-----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, Ozg5cVTL0LLzdJvHizW3RFf9YhoRpi1wdskMk5j6hSvk8ZbqUyfbzQQt6b/6VaKT AmmFien07HI04uVQFu5pbA== 0000899733-97-000059.txt : 19970912 0000899733-97-000059.hdr.sgml : 19970912 ACCESSION NUMBER: 0000899733-97-000059 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970910 SROS: AMEX SROS: BSE SROS: CSE 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: 1031 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 001-10869 FILM NUMBER: 97678283 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/A 1 FORM 10-Q/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A [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 June 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 August 12, 1997 was 13,827,424. PART I - FINANCIAL INFORMATION UNIQUE MOBILITY, INC. AND SUBSIDIARIES Consolidated Balance Sheets June 30, March 31, Assets 1997 1997 (unaudited) Current assets: Cash and cash equivalents $ 3,230,518 5,713,557 Accounts receivable (note 9) 434,271 389,314 Costs and estimated earnings in excess of billings on uncompleted contracts (note 3) 419,502 191,885 Inventories (note 4) 392,887 425,391 Prepaid expenses 86,498 115,260 Other current assets 16,294 17,675 Total current assets 4,579,970 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 2,037,338 1,963,146 4,148,616 4,097,524 Less accumulated depreciation (1,850,039)(1,764,288) Net property and equipment 2,298,577 2,333,236 Investment in Taiwan joint venture (note 5) 2,637,542 2,677,730 Patent and trademark costs, net of accumulated amortization of $49,383 and $45,551 558,119 502,297 Other assets 1,003,034 4,354 $ 11,077,242 12,370,699 (Continued) UNIQUE MOBILITY, INC. AND SUBSIDIARIES Consolidated Balance Sheets, Continued June 30, March 31, Liabilities and Stockholders' Equity 1997 1997 (unaudited) Current liabilities: Accounts payable $ 251,631 169,403 Note payable to Taiwan joint venture - 1,345,285 Other current liabilities (note 6) 227,107 459,223 Current portion of long-term debt 45,978 45,180 Billings in excess of costs and estimated earnings on uncompleted contracts (note 3) 102,224 659,807 Total current liabilities 626,940 2,678,898 Long-term debt, less current portion 714,647 726,218 Total liabilities 1,341,587 3,405,116 Minority interest in consolidated subsidiary 390,394 390,784 Stockholders' equity (notes 7 and 11): Common stock, $.01 par value, 50,000,000 shares authorized; 13,516,094 and 13,042,964 shares issued 135,161 130,430 Additional paid-in capital 28,130,910 27,094,170 Accumulated deficit (18,777,712)(18,532,364) Notes receivable from officers (83,646) (83,646) Cumulative translation adjustment (59,452) (33,791) Total stockholders' equity 9,345,261 8,574,799 Commitments (note 10) $ 11,077,242 12,370,699 See accompanying notes to consolidated financial statements. UNIQUE MOBILITY, INC. AND SUBSIDIARIES Consolidated Statements of Operations (unaudited) Quarter Ended June 30, 1997 1996 Revenue: Contract services (note 9) $ 1,029,611 444,281 Product sales 227,551 191,306 1,257,162 635,587 Operating costs and expenses: Cost of contract services 869,991 318,826 Cost of product sales 158,381 174,698 Research and development 98,239 396,122 General and administrative 374,521 324,314 1,501,132 1,213,960 Operating loss (243,970) (578,373) Other income (expense): Interest income 51,673 25,970 Interest expense (24,079) (54,612) Equity in loss of Taiwan joint venture (note 5) (14,527) (9,639) Minority interest share of earnings of consolidated subsidiary (16,447) (17,201) Other 2,002 357 (1,378) (55,125) Net loss $ (245,348) (633,498) Net loss per common share $ (.02) (.06) Weighted average number of shares of common stock outstanding (note 8) 13,084,151 11,020,857 See accompanying notes to consolidated financial statements. UNIQUE MOBILITY, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (unaudited) Quarter Ended June 30, 1997 1996 Cash flows used by operating activities: Net loss $ (245,348) (633,498) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 90,902 93,062 Minority interest share of earnings of consolidated subsidiary 16,447 17,201 Noncash compensation expense for common stock issued for services - 7,270 Equity in loss of Taiwan joint venture 14,527 9,639 Gain on sale of property and equipment - (350) Change in operating assets and liabilities: Accounts receivable and costs and estimated earnings in excess of billings on uncompleted contracts (272,574) (31,687) Inventories 32,504 (35,480) Prepaid expenses and other current assets 30,143 26,272 Accounts payable and other current liabilities(149,888) (90,936) Billings in excess of costs and estimated earnings on uncompleted contracts (557,583) (73,952) Net cash used by operating activitie (1,040,870) (712,459) Cash provided by (used by) investing activities: Acquisition of property and equipment (51,092) (58,622) Increase in patent and trademark costs (59,653) (25,530) 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 used by investing activities $(1,456,030) 235,305 (Continued) UNIQUE MOBILITY, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows, Continued (unaudited) Quarter Ended June 30, 1997 1996 Cash flows provided by financing activities: Repayment of debt $ (10,773) (20,790) Proceeds from sale of common stock, net - 598,411 Issuance of common stock upon exercise of employee options 30,259 45,000 Issuance of common stock under employee stock purchase plan 11,212 14,152 Distributions paid to holders of minority interest (16,837) (16,836) Net cash provided by financing activities 13,861 619,937 Increase (decrease) in cash and cash equivalents (2,483,039) 142,783 Cash and cash equivalents at beginning of quarter 5,713,557 2,001,028 Cash and cash equivalents at end of quarter $ 3,230,518 2,143,811 Interest paid in cash during the quarter $ 57,336 20,718 Non-cash investing and financing transactions: During the quarter ended June 30, 1997 and 1996 the Company recorded unrealized foreign currency losses related to its investment in Taiwan UQM in the amount of $25,661 and $5,257, respectively. In June, 1997, a warrant holder exercised warrants to acquire 395,000 shares of common stock on a cashless exchange basis resulting in the issuance of 249,154 shares of common stock based upon a fair market value of the commmon stock on the date of exchange of $6.50 per share. 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. 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 financial statement amounts have been reclassified for comparative purposes. (3) The estimated period to complete contracts in process ranged from one to twelve months at June 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: June 30, 1997 March 31, 1997 (unaudited) Costs incurred on uncompleted contracts $ 1,810,046 3,158,704 Estimated earnings 604,948 490,407 2,414,994 3,649,111 Less billings to date (2,097,716) (4,117,033) $ 317,278 (467,922) Included in the accompanying balance sheets as follows: Costs and estimated earnings in excess of billings on uncompleted contracts $ 419,502 191,885 Billings in excess of costs and estimated earnings on uncompleted contracts (102,224) (659,807) $ 317,278 (467,922) (4) Inventories consist of: June 30, 1997 March 31, 1997 (unaudited) Raw materials $ 203,001 283,155 Work in process 105,495 69,460 Finished products 84,391 72,776 $ 392,887 425,391 UNIQUE MOBILITY, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (unaudited) (5) On January 29, 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 Company, 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. Summarized unaudited financial information for Taiwan UQM is as follows: Financial Position March 31, 1997 December 31, 1996 (unaudited) Current assets $ 1,349,704 889,881 Noncurrent assets- land and construction in process 5,502,953 4,542,142 Total assets 6,852,657 5,432,023 Current liabilities 42,903 607,453 Noncurrent liabilities 46,826 - Stockholders' equity 6,762,928 4,824,570 Total liabilities and equity $ 6,852,657 5,432,023 Quarter Ended Quarter Ended Results of Operations March 31, 1997 March 31, 1996 (unaudited) (unaudited) Revenue $ 32,895 4,741 Expenses (70,144) (29,456) Net loss $ (37,249) (24,715) UNIQUE MOBILITY, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (unaudited) (6) Other current liabilities consist of: June 30, 1997 March 31, 1997 (unaudited) Accrued interest $ 5,769 39,218 Accrued legal and accounting fees 27,162 37,171 Accrued payroll, consulting, personal property and real estate taxes 89,340 67,207 Refund of overpayment - 250,005 Other 104,836 65,622 $ 227,107 459,223 (7) The Company reserved 4,104,000 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 500,000 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. UNIQUE MOBILITY, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (unaudited) The following table summarizes activity under the plans during the last two fiscal years, the five months ended March 31, 1997 and the three months ended June 30,1997: Shares Under Weighted Average Option Exercise Price Outstanding at October 31, 1995 1,852,232 5.12 Granted 590,000 4.15 Exercised (100,542) 1.53 Forfeited (315,978) 5.63 Outstanding at October 31, 1996 2,025,712 4.94 Granted 500,000 3.31 Exercised (40,105) 1.57 Expired (30,000) 5.00 Forfeited (4,151) 3.31 Outstanding at March 31, 1997 2,451,456 4.66 Exercised (20,000) 2.25 Outstanding at June 30, 1997 2,431,456 4.69 Exercisable at June 30, 1997 1,646,715 5.20 The following table presents summarized information about stock options outstanding at June 30, 1997:
Options Outstanding Options Exercisable Weighted Number Average Weighted Number Weighted Range of Outstanding Remaining Average Exercisable Average Exercise Prices at 6/30/97 Contractual Life Exercise Price at 6/30/97 Exercise Price $0.50 - 1.00 113,117 2.7 years $0.79 113,117 $0.79 2.25 - 3.31 629,849 8.5 years 3.08 134,000 2.25 3.50 - 5.00 884,555 7.3 years 4.03 595,663 3.99 5.38 - 8.13 803,935 6.6 years 7.20 803,935 7.07 0.50 - 8.13 2,431,456 7.1 years 4.66 1,646,715 4.97
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. UNIQUE MOBILITY, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (unaudited) The following table presents summarized activity under the plan: Shares Under Per Share Option Exercise Price Granted during 1994 and outstanding at October 31, 1994 48,000 $ 5.38 - 6.25 Granted 61,333 $ 5.00 - 5.13 Outstanding at October 31, 1995 109,333 $ 5.00 - 6.25 Granted 32,000 $ 4.38 Outstanding at June 30, 1997 141,333 $ 4.38 - 6.25 At June 30, 1997, options to purchase 94,223 shares were exercisable. 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 expire in August, 1997, and allow 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. 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. The remaining warrants as to 395,000 shares of common stock remain outstanding at June 30, 1997. The Company has reserved 300,000 shares of common stock for issuance pursuant to a warrant agreement with an investment banking company. Warrants to acquire 200,000 shares of common stock vested on January 20, 1994, and the remaining 100,000 shares vested on January 20, 1995. The warrants were exercisable for a period of five years, expiring in January, 1999, at a price of $7.63 per share. Further, the warrants were redeemable on a one-time basis only through June, 1994, for a like number of warrants, at the then current fair market value of the Company's common stock with otherwise identical terms. In fiscal 1994, the warrants were redeemed in accordance with the above provision for a like number of warrants which are exercisable at a price of $6.00 per share, the market price of the common stock of the Company at the date of redemption. 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. The estimated fair value of the warrants issued of $50,000 was recorded as compensation for the investment banking services rendered in fiscal 1995. All of these warrants remain outstanding at June 30, 1997. UNIQUE MOBILITY, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (unaudited) 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. All of these warrants remain outstanding at June 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 on February 27, 1996, 38,100 shares of the Company's common stock at $5.00 per share on May 31, 1996, and 50,000 shares at $4.25 per share on September 30, 1996, being the market price of the common stock of the Company at the date of each respective grant. The warrants expire three years from the date of issuance. All of these warrants remain outstanding at June 30, 1997. In connection with the 1997 private placement, the placement agents were issued warrants to acquire 225,625 shares of the Company's stock at $3.50 per share on February 27, 1997, being the average of the closing price of the Company's stock for the ten days preceding the closing of such placement. The agents were also issued warrants to acquire 50,000 shares of the Company's common stock at $4.20 per share on February 27, 1997, being 120% of the average closing price of the Company's common stock for the ten days preceding the closing of the placement. All of these warrants remain utstanding at June 30, 1997. (8) Net loss per common share amounts are based on the weighted average number of common shares outstanding during the first quarter of each fiscal year presented. 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 June 30, 1997 1996 Customer: Kia Motors Corporation $ 424,881 - Koyo Seiko Company 122,874 - Asia Pacific Technology Co., Ltd. 147,575 - Ford Motor Company - 147,107 Kwang Yang Motor Co., Ltd. - 126,142 $ 695,330 273,249 Percentage of contract services revenue 68% 62% UNIQUE MOBILITY, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (unaudited) These customers, in total, also represented 36% and 30% of total accounts receivable at June 30, 1997, and June 30, 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 $133,621 and $118,371 for the quarter ended June 30, 1997 and June 30, 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 $1,069,583. (11) 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 an additional 350,000 shares of common stock in private transactions. 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. 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 sock on the date Of exchange of $7.13 per share. Warrants to acquire 175,000 shares of common stock remain outstanding which expire on August 25, 1997. 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 first quarter of fiscal 1998 the Company strengthened its strategic relationships and reported improved financial performance. In April, the Company completed an additional investment of $1.35 million in Taiwan UQM, a Taiwan based manufacturer of electric motors and controls owned jointly by Unique, KYMCO and TLT. This investment raised Unique's total investment in the joint venture to $2.79 million representing 39 percent of the total capitalization of the venture. Unique's investment was coincident with the completion and occupancy by Taiwan UQM of a 45,000 square foot manufacturing facility and adjoining 25,000 square foot office building. Initial manufacturing operations of starter motors and AC generators under a supply agreement with KYMCO are expected to commence later this summer. However, there can be no assurance that the commencement of manufacturing operations will not be delayed. In June, the Company signed a memorandum of understanding with former Chrysler Chairman Lee Iacocca's new company, EV Global Motors Company (EVG), KYMCO, Taiwan UQM and TLT for the formation of an international strategic relationship to import, distribute and market electric motor scooters in North and South America. Also in June the Company announced a strategic relationship with EVG to develop electric drive systems for bicycles, scooters and other light vehicles. EVG purchased 1,151,925 shares of the Company's common stock in a private transaction from Alcan Aluminium Limited and purchased warrants from other sources for an additional 350,000 shares. Separately, EVG acquired 200,000 shares of the Company's common stock in exchange for 400,000 shares of EVG common stock raising EVG's beneficial ownership to 12.2% of the Company, makin EVG Unique's largest shareholder. Mr. Iacocca joined Unique's Board of Directors, effective July 1, 1997, and Mr. Geddes, Unique's Chairman and Chief Executive Officer will sit on EVG's Board. Subsequent to the end of the quarter, the Company announced that it had executed a license and supply agreement to build electric motors for Invacare Corporation (Invacare), 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 quarter. Cash and cash equivalents declined $2,483,039 to $3,230,518 at June 30, 1997 from $5,713,557 at March 31, 1997 due principally to the application of cash to operations during the quarter of $1,040,870 and the Company's additional equity investment in Taiwan UQM in the amount of $1,345,285. Working capital (the excess of current assets over current liabilities) declined from $4,174,184 at the beginning of the quarter to $3,953,030 at the end of the quarter. Accounts receivable rose to $434,271 at June 30, 1997 from $389,314 at March 31, 1997 reflecting higher levels of contract services revenue. The accounts receivable balance at June 30, 1997, represented approximately 35 days revenue compared to 69 days revenue at March 31, 1997. Costs and estimated earnings on uncompleted contracts rose $227,617 to $419,502 at the end of the first quarter due to milestone billing arrangements on certain commercial and government projects and increased levels of contract services programs generally. Estimated earnings on contracts in process increased $114,541 to $604,948 at June 30, 1997 on total contracts in process of $1,810,046 compared to estimated earnings on contracts in process of $490,407 on total contracts in process of $3,158,704 at March 31, 1997. The increase in estimated earnings 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. The decrease in total contracts in process is attributable to higher levels of revenue realization during the quarter. Work in process and finished product inventories rose while raw materials inventory declined during the quarter resulting in an overall decline in inventory levels from $425,391 at the beginning of the quarter to $392,887 at June 30, 1997. The decrease in raw materials inventory is primarily attributable to the transfer of raw materials to work in process during the quarter. During the first quarter of fiscal 1997 the Company invested $51,092 for the acquisition of property and equipment and $59,653 in the prosecution of its trademarks and patent applications throughout the world compared to $58,622 and $25,530, respectively, for the comparable prior year quarter. The increase in capital expenditures during the quarter 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 costs is primarily attributable to prosecution of the mark "PowerPhase " throughout the world and ongoing patent continuation fees. Investment in Taiwan joint venture declined to $2,637,542 at June 30, 1997 reflecting the Company's recording of its proportionate share of the operating losses of Taiwan UQM during the quarter. Other assets rose to $1,003,034 at the end of the first quarter compared to $4,354 at the beginning of the quarter. The increase is attributable 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. Accounts payable rose to $251,631 at the end of the first quarter 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 during the quarter reflecting the Company's funding of its capital call obligation to Taiwan UQM. Other current liabilities declined to $227,107 at June 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 $102,224 at June 30, 1997 from $659,807 at March 31, 1997 reflecting performance of work on certain sponsored development programs against advance payments deposited by the customer with the Company. Long-term debt declined $11,571 during the first quarter due to scheduled principal payments on the mortgage debt associated with the Company's facility. Common stock and additional paid-in capital increased to $135,161 and $28,130,910 at June 30, 1997, respectively, compared to $130,430 and $27,094,170 at March 31, 1997. The increases were due to the issuance of common stock upon the exercise of stock options by employees and consultants of the company, the issuance of common stock under the Company's employee stock purchase program, the cashless exercise of certain warrants and the issuance of common stock associated with the Company's investment in EVG. Results of Operations Operations for the quarter ended June 30, 1997, resulted in a net loss of $245,348 or $0.02 per share compared to a net loss of $633,498 or $0.06 per share for the comparable quarter last year. Revenue derived from contract services was $1,029,611 for the fiscal 1998 first quarter versus $444,281 for the comparable prior year quarter. The increase is attributable to increased levels of sponsored development activities. Product sales rose to $227,551 during the first quarter of fiscal 1997 from $191,306 for the prior year quarter. The increase is primarily attributable to increased sales of the Company's PowerPhase system. Gross profit margins for the first quarter of fiscal 1998 declined to 18.2 percent compared to 22.4 percent for the comparable quarter last year. The decline in margins is attributable to lower than expected margins in the Company's contract services business. Gross profit margins from contract services declined to 15.5 percent for the first quarter of fiscal 1998 compared to 28.2 percent for the comparable quarter last year. The decrease in contract services margins is generally attributable to increased material content in sponsored development programs and cost overruns on two commercial sponsored development programs. Gross profit margins on product sales rose to 30.4 percent during the first quarter compared to 8.7 percent for the comparable prior year quarter. The improvement in product sales margins is attributable to increased sales of the PowerPhase system which carry higher gross margins. Research and development expenditures during the first quarter of fiscal 1998 declined $297,883 to $98,239 compared to $396,122 for the comparable quarter last year. The decrease is attributable to the deployment of technical personnel on sponsored development activities resulting in the deferral of certain internally funded development activities. Management expects higher levels of research and development costs commencing in the second quarter associated with production planning and launch of volume manufacturing operations. General and administrative expenses for the quarter ended June 30, 1997 rose to $374,521 from the prior year level of $324,314 due to higher levels of business development, legal and accounting expenditures. Interest income rose to $51,673 for the quarter ended June 30, 1997 compared to $25,970 during the comparable prior year quarter. The increase is attributable to higher levels of invested cash throughout the quarter. Interest expense declined to $24,079 for the first quarter of fiscal 1998 compared to $54,612 for the comparable quarter last year. The decrease is attributable elimination of interest costs on the Company's capital call obligations to Taiwan UQM upon extinguishment of the obligation during the quarter. Equity in loss of Taiwan joint venture rose to $14,527 for the quarter ended June 30, 1997 compared to $9,639 during the comparable quarter 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 ended June 30, 1997, were adequate to meet its operating needs. Net cash used by operating activities was $1,040,870 for the quarter ended June 30, 1997 compared to net cash used by operations for the comparable period last year of $712,459. The decrease 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 and the repayment of an overpaymen to a customer. 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 is 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. However, there can be no assurance that additional capital will not be required. 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 and short-term bank lines-of-credit. Although the Company has, to-date, not yet received a commitment 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, over and above those required to launch volume manufacturing operations, sufficient to fund non-manufacturing operations through at least March 31, 1998. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27* Financial Data Schedule - - ---------- * Filed with original filing of Form 10-Q. (b) Reports on Form 8-K Current Report dated June 18, 1997 regarding a memorandum of understanding to import, distribute and market electric scooters. Current Report dated June 30, 1997 regarding a strategic alliance with EV Global Motors Company. 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: September 8, 1996 By:/s/ Donald A. French Donald A. French Treasurer and Controller (Principal Financial and Accounting Officer) -----END PRIVACY-ENHANCED MESSAGE-----