SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
For the quarterly period ended June 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to ________________.
Commission File Number: 0-21810
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AMERIGON INCORPORATED
------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 95-4318554
- ---------------------------------------------- ----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5462 Irwindale Avenue, Irwindale, California 91706
- ---------------------------------------------- ----------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (626) 815-7400
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
----- -----
At July 31, 1998 the registrant had 12,550,445 shares of Class A Common
Stock, no par value; no shares of Class B Common Stock, no par value; and no
shares Preferred Stock, no par value, issued and outstanding.
(1)
AMERIGON INCORPORATED
TABLE OF CONTENTS
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements 2
Balance Sheets 3
Statements of Operations 4
Statements of Cash Flows 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II. OTHER INFORMATION 11
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
Signature 12
(2)
PART I
ITEM 1. FINANCIAL STATEMENTS
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
(IN THOUSANDS)
December 31, June 30,
1997 1998
------------ --------
ASSETS
Current assets:
Cash & cash equivalents $ 6,037 $ 4,054
Short-term investments 2,400 560
Accounts receivable less allowance of $80 255 135
Receivable due from joint venture partner 1,000 1,000
Inventory 35 89
Prepaid expenses and other assets 196 133
------- -------
Total current assets 9,923 5,971
Property and equipment, net 645 802
------- -------
Total assets $10,568 $ 6,773
------- -------
------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilites:
Accounts payable $ 650 $ 293
Deferred revenue 97 97
Accrued liabilities 350 458
------- -------
Total current liabilities 1,097 848
Long-term portion of capital lease 41 27
Shareholders' equity:
Preferred stock, no par value; 5,000 shares
authorized, none issued and outstanding
Common stock:
Class A - no par value; 40,000 shares authorized,
9,550 issued and outstanding at
June 30, 1998 and December 31, 1997
(An additional 3,000 shares held in escrow) 28,149 28,149
Class B - no par value; 3,000 shares authorized,
none issued and outstanding - -
Contributed capital 9,882 9,882
Deficit accumulated during development stage (28,601) (32,133)
------- -------
Total shareholders' equity 9,430 5,898
------- -------
Total liabilities and shareholders' equity $10,568 $6,773
------- -------
------- -------
See accompanying notes to the condensed financial statements
(3)
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISES)
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
From
April 23, 1991
Three Months Ended Six Months Ended (inception)
June 30, June 30, to June 30,
1997 1998 1997 1998 1998
--------- --------- --------- --------- -------------
Revenues:
Product $- $7 $- $7 $7
Development contracts and
related grants 350 274 734 358 17,568
Grants - - 12 - 6,183
-------- -------- -------- -------- --------
Total revenues 350 281 746 365 23,758
Costs and expenses:
Product - 11 - 11 11
Direct development contract and
related grant costs 1,020 - 1,889 - 20,904
Direct grant costs - - 28 - 4,757
Research and development 456 1,128 712 2,152 13,011
Selling, general and administrative,
including reimbursable expenses 1,395 957 2,189 1,970 20,228
-------- -------- -------- -------- --------
Total costs and expenses 2,871 2,096 4,818 4,133 58,911
-------- -------- -------- -------- --------
Operating Loss (2,521) (1,815) (4,072) (3,768) (35,153)
Interest income 148 78 215 174 1,217
Interest expense - - (117) - (282)
Gain on disposal of assets - 62 - 62 2,425
-------- -------- -------- -------- --------
Net loss before extraordinary items ($2,373) ($1,675) ($3,974) ($3,532) ($31,793)
Extraordinary loss from extinguishment
of indebtedness - - (340) - (340)
-------- -------- -------- -------- --------
Net loss ($2,373) ($1,675) ($4,314) ($3,532) ($32,133)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Basic and diluted net loss per share
before extraordinary item ($0.25) ($0.18) ($0.50) ($0.37)
-------- -------- -------- --------
-------- -------- -------- --------
Basic and diluted net loss per share ($0.25) ($0.18) ($0.54) ($0.37)
-------- -------- -------- --------
-------- -------- -------- --------
Weighted average number of shares outstanding 9,543 9,550 8,024 9,550
-------- -------- -------- --------
-------- -------- -------- --------
See accompanying notes to the condensed financial statements
(4)
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISES)
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
From
April 23, 1991
Six Months Ended (inception) to
June 30, June 30,
1997 1998 1998
--------- --------- -------------
Operating Activities:
Net loss ($4,314) ($3,532) ($32,133)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 195 241 1,315
Provision for doubtful account - - 190
Stock option compensation - - 712
Gain from sale of assets - (62) (2,425)
Contributed capital-founders' services
provided without cash compensation - - 300
Change in operating assets and liabilities:
Accounts receivable 526 120 (325)
Unbilled revenue 957 - -
Inventory - (54) (109)
Prepaid expenses and other assets 427 63 (133)
Accounts payable (1,201) (186) 116
Deferred revenue 5 - 97
Accrued liabilities 619 (5) 382
-------- ------- --------
Net cash used in operating activities (2,786) (3,415) (32,013)
Investing Activities:
Purchase of property and equipment (113) (398) (2,144)
Proceeds from sale of assets - - 2,800
Receivable from sale of assets - - (1,000)
Short term-investments sold (purchased) (1,321) 1,840 (560)
-------- ------- --------
Net cash provided (used) in investing activities (1,434) 1,442 (904)
Financing Activities:
Proceeds sale of common stock units, net 17,444 - 34,772
Proceeds from exercise of stock options - - 160
Repurchase of common stock - - (15)
Borrowing under line of credit - - 6,280
Repayment of line of credit (1,187) - (6,280)
Repayment of capital lease (9) (10) (48)
Proceeds from Bridge Financing - - 3,000
Repayment of Bridge Financing (2,850) - (3,000)
Proceeds of notes payable to shareholder 250 - 450
Repayment of note payable to shareholder (450) - (450)
Notes payable to shareholders contributed to capital - - 2,102
-------- ------ --------
Net cash provided by financing activities 13,198 (10) 36,971
Net increase (decrease) in cash and cash equivalents 8,978 (1,983) 4,054
Cash and cash equivalents at beginning of period 203 6,037 -
-------- ------- --------
Cash and cash equivalents at end of period $9,181 $4,054 $4,054
-------- ------- --------
-------- ------- --------
Supplemental Disclosure of Cash Flow Information:
Cash paid for:
Interest $120 - $280
------- ------- --------
------- ------- --------
Supplemental Disclosure of Non-Cash Transaction:
Conversion of Bridge Debentures into warrants $150 - $150
------- ------- --------
------- ------- --------
See accompanying notes to the condensed financial statements
(5)
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY:
Amerigon Incorporated (the "Company") is a development stage enterprise,
which was incorporated in California on April 23, 1991 primarily to develop,
manufacture and market proprietary, high technology automotive components and
systems for gasoline-powered and electric vehicles.
NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF CERTAIN ACCOUNTING POLICIES:
The accompanying balance sheet as of June 30, 1998 and the statements of
operations and cash flows for the three and six months ended June 30, 1998 and
for the period from April 23, 1991 (inception) to June 30, 1998 have been
prepared by the Company without audit. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) necessary for fair
presentation have been included. The results of operations for the three month
and six month periods ended June 30, 1998 are not necessarily indicative of the
operating results for the full year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These condensed financial statements should be
read in conjunction with the financial statements and notes thereto included in
the Company's Form 10-K for the year ended December 31, 1997.
DEVELOPMENT CONTRACT REVENUES AND RELATED GRANTS. Historically, the Company
entered into a number of fixed price contracts under which revenue is recognized
using the percentage of completion method, or in the case of short duration
contracts, when the prototype or services are delivered. Development contract
revenues earned are recorded on the balance sheet as Unbilled Revenue until
billed. The Company has received government grants, which paralleled one of its
development contracts. These grants are included in development contract and
related grant revenues.
GRANT REVENUES. Revenue from government agency grants and other sources
pursuant to cost-sharing arrangements is recognized when reimbursable costs have
been incurred. Grant revenues earned are recorded on the balance sheet as
Unbilled Revenue until billed.
(6)
NOTE 3 - NET LOSS PER SHARE:
The Company's net loss per share calculations are based upon the weighted
average number of shares of common stock outstanding. Excluded from this
calculation are the 3,000,000 Escrowed Contingent Shares. Common stock
equivalents (stock options and stock warrants) are anti-dilutive in both periods
and are excluded from the net loss per share calculation.
NOTE 4 - RECEIVABLE DUE FROM JOINT VENTURE PARTNER
The receivable due from IVS, Inc., a joint venture formed between Amerigon
and Yazaki Corporation, was paid on July 23, 1998.
(7)
PART 1
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SECOND QUARTER 1998 COMPARED WITH SECOND QUARTER 1997
REVENUES. Revenues for the three months ended June 30, 1998 ("Second
Quarter 1998") were $281,000 as compared with revenues of $350,000 in the three
months ended June 30, 1997 ("Second Quarter 1997"). The decrease in development
contract and related grant revenues was due principally to the completion of
development contracts, somewhat offset by an increase in revenues related to
prototype seat contracts. The Company does not intend to pursue any additional
significant grants or development contracts. Additionally the Company made its
first production shipments of its Climate Control Seat systems in Second Quarter
1998.
The Company has focused its efforts on developing its core products and
technologies (the Climate Control Seat system and radar-based sensing devices),
developing the manufacturing capability for such products and bringing them to
market as rapidly as possible. Because of the current development focus, and the
decision not to pursue actively any more significant grants or development
contracts, the Company expects that revenues for the foreseeable future will be
significantly less than in prior periods.
DIRECT DEVELOPMENT CONTRACT AND RELATED GRANT COSTS. No direct development
contract and related grant costs were incurred in the Second Quarter 1998
compared to $1,020,000 in the Second Quarter 1997 primarily due to the end of
activity in the Company's electric vehicle program (related to development
contracts) and the divestiture of the IVS-TM- product line. Additionally, all
expenses related to prototype orders from customers for seat and radar products
and costs associated with the electric vehicle program are recorded as research
development expense for the Second Quarter 1998.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
increased to $1,128,000 in Second Quarter 1998 from $456,000 in Second Quarter
1997. The increase in Second Quarter 1998 was due to higher levels of research
and development activity on the Company's Climate Control Seat system and radar
products. As mentioned previously, all expenses related to prototype orders from
customers for these two products and the electric vehicle program are now
recorded as research and development expense. As the Company focuses on the
development of its core products, these expenses can be expected to increase in
future periods.
(8)
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses decreased to $957,000 in Second Quarter 1998
compared to $1,395,000 in Second Quarter 1997. The decrease in Second Quarter
1998 was due to a reclassification of personnel and costs incurred in 1997 for
(1) fees related to a proposed joint venture for the electric vehicle business,
(2) legal expenses and (3) relocation expenses. These were somewhat offset by
the fact that no SG&A expenses were allocated to development contracts in 1998
as in the prior year.
INTEREST INCOME. Net interest income in 1998 decreased due to a decline in
invested cash.
SIX MONTHS 1998 COMPARED WITH SIX MONTHS 1997
REVENUES. Revenues for the six months ended June 30, 1998 ("1998") were
$365,000 as compared with revenues of $746,000 in the six months ended June 30,
1997 ("1997"). The decrease was primarily due to the same reasons as given for
the Second Quarter.
DIRECT DEVELOPMENT CONTRACT AND RELATED GRANT COSTS. No direct development
contract and related grant costs were incurred in the 1998 compared to
$1,889,000 in 1997. The decrease was primarily due to the same reasons as given
for the Second Quarter.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
increased to $2,152,000 in 1998 from $712,000 in 1997 for the same reasons given
for the quarter.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses decreased to $1,970,000 in 1998 compared to
$2,189,000 in 1997. The decrease was primarily due to the same reasons as given
for the Second Quarter.
INTEREST INCOME. Net interest income in 1998 decreased due to a decline in
invested cash.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, the Company had working capital of $5,123,000. The
Company's principal sources of operating capital have been the proceeds of its
various financing transactions and, to a lesser extent, revenues from grants,
development contracts and sale of prototypes to customers.
Cash and cash equivalents decreased by $1,983,000 in 1998 primarily due to
cash used in operating activities. Operating activities used $3,415,000, which
was primarily a result of the net loss of $3,532,000. Investing activities
provided $1,442,000, of which $1,840,000 was the result of the sale of short
term investments.
The Company expects to incur losses for the foreseeable future due to the
continuing cost of its product development and marketing activities and to begin
volume manufacturing operations when it is required. Current working capital is
not sufficient to fund the Company's operations for
(9)
the next twelve months. The Company will use current cash and investments,
but will need cash from financing sources to fund its near term operations
and before the Company can achieve profitability from its operations. There
can be no assurance that profitability can be achieved in the future. The
Company is focused on bringing products to market and achieving revenues
based upon its available resources. The Company will continue its program to
divest assets or businesses where it does not have sufficient resources to
bring the product to market and where it will enhance shareholder value. As
has been previously mentioned, the Company is now striving to accomplish a
strategic venture with the Company's electric vehicle program. Although the
Company has begun limited production on its Climate Control Seat product,
larger orders for the seat product and the ability to begin production on the
radar product will require significant expenses for tooling product parts and
to set up manufacturing and/or assembly processes. The Company also expects
to require significant capital to fund other near-term production engineering
and manufacturing, as well as research and development and marketing of these
products. The Company does not intend to pursue significant grants or
development contracts to fund operations and therefore is highly dependent on
its current working capital sources. The Company will require additional
equity and/or debt financing. There can be no assurance that either of these
sources will be available in the future.
Certain matters discussed or referenced in this report, including the
Company's intention to develop, manufacture and market Climate Control Seats and
radar products and the Company's expectation of reduced revenues and continuing
losses for the foreseeable future, are forward looking statements. Other forward
looking statements may be identified by the use of forward looking terminology
such as "may", "will", "expect", "believe", "estimate", "anticipate",
"continue", or similar terms, variations of such terms or the negative of such
terms. Such statements are based upon management's current expectations and are
subject to a number of risks and uncertainties which could cause actual results
to differ materially from those described in the forward looking statements.
Such risks and uncertainties include the market demand for and performance of
the Company's products, the Company's ability to develop, market and manufacture
such products successfully, the viability and protection of the Company's
patents and other proprietary rights, and the Company's ability to obtain new
sources of financing. Additional risks associated with the company and its
business and prospects are described in the Company's Annual Report on Form 10-K
for the year ended December 31, 1997.
(10)
PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual Meeting of Shareholders was held on June 16, 1998. The
following summarizes each matter voted upon at the meeting and the
number of votes cast for or against and the number of abstentions.
As to the election of directors, the number of votes cast as to
each nominee was as follows:
For Against Abstain
----------- -------- --------
Lon E. Bell 11,435,860 0 175,627
Roy A. Anderson 11,434,660 0 174,427
John W. Clark 11,436,160 0 174,127
A. Stephens Hutchcraft, Jr. 11,434,660 0 175,627
Michael R. Peevey 11,436,160 0 174,427
Richard A. Weisbart 11,433,860 0 176,427
ITEM 5. OTHER INFORMATION
The company hereby advises shareholders that until further notice
March 29, 1999 is the date after which notice of a shareholder
sponsored proposal submitted outside the processes of Rule 14a-8
under the Securities Exchange Act of 1934 (i.e., a proposal to be
presented at the next annual meeting of shareholders but not
submitted for inclusion in the Company's proxy statement) will be
considered untimely under the SEC's proxy rules. The Company to
date has not established any advance notice provision for
shareholder proposals.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
None
(b) Reports on Form 8-K
None
(11)
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMERIGON INCORPORATED
Registrant
Date: July 31, 1998 /s/ Scott O. Davis
-------------------
Scott O. Davis
Vice President Finance and
Chief Financial Officer
(12)
5
1,000
3-MOS
DEC-31-1998
APR-01-1998
JUN-30-1998
4,054
560
135
0
89
5,971
2,117
(1,315)
6,773
849
0
0
0
28,149
0
6,773
0
365
0
4,133
0
0
0
(3,532)
0
(3,532)
0
0
0
(3,532)
(0.37)
(0.37)
