an inadvertent overpayment submitted by a customer in the prior quarter ended March 31, 1997. Billings in excess of costs and estimated earnings on uncompleted contracts declined to $34,751 at September 30, 1997 from $659,807 at March 31, 1997 reflecting near completion of work on certain sponsored development programs against advance payments deposited by the Customer with the Company. Long-term debt declined $24,106 to $702,112 at September 30, 1997 due to scheduled principal payments on the mortgage debt associated with the Company's facility. Common stock and additional paid-in capital increased to $140,111 and $29,332,809 at September 30, 1997, respectively, compared to $130,430 and $27,094,170 at March 31, 1997. The increases were primarily due to the issuance of common stock upon the exercise of stock options by employees and consultants of the company ($749,913), the issuance of common stock under the Company's employee stock purchase program ($19,294), the exercise of underwriter warrants ($460,000) and the issuance of common stock associated with the Company's investment in EVG ($1,000,000). Results of Operations Operations for the quarter ended September 30, 1997, resulted in a net loss of $609,099 or $0.04 per common share compared to a net loss of $634,101 or $0.05 per share for the comparable quarter last year. Operations for the six months ended September 30, 1997, resulted in a net loss of $854,448 or $0.06 per common share compared to a net loss of $1,267,599 or $0.11 per common share for the comparable prior period last year. Revenue derived from contract services was $673,759 for the fiscal 1998 second quarter versus $539,193 for the comparable prior year quarter. Revenue derived from contract services for the six months ended September 30, 1997 was $1,703,370 compared to $983,474 for the comparable period last year. The increases in contract services revenue are attributable to increased demand for automotive systems projects. Product sales declined to $118,870 during the second quarter of fiscal 1998 from $184,081 for the comparable prior year quarter. The decrease is primarily attributable to decreased sales of all products other than the Company's PowerPhase system. Gross profit margins for the second quarter of fiscal 1998 declined to a negative 1.8 percent compared to 31.9 percent for the comparable quarter last year. The decline in margins is attributable to cost overruns on several automotive systems projects in the Company's contract services business. Gross profit margins from contract services declined to negative 5.1 percent for the second quarter of fiscal 1998 compared to 34.4 percent for the comparable quarter last year. The decrease in contract services margins is generally attributable to cost overruns on several automotive systems programs. Gross profit margins on product sales declined to 17.3 percent during the second quarter compared to 24.7 percent for the comparable prior year quarter. The decline in product sales margins is attributable to lower margins on products other than the PowerPhase System arising from smaller batch builds which tend to have higher purchased component costs. Gross profit margins from contract services for the six months ended September 30, 1997 declined to 7.3 percent compared to 31.6 percent for the comparable period last year. The decrease is primarily attributable to cost overruns on automotive systems programs. Gross profit margins on product sales for the six months ended September 30, 1997 rose to 23.2 percent from 16.5 percent for the comparable period last year. The increase is attributable to increased sales of the Company's PowerPhase system. Research and development expenditures during the second quarter of fiscal 1998 declined $316,467 to $167,899 compared to $484,366 for the comparable quarter last year. The decrease is attributable to the deployment of technical personnel on sponsored development activities and reduced levels of internally funded production engineering activities on the Invacare wheelchair drive system. For the six months ended September 30, 1997 research and development expenditures declined $623,751 to $256,737. The decrease is attributable to reduced levels of production engineering activities on the Invacare wheelchair drive system and lower levels of work performed on "cost share" type sponsored development programs. General and administrative expenses for the quarter ended September 30, 1997 rose to $371,551 from the prior year level of $265,850 due to higher levels of business development, legal and accounting expenditures. General and administrative expenses for the six months ended September 30, 1997 increased to $688,311 from $531,654 for the comparable period last year. The increase is primarily due to higher legal, shareholder and salary expenses. Interest income rose to $46,296 for the second quarter and $97,969 for the first half compared to $26,856 and $52,826 for the comparable prior year periods, respectively. The increases are attributable to higher levels of invested cash. Interest expense declined to $17,735 for the second quarter and $55,489 for the first half of fiscal 1998 compared to $55,489 and $110,101 for the comparable periods last year. The decreases are due to elimination of interest costs on the Company's capital call obligations to Taiwan UQM. Equity in loss of Taiwan joint venture rose to $16,905 and $31,433 for the quarter and six months ended June 30, 1997, respectively, compared to $13,643 and $23,282 during the comparable periods last year. The increase is attributable to expanded staffing and operations at Taiwan UQM preparatory to the launch of manufacturing operations. Liquidity and Capital Resources The Company's cash balances and liquidity during the quarter and six months ended September 30, 1997, were adequate to meet its operating needs. Net cash used by operating activities was $1,725,982 for the six months ended September 30, 1997 compared to net cash used by operations for the comparable period last year of $963,049. The increase is primarily attributable to the performance of sponsored development activities against cash prepayments from customers on deposit with the company, increased levels of accounts receivable and costs and estimated earnings in excess of billings on uncompleted contracts. Cash requirements during the period were funded primarily from cash on hand. In January 1996, Invacare purchased 129,032 shares of common stock at a price of $3.88 per share. Net proceeds to the Company were $500,000, all of which were applied to fund the development of a wheelchair motor for Invacare. Contingent upon achieving development milestones, Invacare further agreed to purchase additional shares at the then market price, the proceeds of which would be used, in part, to fund the Company's anticipated capital investment in motor manufacturing tools and equipment. In August, the Company completed agreements with Invacare to manufacture motors for its wheelchairs. Coincident to these agreements Invacare will purchase directly the assets required to launch production, such as tooling and dedicated manufacturing equipment in lieu of completing the second investment originally envisioned in the stock purchase agreement. Accordingly, the Company does not anticipate any further sales of its equity securities to Invacare. In fiscal 1994, the Company, KYMCO and TLT entered into a joint venture agreement which provided for the formation, capitalization and operation of Taiwan UQM, a company organized under the laws of the Republic of China. The Company purchased 39 percent of the initial stock of Taiwan UQM for NT$1,170,000 (US$45,082 on the transaction date). Pursuant to the joint venture agreement, the venture partners are obligated to meet future capital calls as the Board of Directors of Taiwan UQM, by unanimous vote, determines. During fiscal 1995, the Company was unable to fund its capital call obligations. In June 1995, the Company, KYMCO and TLT entered into a waiver and option agreement pursuant to which KYMCO agreed to purchase those shares of Taiwan UQM underlying the Company's capital call obligations. The purchase price of such shares was NT$37,830,000 (U.S.$1,403,493 at October 31, 1995). The Company was granted the option to repurchase the shares for the original capital call amount plus 10 percent interest and associated transfer taxes. In November 1996, the Company exercised its option and subsequently repurchased the shares from KYMCO, thus maintaining the Company's ownership position at 39 percent of the then outstanding shares of Taiwan UQM. The repurchase price plus interest and taxes totaled NT$44,175,505 (US$1,612,539 on the transaction date). In November 1996, the Board of Directors of Taiwan UQM announced an additional capital call to provide cash to fund facility construction and the launch of electric component production. The Company's capital call obligation pursuant thereto was NT$37,050,000 (US$1,348,300 as of December 1, 1996), plus interest at the rate of 10 percent per annum on the outstanding amount from December 1, 1996, through the due date. The obligation was due and payable in two equal installments on March 1, 1997 and June 1, 1997. During the first quarter of fiscal 1998, the Company elected to fund the entire capital call obligation in one payment and remitted approximately $1,384,000 including accrued interest of approximately $40,000 in complete satisfaction of its capital call obligation. The Company believes that Taiwan UQM is adequately capitalized to meet its operating cash requirements over the next twelve months. Accordingly, the Company does not anticipate any additional capital calls by Taiwan UQM in fiscal 1998. Over the next several months, the Company expects to invest substantially greater amounts of capital to launch manufacturing operations for Invacare. Anticipated capital expenditures for working capital, production machinery, equipment, computer hardware and software are expected to exceed $1.5 million. The Company expects to fund this investment requirement through a combination of existing cash resources, cash proceeds received from the exercise of outstanding stock options and warrants and short-term bank lines-of-credit. Although the Company has, to-date, not entered into formal arrangements for such bank lines-of-credit, Management believes bank lines-of-credit are readily available to the Company on terms acceptable to the Company. The Company believes it has cash resources, in addition to those required to launch volume manufacturing operations, sufficient to fund non-manufacturing operations through at least March 31, 1998. PART II - OTHER INFORMATION ITEM 4. Submission of Matters to a Vote of Security Holders The Annual Meeting of the Shareholders of Unique Mobility, Inc. was held on August 19, 1997. The following is a summary of the matters submitted to a vote of security holders and the results of the voting thereon: Proposal 1: Election of Directors Withhold For Authority Ray A. Geddes 9,552,097 508,892 Lee A. Iacocca 9,816,964 244,025 Frank Hodsoll 9,765,324 295,665 William G. Rankin 9,814,871 246,118 H. J. Young 9,512,814 548,175 J. B. Richey 9,509,714 551,275 Proposal 2: Proposal to ratify the appointment of KPMG Peat Marwick LLP as the Independent Auditors of the Company. For Against Abstain 9,989,020 15,976 55,993 Proposal 3: Proposal to amend the 1992 Stock Option Plan to increase the number of shares available for grant from 3,000,000 to 4,000,000 and increase the maximum number of shares available for grant to an individual during the term of the plan from 500,000 to 1,000,000. For Against Abstain 4,392,409 1,358,678 456,834 Total votable shares: 13,316,094 Total shares represented in person and by proxy: 10,060,989 Percentage of votable shares voted: 75.56% ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits 10.1 Incentive Stock Option Agreement with Ray A. Geddes 10.2 Non-qualified Stock Option Agreement with Ray A. Geddes 27 Financial Data Schedule (b) Reports on Form 8-K None. 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. Unique Mobility, Inc. Registrant Date: November 13, 1997 By:/s/ Donald A. French Donald A. French Treasurer and Controller (Principal Financial and Accounting Officer) EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS OF UNIQUE MOBILITY, INC. AND CONSOLIDATED SUBSIDIARIES AS OF SEPTEMBER 30, 1997, AND THE CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997, AND IS QUALIFIED IN ITS ENTIIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS MAR-31-1998 SEP-30-1997 3,505,215 0 252,597 0 1,163,738 5,077,568 4,271,888 1,934,226 11,573,638 590,634 702,112 0 0 29,472,920 (19,582,257) 11,573,638 346,421 2,049,791 1,844,408 2,897,854 (35,429) 0 41,814 (854,448) 0 (854,448) 0 0 0 (854,448) (.06) (.06)
EX-10 3 EXHIBIT 10.1 UNIQUE MOBILITY, INC. 1992 STOCK OPTION PLAN INCENTIVE STOCK OPTION AGREEMENT THIS AGREEMENT made as of this 4th day of September, 1997, between Unique Mobility, Inc., a Colorado corporation (the "Company"), and Ray A. Geddes (the "Option Holder"). 1. Stock Option. Pursuant to the Unique Mobility, Inc. 1992 Stock Option Plan (the "Plan") and subject to the terms and conditions of this Agreement, the Company hereby grants to the Option Holder an option (the "Option") to purchase 14,000 shares of the authorized and unissued $0.01 par value common stock (the "Stock") of the Company at a price of $7.13 per share (the "Option Price"). The Option is granted on August 19, 1997 (the "Grant Date"). The Option granted pursuant to this Agreement is intended to qualify as an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as it may be amended (the "Code"). 2. Exercise of the Option. (a) The Option shall not become exercisable until the Option Holder has completed one year of continuous employment after the Grant Date. Upon the completion of one full year of continuous employment after the Grant Date, the Option shall become exercisable as to one-third of the number of shares subject to the Option. Upon the completion of the second full year of continuous employment after the Grant Date, the Option shall become exercisable as to an additional one-third of the shares originally subject to the Option. Upon the completion of the third full year of continuous employment after the Grant Date, the Option shall become exercisable as to an additional one-third of the shares originally subject to the Option. Except as set forth in Sections 4 or 5 hereof, the Option shall not be exercisable as to any shares as to which the continuous employment requirement shall not be satisfied, regardless of the circumstances under which the Option Holder's employment by the Company shall be terminated. The number of shares as to which the Option may be exercised shall be cumulative, so that once the Option shall become exercisable as to any shares it shall continue to be exercisable as to such shares until expiration or termination of the Option as provided in Section 5 hereof. (b) The Option may be exercised only by delivery to the Corporate Secretary of the Company of written notice specifying the number of shares with respect to which the Option is exercised and payment of the Option Price. At the request of the Company, such notice shall contain the Option Holder's representation that he is purchasing such Stock for investment purposes only and his agreement not to sell any Stock purchased pursuant to the Option in any manner that is in violation of the Securities Act of 1933, as amended, or any applicable state law. Such restrictions or notice thereof shall be placed on the certificates representing the Stock purchased pursuant to the Option, and the Company may refuse to issue the certificates or to transfer the shares on its books unless it is satisfied that no violation of such restrictions will occur. The exercise of the Option shall be deemed effective on the receipt of such notice by the Corporate Secretary and payment to the Company. The purchase of such Stock shall take place at the principal offices of the Company upon the delivery of such notice of exercise, at which time the Option Price for the Stock shall be paid in full by any of the methods set forth in Section 2(c) below. A properly executed certificate or certificates representing the Stock shall be issued by the Company and delivered to the Option Holder. If certificates are used to pay all or part of the exercise price, upon such payment, separate certificates shall be delivered representing each certificate so used, and an additional certificate shall be delivered representing any additional shares to which the Option Holder is entitled as a result of the exercise of the Option. If payment is made pursuant to subparagraph (c)(v) below, the certificate shall be delivered to the broker. (c) The exercise price shall be paid by any of the following methods or any combination of the following methods, as the Stock Option Committee (the "Committee") shall determine in its sole discretion: (i) in cash; (ii) by certified or cashier's check payable to the order of the Company; (iii) by delivery to the Company of certificates representing the number of shares then owned by the Option Holder, the fair market value of which equals the purchase price of the Stock purchased pursuant to the Option, properly endorsed for transfer to the Company; provided however, that the Option may not be exercised by delivery to the Company of certificates representing Stock, unless such Stock has been held by the Option Holder for more than six months; for purposes of this Agreement, the "fair market value" of any shares of Stock delivered in payment of the Option Price upon exercise of the Option shall be as defined in Section 2.1(g) of the Plan; (iv) to the extent permitted under the applicable provisions of state law, by delivery to the Company of a promissory note, which shall be in a principal amount equal to the Option Price plus any federal and state income tax required to be withheld; which shall be full recourse and secured by all or a portion of the Stock acquired pursuant to the exercise of the Option; which shall bear interest at a rate determined by the Committee, but not lower than the rate required to avoid the imputation of interest under the Code; which shall provide for level quarterly payments of interest and principal over its term; which shall become payable in full upon the first to occur of the fifth anniversary of the date the Option is exercised, failure to pay any payment of principal and interest within five days after it is due or termination of the Option Holder's employment for any reason; and which shall contain such other terms and conditions including the provision of security in addition to the Stock that the Company, in its sole discretion, deems necessary or appropriate; (v) by delivery to the Company of a properly executed notice of exercise together with irrevocable instructions to a broker to deliver to the Company promptly the amount of the proceeds of the sale of all or a portion of the Stock or of a loan from the broker to the Option Holder necessary to pay the exercise price. 3. Adjustment of the Option. (a) Adjustment by Stock Split, Stock Dividend, Etc. If at any time the Company increases or decreases the number of its outstanding shares of Stock, or changes in any way the rights and privileges of such shares by means of the payment of a stock dividend or the making of any other distribution on such shares payable in Stock, or through a stock split, subdivision, consolidation, combination or reclassification or recapitalization involving the Stock, the numbers, rights and privileges of the shares of Stock included in the Option shall be increased, decreased or changed in like manner as if such shares had been issued and outstanding, fully paid and nonassessable at the time of such occurrence. (b) Dividends Payable in Stock of Another Corporation, Etc. If at any time the Company pays or makes any dividend or other distribution upon the Stock payable in securities or other property (except money or Stock), a proportionate part of such securities or other property shall be set aside and delivered to the Option Holder when he exercises the Option. The securities and other property delivered to the Option Holder upon exercise of the Option shall be in the same ratio to the total securities and property set aside for the Option Holder as the number of shares with respect to which the Option is then exercised is to the total shares subject to the Option. (c) Other Changes in Stock. If there shall be any change, other than as specified in the preceding subsections (a) and (b), in the number or kind of outstanding shares of Stock or of any stock or other securities into which the Stock shall be changed or for which it shall have been exchanged, then and if the Committee shall in its discretion determine that such change equitably requires an adjustment in the number or kind of shares subject to the Option, such adjustments shall be made by the Committee and shall be effective for all purposes of this agreement. (d) Apportionment of Price. Upon any occurrence described in the preceding subsections (a), (b), and (c), the total Option Price shall remain unchanged and shall be apportioned ratably over the increased or decreased number or changed kinds of securities or other properties subject to the Option. (e) Rights to Subscribe. If at any time the Company grants, to the holders of its Stock, rights to subscribe pro rata for additional shares thereof or for any other securities of the Company or of any other corporation, there shall then be added to the number of shares subject to the Option, the Stock or other securities that the Option Holder would have been entitled to subscribe for if immediately prior to such grant, the Option Holder had exercised his entire Option, and the Option price shall be increased by the amount of the price that would have been payable by the Option Holder for such Stock or other securities. (f) General Adjustment Rules. No adjustment or substitution provided for in this Section 3 shall require the company to sell a fractional share under this Agreement and the total substitution or adjustment with respect to this agreement shall be limited by deleting any fractional share. In the case of any such substitution or adjustment, the Option shall be equitably adjusted by the Committee to reflect the greater or lesser number of shares of Stock or other securities into which the Stock subject to the Option may have been changed. Notwithstanding the foregoing subsections (a), (b), (c), (d), and (e), no adjustment shall be made that would constitute a modification of the Option within the meaning of Section 424 of the Code. (g) Determinations by the Committee. Adjustments under this paragraph shall be made by the Committee, whose determinations with respect thereto shall be final and binding. No fractional shares shall be issued on account of any such adjustment. 4. Reorganization or Change of Control. (a) Reorganization. If the Company is merged or consolidated with another corporation or the Company is a party to a reorganization (other than a merger, consolidation or reorganization in which the Company is the continuing corporation and which does not result in any reclassification or change of outstanding shares of stock), or if all or substantially all of the assets or more than 50% of the outstanding voting stock of the Company is acquired by any other corporation, business entity or person (other than a sale or conveyance in which the Company continues as a holding company of an entity or entities that conduct the business or businesses formerly conducted by the Company), or in case of a reorganization (other than a reorganization under the United States Bankruptcy Code) or liquidation of the Company, the Committee shall, either (i) make appropriate provision for the adoption and continuation of the Plan by the acquiring or successor corporation and for the protection of any such outstanding Options by the substitution on an equitable basis of appropriate stock of the Company or of the merged, consolidated or otherwise reorganized corporation which will be issuable with respect to the Stock, provided that no additional benefits shall be conferred upon the Option Holder as a result of such substitution, and the excess of the aggregate fair market value of the Stock subject to the Option immediately after such substitution over the Option Price is not more than the excess of the aggregate Fair Market Value of the Stock subject to the Option immediately before such substitution over the Option Price, and provided further that any such substitution made with respect to the Option shall comply with Section 424(a) of the Code, or (ii) upon written notice to the Option Holder, provide that the unexercised portion of the Option must be exercised within thirty (30) days of the date of such notice or the Option will be terminated. If alternative (i) is implemented, the Committee may, at its sole discretion, provide that the Option may be exercisable in full without regard to the applicable exercise periods set forth in Section 2 and if alternative (ii) is implemented, the Option shall be exercisable in full without regard to the applicable exercise periods set forth in Section 2 above. However, if the Option Holder is subject to Section 16(b) of the Securities Exchange Act of 1934, the Option shall not be exercisable until six months after the Grant Date. (b) Change of Control. If there is a change in control of the Company, as defined below, the Option shall become exercisable in full, without regard to applicable exercise periods set forth in Section 2. For purposes of the Plan, a "change in control" shall be deemed to have occurred if during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company (the "Board") (and any new director whose election by the Board or whose nomination for election by the Company's shareholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority thereof. 5. Expiration and Termination of the Option. The Option shall expire 10 years (the "Option Period") from the date of this Agreement or prior to such time as follows: (a) If the Option Holder's employment with the Company is terminated for cause, as determined by the Company, the Option shall terminate immediately and shall thereafter be void for all purposes. As used in this Section 5, "cause" shall mean a gross violation, as determined by the Company, of the Company's established policies and procedures, provided that the effect of this Section 5 shall be limited to determining the consequences of a termination and that nothing in this Section 5 shall restrict or otherwise interfere with the Company's discretion with respect to the termination of any employee. (b) If the Option Holder retires from employment by the Company or its affiliates during the Option Period but after attaining age 65, the Option may be exercised by the Option Holder, or in the case of death by the persons specified in subsection (c) of this Section 5, within three months following his or her retirement (if otherwise within the Option Period), but not thereafter. In any such case, the Option may be exercised only as to the shares as to which the Option had become exercisable on or before the date of the Option Holder's termination of employment or death. (c) If the Option Holder dies during the Option Period while still employed or within the one-month period referred to in (d) below, the Option may be exercised by those entitled to do so under the Option Holder's will or by the laws of descent and distribution within fifteen months following the Option Holder's death, but not thereafter. In any such case, the Option may be exercised only as to the shares as to which the Option had become exercisable on or before the date of the Option Holder's death. (d) If the employment of the Option Holder by the Company is terminated (which for this purpose means that the Option Holder is no longer employed by the Company or by any parent or subsidiary corporation of the Company within the meaning of Section 424 of the Code)within the Option Period for any reason other than cause, retirement after attaining age 65, or the Option Holder's death, the Option may be exercised by the Option Holder within three months following the date of such termination (if otherwise within the Option Period), but not thereafter. In any such case, the Option may be exercised only as to the shares as to which the Option had become exercisable on or before the date of termination of employment. 6. Transferability. The Option may not be transferred except by will or pursuant to the laws of descent and distribution, and it shall be exercisable during the Option Holder's life only by him and after his death only by those entitled to do so under his will or the applicable laws of descent and distribution. 7. Consideration for the Grant of the Option. In consideration of the granting of this Option, the Option Holder agrees to remain in the employ of the Company at the pleasure of the Company for a continuous period of at least one year from the date of this Agreement at the salary rate in effect at the date of this Agreement or at such changed rate as may be fixed from time to time by the Company. 8. Notice of Disposition; Withholding. The Option Holder shall notify the Company if Stock acquired pursuant to this Option is "disposed of" (within the meaning of Section 422 of the Code) within two years after the date of the grant of this Option or within one year after the transfer of such Stock to the Option Holder. If the Option Holder does "dispose of" Stock within such period, the Option Holder shall make appropriate arrangements with the Company to provide for the amount of additional withholding required by Sections 3102 and 3402 of the Code and applicable state income tax laws. 9. Trading Restrictions. As long as the Option Holder is an employee of the Company, the Option Holder shall comply at all times with the Company's policy on trading securities of the Company as such policy is in effect from time to time. In addition, as long as the Option Holder is an employee of the Company, and unless the Board of Directors of the Company otherwise agrees in writing, the Option Holder agrees to sell no Stock that such employee has received through the Company's employee benefit programs (including Stock acquired otherwise than upon exercise of an Option) if the sale of such Stock shall exceed 10% of the total trading volume of the Stock on the date of sale by the Option Holder on any stock exchange and in the over-the-counter market. If the Option Holder fails to comply with the Company's policy on trading securities, or violates the agreement made in the immediately preceding sentence, as determined in the sole discretion of the Company, the Option Holder shall pay to the Company as liquidated damages the profit realized (which shall be equal to the excess of the amount received by the Option Holder over the Option Holder's basis for the Stock disposed of) in the transaction that resulted in the failure to comply with the Company's policy. This covenant shall survive the exercise of an Option and the termination of the Plan. 10. Notices. Any notice required or permitted to be given under this Agreement shall be in writing and shall be given by first class registered or certified mail, postage prepaid, or by personal delivery to the appropriate party, addressed: (a) If to the Company, at 425 Corporate Circle, Golden, Colorado 80401; or (b) If to the Option Holder, at 425 Corporate Circle, Golden, Colorado 80401, or at such other address as may have been furnished to the Company by the Option Holder. Any such notice shall be deemed to have been given as of the date so mailed in the case of mailed notice, or as of the date delivered in the case of personal delivery. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. UNIQUE MOBILITY, INC. /s/ Donald A. French By: Donald A. French, Treasurer OPTION HOLDER /s/ Ray A. Geddes By: Ray A. Geddes EX-10 4 EXHIBIT 10.2 UNIQUE MOBILITY, INC. 1992 STOCK OPTION PLAN NON-QUALIFIED STOCK OPTION AGREEMENT THIS AGREEMENT made as of this 4th day of September, 1997, between Unique Mobility, Inc., a Colorado corporation (the "Company"), and Ray A. Geddes (the "Option Holder"). 1. Stock Option. Pursuant to the Unique Mobility, Inc. 1992 Stock Option Plan (the "Plan") and subject to the terms and conditions of this Agreement, the Company hereby grants to the Option Holder an option (the "Option") to purchase 36,000 shares of the authorized and unissued $0.01 par value common stock (the "Stock") of the Company at a price of $7.13 per share (the "Option Price"). The Option is granted on August 19, 1997 (the "Grant Date"). The Option granted pursuant to this Agreement is not intended to qualify as an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as it may be amended (the "Code"). 2. Exercise of the Option. (a) The Option shall not become exercisable until the Option Holder has completed one year of continuous employment after the Grant Date. Upon the completion of one full year of continuous employment after the Grant Date, the Option shall become exercisable as to one-third of the number of shares subject to the Option. Upon the completion of the second full year of continuous employment after the Grant Date, the Option shall become exercisable as to an additional one-third of the shares originally subject to the Option. Upon the completion of the third full year of continuous employment after the Grant Date, the Option shall become exercisable as to an additional one-third of the shares originally subject to the Option. Except as set forth in Sections 4 or 5 hereof, the Option shall not be exercisable as to any shares as to which the continuous employment requirement shall not be satisfied, regardless of the circumstances under which the Option Holder's employment by the Company, or service with the Company, shall be terminated. The number of shares as to which the Option may be exercised shall be cumulative, so that once the Option shall become exercisable as to any shares it shall continue to be exercisable as to such shares until expiration or termination of the Option as provided in Section 5 hereof. (b) The Option may be exercised only by delivery to the Corporate Secretary of the Company of written notice specifying the number of shares with respect to which the Option is exercised and payment of the Option Price. At the request of the Company, such notice shall contain the Option Holder's representation that he is purchasing such Stock for investment purposes only and his agreement not to sell any Stock purchased pursuant to the Option in any manner that is in violation of the Securities Act of 1933, as amended, or any applicable state law. Such restrictions or notice thereof shall be placed on the certificates representing the Stock purchased pursuant to the Option, and the Company may refuse to issue the certificates or to transfer the shares on its books unless it is satisfied that no violation of such restrictions will occur. The exercise of the Option shall be deemed effective on the receipt of such notice by the Corporate Secretary and payment to the Company. The purchase of such Stock shall take place at the principal offices of the Company upon the delivery of such notice of exercise, at which time the Option Price for the Stock shall be paid in full by any of the methods set forth in Section 2(c) below. A properly executed certificate or certificates representing the Stock shall be issued by the Company and delivered to the Option Holder. If certificates are used to pay all or part of the exercise price, upon such payment, separate certificates shall be delivered representing each certificate so used, and an additional certificate shall be delivered representing any additional shares to which the Option Holder is entitled as a result of the exercise of the Option. If payment is made pursuant to subparagraph (c)(v) below, the certificate shall be delivered to the broker. (c) The exercise price shall be paid any of the following methods or any combination of the following methods. as the Stock Option Committee (the "Committee") shall determine in its sole discretion: (i) in cash; (ii) by certified or cashier's check payable to the order of the Company; (iii) by delivery to the Company of certificates representing the number of shares then owned by the Option Holder, the fair market value of which equals the purchase price of the Stock purchased pursuant to the Option, properly endorsed for transfer to the Company; provided however, that the Option may not be exercised by delivery to the Company of certificates representing Stock, unless such Stock has been held by the Option Holder for more than six months; for purposes of this Agreement, the "fair market value" of any shares of Stock delivered in payment of the Option Price upon exercise of the Option shall be as defined in Section 2.1(9) of the Plan; (iv) to the extent permitted under the applicable provisions of state law, by delivery to the Company of a promissory note, which shall be in a principal amount equal to the Option Price plus any federal and state income tax required to be withheld; which shall be full recourse and secured by all or a portion of the Stock acquired pursuant to the exercise of the Option; which shall bear interest at a rate determined by the Committee, but not lower than the rate required to avoid the imputation of interest under the Code; which shall provide for level quarterly payments of interest and principal over its term; which shall become payable in full upon the first to occur of the fifth anniversary of the date the Option is exercised, failure to pay any payment of principal and interest within five days after it is due or termination of the Option Holder's employment for any reason; and which shall contain such other terms and conditions including the provision of security in addition to the Stock that the Company, in its sole discretion, deems necessary or appropriate; (v) by delivery to the Company of a property executed notice of exercise together with irrevocable instructions to a broker to deliver to the Company promptly the amount of the proceeds of the sale of all or a portion of the Stock or of a loan from the broker to the Option Holder necessary to pay the exercise price. 3. Adjustment of the Option. (a) Adjustment by Stock Split. Stock Dividend. Etc. If at any time the Company increases or decreases the number of its outstanding shares of Stock, or changes in any way the rights and privileges of such shares by means of the payment of a stock dividend or the making of any other distribution on such shares payable in Stock, or through a stock split, subdivision, consolidation, combination or reclassification or recapitalization involving the Stock, the numbers, rights and privileges of the shares of Stock included in the Option shall be increased, decreased or changed in like manner as if such shares had been issued and outstanding, fully paid and nonassessable at the time of such occurrence. (b) Dividends Payable in Stock of Another Corporation. Etc. If at any time the Company pays or makes any dividend or other distribution upon the Stock payable in securities or other property (except money or Stock), a proportionate part of such securities or other property shall be set aside and delivered to the Option Holder when he exercises the Option. The securities and other property delivered to the Option Holder upon exercise of the Option shall be in the same ratio to the total securities and property set aside for the Option Holder as the number of shares with respect to which the Option is then exercised is to the total shares subject to the Option. (c) Other Changes in Stock. If there shall be any change, other than as specified in the preceding subsections (a) and (b), in the number or kind of outstanding shares of Stock or of any stock or other securities into which the Stock shall be changed or for which it shall have been exchanged, then and if the Committee shall in its discretion determine that such change equitably requires an adjustment in the number or kind of shares subject to the Option, such adjustments shall be made by the Committee and shall be effective for all purposes of this Agreement. (d) Apportionment of Price. Upon any occurrence described in the preceding subsections (a), (b), and (c), the total Option Price shall remain unchanged and shall be apportioned ratably over the increased or decreased number or changed kinds of securities or other properties subject to the Option. (e) Rights to Subscribe. If at any time the Company grants, to the holders of its Stock, rights to subscribe pro rata for additional shares thereof or for any other securities of the Company or of any other corporation, there shall then be added to the number of shares subject to the Option, the Stock or other securities that the Option Holder would have been entitled to subscribe for if immediately prior to such grant, the Option Holder had exercised his entire Option, and the Option price shall be increased by the amount of the price that would have been payable by the Option Holder for such Stock or other securities. (f) General Adjustment Rules. No adjustment or substitution provided for in this Section 3 shall require the company to sell a fractional share under this Agreement and the total substitution or adjustment with respect to this Agreement shall be limited by deleting any fractional share. In the case of any such substitution or adjustment, the Option shall be equitably adjusted by the Committee to reflect the greater or lesser number of shares of Stock or other securities into which the Stock subject to the Option may have been changed. Notwithstanding the foregoing subsections (a), (b), (c), (d), and (e), no adjustment shall be made that would constitute a modification of the Option within the meaning of Section 424 of the Code. (g) Determinations by the Committee. Adjustments under this paragraph shall be made by the Committee, whose determinations with respect thereto shall be final and binding. No fractional shares shall be issued on account of any such adjustment. 4. Reorganization or Change of Control. (a) Reorganization. If the Company is merged or consolidated with another corporation or the Company is a party to a reorganization (other than a merger, consolidation or reorganization in which the Company is the continuing corporation and which does not result in any reclassification or change of outstanding shares of stock), or if all or substantially all of the assets or more than 50% of the outstanding voting stock of the Company is acquired by any other corporation, business entity or person (other than a sale or conveyance in which the Company continues as a holding company of an entity or entities that conduct the business or businesses formerly conducted by the Company), or in case of a reorganization (other than a reorganization under the United States Bankruptcy Code) or liquidation of the Company, the Committee shall, either (i) make appropriate provision for the adoption and continuation of the Plan by the acquiring or successor corporation and for the protection of any such outstanding Options by the substitution on an equitable basis of appropriate stock of the Company or of the merged, consolidated or otherwise reorganized corporation which will be issuable with respect to the Stock, provided that no additional benefits shall be conferred upon the Option Holder as a result of such substitution, and the excess of the aggregate Fair Market Value of the Stock subject to the Option immediately after such substitution over the Option Price is not more than the excess of the aggregate Fair Market Value of the Stock subject to the Option immediately before such substitution over the Option Price, and provided further that any such substitution made with respect to the Option shall comply with Section 424(a) of the Code, or (ii) upon written notice to the Option Holder, provide that the unexercised portion of the Option must be exercised within thirty (30) days of the date of such notice or the Option will be terminated. If alternative (i) is implemented, the Committee may, at its sole discretion, provide that the Option may be exercisable in full without regard to the applicable exercise periods set forth in Section 2 and if alternative (ii) is implemented, the Option shall be exercisable in full without regard to the applicable exercise periods set forth in Section 2 above. However, if the Option Holder is subject to Section 16(b) of the Securities Exchange Act of 1934, the Option shall not become exercisable until six months after the Grant Date. (b) Change of Control. If there is a change in control of the Company, as defined below, the Option shall become exercisable in full, without regard to applicable exercise periods set forth in Section 2. For purposes of the Plan, a "change in control" shall be deemed to have occurred if during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company (the "Board") (and any new director whose election by the Board or whose nomination for election by the Company's shareholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority thereof. 5. Expiration and Termination of the Option. The Option shall expire 10 years (the "Option Period") from the date of this Agreement or prior to such time as follows: (a) If the Option Holder's employment with the Company is terminated for cause, as determined by the Company, the Option shall terminate immediately and shall thereafter be void for all purposes. As used in this Section 5, "cause" shall mean a gross violation, as determined by the Company, of the Company's established policies and procedures, provided that the effect of this Section 5 shall be limited to determining the consequences of a termination and that nothing in this Section 5 shall restrict or otherwise interfere with the Company's discretion with respect to the termination of any employee. (b) If the Option Holder retires from employment by the Company or its affiliates during the Option Period but after attaining age 65, the Option may be exercised by the Option Holder, or in the case of death by the persons specified in subsection (c) of this Section 5, within three months following his or her retirement (if otherwise within the Option Period), but not thereafter. In any such case, the Option may be exercised only as to the shares as to which the Option had become exercisable on or before the date of the Option Holder's termination of employment or death. (c) If the Option Holder dies during the Option Period while still employed or within the one-month period referred to in (d) below, the Option may be exercised by those entitled to do so under the Option Holder's will or by the laws of descent and distribution within fifteen months following the Option Holder's death, but not thereafter. In any such case, the Option may be exercised only as to the shares as to which the Option had become exercisable on or before the date of the Option Holder's death. (d) If the employment of the Option Holder by the Company is terminated (which for this purpose means that the Option Holder is no longer employed by the Company or by any parent or subsidiary corporation of the Company within the meaning of Section 424 of the Code) within the Option Period for any reason other than cause, retirement after attaining age 65, or the Option Holder's death, the Option may be exercised by the Option Holder within one month following the date of such termination (if otherwise within the Option Period), but not thereafter. In any such case, the Option may be exercised only as to the shares as to which the Option had become exercisable on or before the date of termination of employment. 6. Transferability. The Option may not be transferred except by will or pursuant to the laws of descent and distribution, and it shall be exercisable during the Option Holder's life only by him and after his death only by those entitled to do so under his will or the applicable laws of descent and distribution; provided however, that, during his lifetime, the Option Holder may transfer the Option to a member of his immediate family, a trust of which members of his immediate family are the sole beneficiaries, or a partnership of which members of his immediate family or trusts for the sole benefit of his immediate family are the only partners. For this purpose immediate family means the Option Holder's spouse, children, stepchildren, grandchildren, parents, grandparents, siblings (including half brothers and sisters), and individuals who are family members by adoption. 7. Consideration for the Grant of the Option. In consideration of the granting of this Option, the Option Holder agrees to remain in the employ of the Company at the pleasure of the Company for a continuous period of at least one year from the date of this Agreement at the salary rate in effect at the date of this Agreement or at such changed rate as may be fixed from time to time by the company 8. Withholding. (a) The Option Holder shall make appropriate arrangements with the Company to provide for the amount of withholding that may be required by Sections 3102 and 3402 of the Code and applicable state income tax laws. (b) The Option Holder may elect to pay all such amounts of tax withholding, or any part thereof, if any withholding is required, by electing to transfer to the Company, or to have the Company withhold from shares otherwise issuable to the Option Holder, shares of Stock having a value equal to the amount required to be withheld or such lesser amount as may be elected by the Option Holder. All elections shall be subject to the approval or disapproval of the Committee. The value of shares of Stock to be withheld shall be based on the fair market value of the Stock on the date that the amount of tax to be withheld is to be determined (the "Tax Date"). Any such election by an Option Holder to have shares of Stock withheld for this purpose shall be subject to the following restrictions: (i) All elections must be made prior to the Tax Date. (ii) All elections shall be irrevocable. (iii) If the Option Holder is subject to Section 16 of the Securities Exchange Act of 1934 ("Section 16"), the Option Holder may not exercise the Option within six months of the date of grant. (iv) If the Option Holder is subject to Section 16, any such election must be made either six months prior to the Tax Date or in the ten day "window period" beginning on the third day following the release of the Company's quarterly or annual summary statement of sale and earnings. 9. Compliance with Certain Company Policies. The Option Holder shall comply at all times with the Company's policy on trading securities of the Company as such policy is in effect from time to time. In addition, the Option Holder agrees to sell no Stock (including Stock acquired otherwise than upon exercise of an Option) if the sale of such Stock, together with all other sales of Stock by any of the Company's directors or employees on any stock exchange or in the over-the-counter market, shall exceed 10% of the total trading volume of the Stock on the date of sale by the Option Holder on any stock exchange and in the over-the counter market. If the Option Holder fails to comply with the Company's policy on trading securities, or violates the agreement made in the immediately preceding sentence, as determined in the sole discretion of the Company, the Option Holder shall pay to the Company as liquidated damages the profit realized (which shall be equal to the excess of the amount received by the Option Holder over the Option Holder's basis for the Stock disposed of) in the transaction that resulted in the failure to comply with Company's policy. This condition shall survive the exercise of an Option and the termination of the Plan. 10. Notices. Any notice required or permitted to be given under this Agreement shall be in writing and shall be given by first class registered or certified mail, postage prepaid, or by personal delivery to the appropriate party, addressed: (a) If to the Company, at 425 Corporate Circle, Golden, Colorado 80401; or (b) If to the Option Holder, at 425 Corporate Circle, Golden, Colorado 80401, or at such other address as may have been furnished to the Company by the Option Holder. Any such notice shall be deemed to have been given as of the date so mailed in the case of mailed notice, or as of the date delivered in the case of personal delivery. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. UNIQUE MOBILITY, INC. By:/s/ Donald A. French Donald A. French, Treasurer OPTION HOLDER /s/ Ray A. Geddes Ray A. Geddes -----END PRIVACY-ENHANCED MESSAGE-----