UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
For the quarterly period ended March 31, 2000
[_] 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
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(Exact name of registrant as specified in its charter)
California 95-4318554
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5462 Irwindale Avenue, Irwindale,
California 91706
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(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
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At May 1, 2000, the registrant had 1,914,089 shares of Class A Common Stock, no
par value, issued and outstanding.
AMERIGON INCORPORATED
TABLE OF CONTENTS
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet 3
Statement of Operations 4
Statement of Cash Flows 5
Notes to Unaudited Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About 13
Market Risk
Part II OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 14
Item 6 Exhibits and Reports on Form 8-K 14
Signatures 15
(2)
Part 1
AMERIGON INCORPORATED
BALANCE SHEET
(In thousands)
March 31, December 31,
2000 1999
------------------ -------------------
(Unaudited)
ASSETS
Current Assets:
Cash & cash equivalents $ 1,104 $ 1,647
Accounts receivable less allowance of $58 at March 31, 2000 and
December 31, 1999 779 282
Inventory 477 490
Prepaid expenses and other assets 426 251
-------- --------
Total current assets 2,786 2,670
Property and equipment, net 978 1,051
Deferred exclusivity fee 1,148 --
-------- --------
Total assets $ 4,912 $ 3,721
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable $ 766 $ 592
Accrued liabilities 1,009 597
Bridge loan payable less debt discount of $80 at March 31, 2000 1,420 -
-------- --------
Total current liabilities 3,195 1,189
Long term portion of capital lease 9 11
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Total liabilities 3,204 1,200
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Mandatorily redeemable preferred stock:
Series A - Preferred Stock - no par value; redeemable and convertible;
9 shares authorized, none and 9 issued and outstanding at March 31,
2000 and December 31, 1999; liquidation preference of $9,315 - 8,267
-------- --------
Shareholders' equity (deficit):
Preferred stock:
Series A - no par value; convertible; 9 shares authorized, 9 and none
issued and outstanding at March 31, 2000 and December 31, 1999;
liquidation preference of $9,315 8,267 -
Common stock;
Class A - no par value; 20,000 shares authorized, 1,914 and 1,910
issued and outstanding at March 31, 2000 and December 31, 1999 28,161 28,149
Class B - no par value; 600 shares authorized, none issued and
outstanding - -
Paid-in capital 11,326 10,059
Deferred compensation (102) (74)
Accumulated deficit (45,944) (43,880)
-------- --------
Total shareholders' equity (deficit) 1,708 (5,746)
-------- --------
Total liabilities and shareholders' equity (deficit) $ 4,912 $ 3,721
======== ========
See accompanying notes to the condensed financial statements
(3)
AMERIGON INCORPORATED
STATEMENT OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months
Ended March 31,
---------------------------------------
2000 1999
----------------- ----------------
Revenues:
Product sales $ 954 $ 17
Development contracts 80 203
------- -------
Total revenues 1,034 220
Costs and expenses:
Product 852 32
Development contracts 274 447
Research and development 647 534
Selling, general and administrative 1,320 860
------- -------
Total costs and expenses 3,093 1,873
------- -------
Operating loss (2,059) (1,653)
Interest income 10 16
Interest expense (15) (2)
------- -------
Net loss $(2,064) $(1,639)
======= =======
Basic and diluted net loss per share $ (1.08) $ (0.86)
======= =======
Weighted average number of common shares outstanding 1,912 1,910
======= =======
See accompanying notes to the condensed financial statements
(4)
AMERIGON INCORPORATED
STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended March 31,
----------------------------------------
2000 1999
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Operating Activities:
Net loss $(2,064) $(1,639)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization 103 92
Provision for doubtful accounts - (74)
Compensation from grant of non-employee stock options and
warrants - 12
Change in operating assets and liabilities:
Accounts receivable (497) 50
Inventory 13 9
Prepaid expenses and other assets (35) (80)
Accounts payable 174 66
Deferred revenue - (44)
Accrued liabilities 412 166
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Net cash used in operating activities (1,894) (1,442)
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Investing Activities:
Purchase of property and equipment (159) (31)
------- -------
Financing Activities:
Proceeds from exercise of stock options 12 -
Repayment of capital lease (2) (5)
Proceeds from bridge financing 1,500 300
Sale of shares in consolidated subsidiary - 88
------- -------
Net cash provided by financing activities 1,510 383
------- -------
Net decrease in cash and cash equivalents (543) (1,090)
------- -------
Cash and cash equivalents at beginning of period 1,647 1,667
------- -------
Cash and cash equivalents at end of period $ 1,104 $ 577
======= =======
See accompanying notes to condensed financial statements
(5)
AMERIGON INCORPORATED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 1 - The Company:
Amerigon Incorporated (the "Company"), was incorporated in California in April
1991, and is a developer, marketer and manufacturer of proprietary, high
technology electronic components and systems for sale to car and truck original
equipment manufacturers ("OEMs"). The Company is currently focusing the majority
of its efforts on the introduction of its primary product, a Climate Control
Seat(TM) ("CCS(TM)"), which provides both heating and cooling to seat occupants.
The Company has one other product under development, the AmeriGuard(TM) radar-
based speed and distance sensor system, which alerts drivers to the presence of
objects near the vehicle.
Note 2 - Basis of Presentation and Summary of Certain Accounting Policies:
The accompanying financial statements as of March 31, 2000, have been
prepared by the Company without audit. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) necessary for fair
presentation have been included. The results of operations for the three-month
period ended March 31, 2000, 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, 1999.
Certain amounts have been reclassified from the prior year Form 10-Q to
conform to current period presentation.
Note 3 - Going Concern
The Company has suffered recurring losses and negative cash flows from
operations since inception and has a significant accumulated deficit.
Consequently, in order to fund continuing operations and complete product
development, the Company will need to raise additional financing. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. The Company's ability to continue as a going concern is
dependent upon its ability to generate sufficient cash flow to meet its
obligations as they come due. In this regard, on March 16, 2000, the Company
entered into a Bridge Loan facility for up to $4 million, of which $2.5 million
has been borrowed (See Notes 5 and 9), which is due at the earlier of August 31,
2000 or the occurrence of certain Trigger Events, as described in Note 5.
Management is seeking additional sources of permanent equity or long-term
financing to fund its operations. The outcome of such efforts to obtain
additional financing cannot be assured.
(6)
Note 4 - 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. Because their effects are
anti-dilutive, net loss per share for the quarters ended March 31, 2000 and 1999
does not include the effect of:
Three Months Ended
March 31,
----------------------------------------------------
2000 1999
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Stock options outstanding for:
1993 and 1997 Stock Option Plans 881,680 193,502
Options granted by an officer to
directors and officers - 118,422
Shares of Class A Common Stock
issuable upon the exercise of warrants 2,845,489 1,946,200
Common stock issuable upon the
conversion of Series A Preferred Stock 5,373,134 -
Class B Common Stock - 600,000
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Total 9,100,303 2,858,124
======================= ========================
Note 5 - Bridge Loan
On March 16, 2000, the Company obtained a loan from Big Star
Investments LLC (a limited liability company owned by Westar Capital II and TMW
Enterprises, the Company's two principal shareholders) for an initial advance of
$1.5 million and, at the Company's request and subject to Big Star's sole
discretion, additional advances of up to an additional $2.5 million. The
advances accrue interest at 10% per annum, payable at maturity or on the date of
any prepayment. The principal and accrued interest of the initial loan are
convertible at any time into Class A Common Stock at a conversion price (the
"Conversion Price") equal to the average closing bid price of the Common Stock
during the ten days preceding the date of the bridge loan (the "Market Price").
In the event the Company issues in excess of $5 million of equity securities in
an offering at an issuance price that is less than the Market Price with respect
to the bridge loan, the Conversion Price will be adjusted to the equity issuance
price. Additional advances will also be convertible based on the average price
of the Company's Class A Common Stock during the ten days preceding such
additional advances. The loans are due on the earlier of August 31, 2000, or
upon the occurrence of a Trigger Event as defined as an event that the Company
(or its Board of Directors) shall have authorized, recommended, proposed or
publicly announced its intention to enter into (or has failed to recommend
rejection of) any tender or exchange offer, merger, consolidation, liquidation,
dissolution, business combination, recapitalization, acquisition, or disposition
of a material amount of the assets or securities or any comparable transaction
which has not been consented to in writing by Big Star. The loans are
collateralized by substantially all of the Company's assets.
In connection with the Bridge Loan, the Company issued a warrant for the
right to purchase 7,963 shares of the Company's Class A Common Stock (an amount
equal to 10% of the principal amount of the advances made divided by the
conversion price of $18.84). The conversion price of the warrants is adjustable
in the same manner as the loan. The proceeds of the bridge loan were allocated
among the bridge loan and the warrants based upon their relative fair values.
The allocated value of the warrants of $88,000 results in a discount to the
loan.
(7)
Note 6 - Ford Agreement
On March 27, 2000, the Company entered into a Value Participation Agreement
("VPA") with Ford Motor Company ("Ford"). Pursuant to the VPA, Ford agreed that,
through December 31, 2004, the Company has the exclusive right to manufacture
and supply CCS units to Ford's tier 1 suppliers for installation in Ford,
Lincoln and Mercury branded vehicles produced and sold in North America (other
than Ford badged vehicles produced by Auto Alliance, Inc.). Ford is not
obligated to purchase any CCS units under the VPA.
As part of the VPA, the Company will grant to Ford warrants exercisable for
Class A Common Stock. A warrant for the right to purchase 82,197 shares of
Class A Common Stock at an exercise price of $2.75 per share was issued and
fully vested on March 27, 2000. The fair value of the warrant of $1,148,000
was determined using the Black-Scholes valuation method and was recorded as a
deferred exclusivity fee on the balance sheet. This fee will be amortized on a
straight-line basis from April 2000 to December 2004, the initial term of the
Agreement. Additional warrants will be granted and vested based upon purchases
by Ford of a specified number of CCS units throughout the length of the VPA. The
exercise price of these additional warrants depends on when such warrants vest,
with the exercise price increasing each year. If Ford does not achieve specific
goals in any year, the VPA contains provisions for Ford to make up the shortfall
in the next succeeding year. If Ford achieves all of the incentive levels
required under the VPA, warrants will be granted and vested for an additional
986,364 shares of Class A Common Stock. The total number of shares subject to
warrants which may become vested will be adjusted in certain circumstances for
antidilution purposes, including an adjustment for equity issuances of up to $15
million on or before September 30, 2000, so that the percentage interest in the
Company represented by the aggregate number of shares subject to warrants is not
diluted by such issuances.
Note 7 - Segment Reporting
The tables below present segment information about the reported revenues
and operating loss of Amerigon for the three months ended March 31, 2000 and
1999 (in thousands). Asset information by reportable segment is not reported
since management does not produce such information.
For the quarters Reconciling As
ended March 31, CCS Radar Items Reported
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2000
Revenue $1,034 $ - $ - $ 1,034
Operating Loss (663) (76) (1,320) (1) (2,059)
1999
Revenue 220 - - 220
Operating Loss (584) (209) (860) (1) (1,653)
- ------------------
(1) Represents selling, general and administrative costs of $1,251,000 and
$803,000, respectively, and depreciation expense of $69,000 and $57,000,
respectively, for the quarters ended March 31, 2000 and 1999.
(8)
Note 7 - Segment Reporting (continued)
Revenue information by geographic area (in thousands):
Quarters Ended March 31,
------------------------------------
2000 1999
--------------- ---------------
United States - Commercial $1,022 $ 126
Asia 12 89
Europe - 5
--------------- ---------------
Total Revenues $1,034 $ 220
=============== ===============
For the quarter ended March 31, 2000, one commercial customer (CCS),
represented 90% of the Company's sales. For the quarter ended March 31, 1999,
one foreign customer (CCS) and one domestic customer (CCS) represented 41% and
57% of the Company's sales, respectively.
Note 8 - Accrued Liabilities
Details of Accrued liabilities (in thousands):
March 31, December 31,
2000 1999
------------ ------------
Accrued salaries $ 557 $220
Accrued vacation 210 187
Other accrued liabilities 242 190
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Total Accrued Liabilities $1,009 $597
============ ===========
Note 9 - Subsequent Events
On April 19, 2000, the Company effected a one-for-five reduction in its
outstanding, publicly traded, Class A Warrants. Due to this reduction, only one
Class A Warrant is required to purchase one share of Class A Common Stock. The
total number of publicly traded Class A Warrants outstanding is now
approximately 1,468,755, down from approximately 7,343,775, prior to the
reduction. As a result of the warrant issued to Ford, the total exercise price
for each publicly traded warrant has been lowered from $25.00 to $24.149. The
Company's Class A warrants are temporarily trading under the symbol ARGMW until
May 17, 2000, at which point they will resume trading under the symbol ARGNW.
On May 10, 2000, the Company was advanced an additional $1,000,000 under the
bridge loan agreement with Big Star (See Note 5). The Company issued an
additional warrant for 10,146 shares of Class A common stock related to this
loan.
(9)
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Amerigon Incorporated (the "Company") is in the business of developing and
manufacturing vehicle components for automotive original equipment manufacturers
("OEMs"). The Company was incorporated in California on April 23, 1991 as a
research and development entity focused on creating electric vehicles ("EV").
During 1998, the Company decided to suspend funding activities associated with
EV and directed its resources to developing and commercializing the Climate
Control Seat ("CCS(TM)") and Radar for Maneuvering and Safety ("AmeriGuard"),
which are both products of the Company's research. On May 26, 1999, the
shareholders of the Company voted to discontinue EV operations. As a result,
the Company is now principally positioned to bring to market the CCS and
AmeriGuard product lines and accordingly has incurred significant sales and
marketing, prototype and engineering expenses to gain orders for production
vehicles.
Auto Industry. The Company is now operating as a supplier to the auto
industry. Inherent in this market are costs and expenses well in advance of the
receipt of orders (and resulting revenues) from customers. This is due in part
to the OEM requiring the coordination and testing of proposed new components and
sub-systems. Revenues from these expenditures may not be realized for two to
three years as the OEMs tend to group new components and enhancements into
annual or every two to three year vehicle model introductions.
Results of Operations
First Quarter 2000 Compared with First Quarter 1999
- ---------------------------------------------------
Revenues. Revenues for the three months ended March 31, 2000 ("First
Quarter 2000") were $1,034,000 as compared with revenues of $220,000 in the
three months ended March 31, 1999 ("First Quarter 1999"). The increase in
revenues was due primarily to product shipments to Johnson Controls Incorporated
("JCI") of the Company's CCS of $920,000. Development contracts decreased
$123,000 from First Quarter 1999 due to the completion of most development
activity for new CCS platforms in the first quarter 2000.
Product Cost. Product cost increased $820,000 in the First Quarter 2000
from $32,000 in the First Quarter 1999. The increase is due to the shipments
to JCI of CCS units in the First Quarter 2000. The Company anticipates product
costs to increase in absolute dollars while decreasing as a percentage of
revenue.
Development Contracts. Development contract costs incurred in the First
Quarter 2000 were $274,000 compared to $447,000 in the First Quarter 1999. The
decrease is due to the completion of most development activity for new CCS
platforms in the First Quarter 2000 and the reimbursement of engineering expense
associated with a joint research project with the State of New Mexico for
AmeriGuard of $99,000.
(10)
Results of Operations (continued)
Research and Development Expenses. Research and development expenses
increased to $647,000 in First Quarter 2000 from $534,000 in First Quarter 1999.
The increase was due to higher levels of research and development activity on
the Company's CCS.
Selling, General and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses increased to $1,320,000 in First Quarter 2000
compared to $860,000 in First Quarter 1999. The change was due to costs
associated with the launch of the Lincoln Navigator CCS program.
Liquidity and Capital Resources
At March 31, 2000, the Company had negative working capital of $409,000.
On March 16, 2000, the Company entered into a secured bridge loan with Big Star
for up to $4 million which bears interest at 10% per annum and matures upon the
earlier of August 31, 2000, or upon the occurrence of a Trigger Event as defined
as an event that the Company (or its Board of Directors) shall have authorized,
recommended, proposed or publicly announced its intention to enter into (or has
failed to recommend rejection of) any tender or exchange offer, merger,
consolidation, liquidation, dissolution, business combination, recapitalization,
acquisition, or disposition of a material amount of the assets or securities or
any comparable transaction which has not been consented to in writing by Big
Star. The bridge loan is necessary to allow the Company to continue operations
pending the raising of additional financing. The amount of the bridge loan may
not be adequate even if fully drawn.
The Company's principal sources of operating capital have been the proceeds
of its various financing transactions and, to a lesser extent, CCS product
revenues, development contracts and sales of prototypes to customers.
Cash and cash equivalents decreased by $543,000 for the First Quarter 2000
primarily due to cash used in operating activities of $1,894,000, which was
mainly attributable to increases in product costs and SG&A expenses. Investing
activities used $159,000 related to the purchase of property and equipment.
Financing activities provided $1,510,000 due primarily to $1,500,000 received
from the bridge loan.
The Company expects to incur losses for the foreseeable future, until it
begins selling units in the automotive market with an appropriate margin and
volume. Even with the shipments of volume production for the Lincoln Navigator
SUV platform, the revenue generated from the initial orders will not be
sufficient to meet the Company's operating needs. The Company will need to
raise additional cash from financing sources before the Company can achieve
profitability from its operations. There can be no assurance that profitability
can be achieved in the future. Although the Company has begun limited production
on its CCS product, larger orders for the CCS product and the ability to begin
production on the AmeriGuard product will require significant expenses for
tooling 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 any more significant
development contracts to fund operations and therefore is highly dependent on
its current working capital sources. Future financing will
(11)
be required and there can be no assurance that additional financing will be
available in the future or that it will be available on favorable terms.
Other Information
Certain matters discussed or referenced in this report, including the
Company's intention to develop, manufacture and market the CCS and AmeriGuard
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, 1999.
(12)
ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
The Company's exposure to market risk for changes in interest rates relate
primarily to the Company's investment portfolio. The Company places its
investments in debt instruments of the U.S. government and in high-quality
corporate issuers. As stated in its policy, the Company seeks to ensure the
safety and preservation of its invested funds by limiting default risk and
market risk. The Company has no investments denominated in foreign country
currencies and therefore is not subject to foreign exchange risk.
There have been no material changes since the Form 10-K was filed for the
Company's year ended December 31, 1999.
(13)
PART II
OTHER INFORMATION
ITEM 2. Changes in Securities and Use of Proceeds
-----------------------------------------
On March 16, 2000, the Company issued a warrant to purchase up to 7,963
shares of Class A Common Stock of the Company to Big Star Investments LLC ("Big
Star") in connection with the Company entering into a secured bridge loan with
Big Star for up to $4.0 million. The warrant expires in five years and allows
Big Star to purchase Class A Common Stock of the Company at $18.84 per share.
The warrant was exempt from registration under Section 4(2) of the Securities
Act of 1933.
On March 27, 2000, the Company issued a warrant to purchase up to 82,197
shares of Class A Common Stock of the Company to Ford Motor Company ("Ford")
pursuant to the terms of the Value Participation Agreement dated March 27, 2000,
between Ford and the Company. The Warrant, which expires in March 2007, allows
Ford to purchase shares of Class A Common Stock of the Company at $2.75 per
share. The warrant was exempt from registration under Section 4(2) of the
Securities Act of 1933.
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
4.1 Bridge Loan Warrant dated March 16, 2000 (1)
4.2 Ford Warrant dated March 27, 2000
10.1 Credit Agreement dated March 16, 2000 between the Company
and Big Star (1)
10.2 Security Agreement dated March 16, 2000 between the
Company and Big Star (1)
10.3 Patent and Trademark Security Agreement dated March 16,
2000 between the Company and Big Star (1)
10.4 Letter to Amerigon Incorporated Regarding Series A
Preferred Stock (1)
10.5 Value Participation Agreement dated March 27, 2000 between
the Company and Ford Motor Company
27. Financial Data Schedule
(b) Reports on Form 8-K
None
________________________________________________________________________________
(1) Previously filed as an exhibit to the Company's Annual Report on Form 10 K
for the period ended December 31, 1999 and incorporated herein by reference.
(14)
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: May 15, 2000 /s/ Richard A. Weisbart
------------------------
Richard A. Weisbart
Chief Executive Officer
/s/ Sandra L. Grouf
-----------------------
Sandra L. Grouf
Controller
(Chief Accounting Officer)
15