UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
[ ] 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 Identification No.)
incorporation or organization)
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 May 9, 2001, the registrant had 4,627,975 shares of Common Stock, no par
value, issued and outstanding.
(1)
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 12
Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
Part II OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
(2)
Part I
AMERIGON INCORPORATED
BALANCE SHEET
(In thousands)
March 31, 2001
Pro Forma (1),
April 6, 2001
completion
March 31, of Ferrotec December 31,
2001 transaction 2000
----------- -------------- -----------
(Unaudited) (Unaudited)
ASSETS
Current Assets:
Cash & cash equivalents $ 520 $ 3,520 $ 2,852
Accounts receivable less allowance
of $55 at March 31, 2001 and
December 31, 2000 1,247 1,247 1,375
Inventory 1,283 1,283 1,478
Prepaid expenses and other assets 438 438 487
-------- -------- --------
Total current assets 3,488 6,488 6,192
Property and equipment, net 1,340 1,340 1,383
Deferred exclusivity fee 1,097 1,097 1,170
-------- -------- --------
Total assets $ 5,925 $ 8,925 $ 8,745
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 436 $ 436 $ 1,376
Accrued liabilities 1,560 1,560 1,446
Deferred revenue - - 170
-------- -------- --------
Total current liabilities 1,996 1,996 2,992
Long term portion of capital lease 2 2 5
Other liability - 2,000 -
-------- -------- --------
Total liabilities 1,998 3,998 2,997
-------- -------- --------
Shareholders' equity:
Preferred Stock:
Series A - no par value;
convertible; 9 shares authorized,
9 issued and outstanding at March
31, 2001 and December 31, 2000;
liquidation preference of $10,103
and $9,945 at March 31, 2001 and
December 31, 2000 8,267 8,267 8,267
Common Stock;
No par value; 20,000 shares
authorized, 4,428 issued and
outstanding at March 31, 2001 and
December 31, 2000 and 4,628 at
April 6, 2001 37,947 38,947 37,947
Paid-in capital 14,745 14,745 14,689
Deferred compensation (55) (55) (1)
Accumulated deficit (56,977) (56,977) (55,154)
-------- -------- --------
Total shareholders' equity 3,927 4,927 5,748
-------- -------- --------
Total liabilities and shareholders'
equity $ 5,925 $ 8,925 $ 8,745
======== ======== ========
(1) Pro forma after giving effect to the entering into of a manufacturing and
supply agreement for $2 million and the sale of 200,000 shares of common
stock for $1 million with Ferrotec Corporation on April 6, 2001.
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,
2001 2000
----------------------------
Product revenues $ 2,335 $ 954
Cost of sales 2,035 845
--------- -------
Gross margin 300 109
Operating costs and expenses:
Research and development 735 848
Selling, general and administrative 1,404 1,320
--------- -------
Total operating costs and expenses 2,139 2,168
--------- -------
Operating Loss (1,839) (2,059)
Interest income 16 10
Interest expense - (15)
--------- -------
Net loss $(1,823) $(2,064)
========= =======
Basic and diluted net loss per share $(0.41) $ (1.08)
========= =======
Weighted average number of shares outstanding 4,428 1,912
========= =======
See accompanying notes to the condensed financial statements
(4)
AMERIGON INCORPORATED
STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended March 31,
----------------------------------
Operating Activities: 2001 2000
----------------------------------
Net loss $(1,823) $(2,064)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization 176 103
Deferred revenue (169) -
Compensation from grant of non-employee stock options and warrants 2 -
Change in operating assets and liabilities:
Accounts receivable 128 (497)
Inventory 195 13
Prepaid expenses and other assets 48 (35)
Accounts payable (940) 174
Accrued liabilities 114 412
------- -------
Net cash used in operating activities (2,269) (1,894)
------- -------
Investing Activities:
Purchase of property and equipment (60) (159)
------- -------
Net cash used in investing activities (60) (159)
------- -------
Financing Activities:
Proceeds from exercise of stock options - 12
Repayment of capital lease (3) (2)
Proceeds from bridge financing - 1,500
------- -------
Net cash (used in) provided by financing activities (3) 1,510
------- -------
Net decrease in cash and cash equivalents (2,332) (543)
------- -------
Cash and cash equivalents at beginning of period 2,852 1,647
------- -------
Cash and cash equivalents at end of period $ 520 $ 1,104
======= =======
See accompanying notes to condensed financial statements
(5)
AMERIGON INCORPORATED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 1 - The Company
Amerigon Incorporated (the "Company"), incorporated in California in April
1991, 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 its efforts on the
introduction of its Climate Control Seat(TM) ("CCS(TM)"), which provides both
heating and cooling to seat occupants, and the development of the next
generation CCS device.
Note 2 - Basis of Presentation and Summary of Certain Accounting Policies
The accompanying financial statements as of March 31, 2001 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, 2001 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, 2000.
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. The
Company expects to incur losses for the next one to two years as current sales
volumes are not sufficient to cover the Company's fixed manufacturing, overhead
and operating costs. Sufficient volume will not be reached in the near term,
as automotive industry development timing tends to be relatively long.
Even with the shipments of volume production for the Lincoln Navigator SUV,
Lincoln Blackwood, Lexus LS 430 and Toyota Celsior, the revenue generated from
the initial orders will not be sufficient to meet the Company's operating needs.
There can be no assurance that profitability can be achieved in the future.
Although the Company has begun production on its CCS product, larger orders for
the CCS 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. Future financing will 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. These conditions raise substantial doubt about
the Company's ability to continue as a going concern.
(6)
In March 2001, the Company entered into a Manufacturing and Supply
Agreement and a Subscription Agreement with Ferrotec Corporation, a Tokyo based
manufacturer (see Note 7). Ferrotec paid to the Company $2,000,000 and
$1,000,000 in April 2001 in accordance with the Manufacturing and Supply
Agreement and the Subscription Agreement, respectively. Management will need to
seek 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. The effect of these agreements has been reported as pro forma data
on the balance sheet of the financial statements.
Note 4 - Inventory
Details of Inventory by category, in thousands:
March 31, December 31,
2001 2000
--------- -----------
Raw Material 1,202 1,118
Work in Process 56 76
Finished Goods 193 452
-------- --------
Total Inventory 1,451 1,646
Less Inventory Reserve (168) (168)
-------- --------
Net Inventory 1,283 1,478
======== ========
Note 5 - 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 three months ended March 31, 2001 and
2000, does not include the effect of:
Three Months
Ended March 31,
2001 2000
------------------------------
Stock options outstanding for:
1993 and 1997 Stock Option Plans 896,914 881,680
Shares of Common Stock
issuable upon the exercise of warrants 3,997,382 2,882,394
Shares of Common Stock
issuable upon the exercise of
an option to purchase Unit Purchase
Options granted to underwriter 190,400 190,400
Common Stock issuable upon the
conversion of Series A Preferred Stock 5,373,134 5,373,134
----------- -----------
Total 10,457,830 9,327,608
=========== ===========
(7)
Note 6 - Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards Number 133 ("SFAS 133"), "Accounting for
Derivative Instruments and Hedging Activities", which became effective for the
Company in fiscal 2001. SFAS 133 establishes accounting and reporting standards
for derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives), and for hedging
activities. Implementing SFAS 133 will not have a material impact on the
reported financial condition and results of operations.
Note 7 - Manufacturing and Supply Agreement, and Subscription Agreement
On March 28, 2001 the Company entered into a Manufacturing and Supply
Agreement (the "Agreement") with Ferrotec Corporation, a Tokyo based
manufacturer. The Agreement grants to Ferrotec the exclusive right to
manufacture CCS units in certain countries (the "Territory"), for ultimate
distribution by Amerigon to its customers within the Territory, with the
understanding that the parties will enter into good faith negotiations to
establish a joint venture for the purpose of purchasing, marketing, selling and
distributing the CCS units in the Territory. The Territory includes China,
Japan, Taiwan, Korea, India, Thailand, Vietnam, Malaysia, Indonesia and the
Philippines. The initial term of the Agreement begins April 1, 2001 and expires
on April 1, 2011. The $2,000,000 fee will be amortized on a straight-line basis
over the term of the Agreement. Ferrotec has also entered into a Subscription
Agreement with the Company, whereby Ferrotec will purchase 200,000 shares of
unregistered Amerigon Common Stock at $5 per share. The Subscription Agreement
grants Ferrotec demand registration rights beginning one year from the closing
of the Subscription Agreement and piggy-back registration rights if the Company
proposes to register any securities before then. The Company received the
$2,000,000 and $1,000,000 payments under the two agreements in April 2001.
Note 8 - Private Placement
On June 14, 2000, the Company completed the sale of 2.2 million restricted
shares of its Common Stock in the Private Placement to selected institutional
and accredited investors, resulting in total proceeds of $11.0 million, less
issuance costs of $1.3 million. The $11.0 million excludes a $1.5 million
advance on the Bridge Loan which was exchanged for 300,000 shares of Common
Stock and issued to Westar Capital II LLC ("Westar") and Big Beaver Investments
LLC ("Big Beaver"), the owners of Big Star, the lender on the Bridge Loan (see
Note 9). As partial compensation for services rendered in the Private
Placement, Roth Capital Partners, Inc., was granted a warrant to purchase up to
188,000 shares of the Company's Common Stock at $5 per share. The value of such
warrant of $1.4 million was determined using the Black-Scholes model and was
reflected as non-cash offering expense.
Note 9 - Bridge Loan
On March 16, 2000, the Company obtained a Bridge Loan from Big Star
Investments LLC (a limited liability company owned by Westar and Big Beaver, the
Company's two principal shareholders) for an initial advance of $1.5 million.
The Company took a second advance of $1.0 million on May 10, 2000. The loan
accrued interest at 10% per annum.
The terms of the Bridge Loan specified that the principal and accrued
interest were convertible at any time into Common Stock at a conversion price
(the "Conversion Price") equal to the average daily
(8)
closing bid price of the Common Stock during the ten-day period preceding the
date of each Bridge Loan advance. This conversion price was $18.84 and $9.86 per
share for the $1.5 million and $1.0 million advances, respectively. The
Conversion Price was contingently adjustable in the event the Company issued in
excess of $5 million of equity securities in an offering at an issuance price
less than the initial Conversion Price with respect to the Bridge Loan. Due to
the Company's Private Placement of equity securities in June 2000 (Note 8) at an
issuance price of $5 per share, the Conversion Price of the Bridge Loan was
adjusted to $5 per share. This adjustment of the Conversion Price resulted in a
non-cash charge to interest expense and a credit to additional paid-in capital
of $2.5 million, because it met the definition of a "beneficial conversion
feature" in accordance with Emerging Issues Task Force Consensus 98-5.
In connection with entering into the Bridge Loan, the Company issued
warrants for the right to purchase 7,963 and 10,146 shares of the Company's
Common Stock relating to the $1.5 million and $1.0 million Bridge Loan advances,
respectively (an amount equal to 10% of the principal amount of the advance
divided by the original Conversion Price of $18.84 and $9.86, respectively.)
The Conversion Price of the warrants was adjustable in the same manner as the
Bridge Loan. The proceeds of the Bridge Loan were allocated between the Bridge
Loan and the warrants based upon their estimated relative fair values. The
allocated value of the warrants resulted in a discount of $173,000 to the Bridge
Loan, of which $57,000 was amortized to interest expense, $68,000 was offset
against extraordinary gain and $48,000 was offset against paid-in capital during
the quarter ended June 30, 2000.
The Company repaid $1.0 million of Bridge Loan principal and accrued
interest of $49,000 on June 16, 2000 with proceeds from the Private Placement
(Note 8). The Company's $1.0 million payment was allocated for accounting
purposes between reacquiring the beneficial conversion feature and the debt.
Due to this allocation, the debt was extinguished for less than its net book
value, resulting in a $775,000 extraordinary gain on extinguishment of debt.
The remaining $1.5 million of Bridge Loan principal was exchanged for 300,000
shares of Common Stock, which was issued equally to Westar and Big Beaver.
Note 10 - 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 AutoAlliance International, 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
Common Stock. A warrant for the right to purchase 82,197 shares of 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 model and was recorded as a deferred exclusivity fee on
the balance sheet. This fee is being amortized on a straight-line basis from
April 2000 to December 2004, the initial term of the Agreement. In addition,
Ford received an additional warrant for 26,148 shares of Common Stock due to
certain anti-dilution provisions of the VPA that were triggered by the Company's
Private Placement in June 2000. The fair value of the additional warrant of
$220,000 was determined using the Black-Scholes model and has been accounted for
in the same manner as the deferred exclusivity fee. Additional warrants will be
granted and vested based upon purchases by Ford's Tier 1 suppliers 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
(9)
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 1,300,140
shares of Common Stock.
Note 11 - Segment Reporting
The tables below present segment information about the reported revenues
and operating loss of Amerigon for the three months ended March 31, 2001 and
2000 (in thousands). Asset information by reportable segment is not reported
since management does not produce such information.
For the Three Months Ended Reconciling As
March 31, CCS Radar (1) Items Reported
- ---------------------------------------------------------------------------- ---------------
2001
Revenue $2,335 $ - $ - $ 2,335
Operating Loss (435) - (1,404) (2) (1,839)
2000
Revenue 954 - - 954
Operating Loss (663) (76) (1,320) (2) (2,059)
(1) The Company discontinued the development of the radar system in the fourth
quarter of 2000.
(2) Represents selling, general and administrative costs of $1,340,000 and
$1,251,000, respectively, and depreciation expense of $64,000 and $69,000,
respectively, for the three months ended March 31, 2001 and 2000.
Revenue information by geographic area (in thousands):
Quarters Ended
March 31,
--------------------------
2001 2000
------ ------
United States $ 690 $ 954
Asia 1,645 -
------ -----
Total Revenues $2,335 $ 954
====== =====
For the three months ended March 31, 2001, one domestic customer and one
foreign customer represented 29% and 70%, respectively, of the Company's sales.
For the three months ended March 31, 2000, one domestic customer represented
100% of the Company's sales.
Note 12 - Accrued Liabilities
Details of Accrued liabilities (in thousands):
March 31, December 31,
2001 2000
----------- -------------
Accrued salaries $ 810 $ 710
Accrued vacation 170 209
Other accrued liabilities 580 527
------ ------
Total Accrued Liabilities $1,560 $1,446
====== ======
(10)
Note 13 - Class A Warrants
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 Common Stock; previously,
five Class A Warrants were required to purchase one share of Common Stock. The
total number of publicly traded Class A Warrants outstanding was adjusted to
approximately 1,468,778, down from approximately 7,343,890, prior to the
reduction. The Company's Class A Warrants trade under the symbol ARGNW.
The issuance of 2.5 million shares of Common Stock in June 2000 triggered
certain anti-dilution provisions in the Class A Warrants which required the
Company to issue additional warrants to purchase 524,486 shares of Common Stock.
As a result, the number of Class A Warrants outstanding increased to 1,993,264.
As a result of the warrant issued to Ford in March 2000, and the issuance of the
2.5 million shares of Common Stock in June 2000, the total exercise price for
each publicly traded warrant has been lowered from $25.00 to $17.795.
(11)
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
We design, market and manufacture proprietary high technology electronic
components and systems for sale to car and truck original equipment
manufacturers ("OEMs"). In 2000, we completed our first full year of producing
and selling our Climate Control Seat(TM) ("CCS(TM)"), which provides year-round
comfort by providing both heating and cooling to seat occupants.
We were incorporated in California in 1991 and originally focused our
efforts on developing electric vehicles and high technology automotive systems.
Because the electric vehicle market did not develop as rapidly as anticipated,
we are now focusing our efforts on the CCS system, our only commercial product.
We are now operating as a supplier to the automotive 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 OEMs 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. In addition, we believe that in light of the
current economic conditions, lower industry volumes and other factors, that new
vehicle production volumes for OEMs in 2001 will be lower than levels in 2000.
Reduced demand for new vehicles could have an impact on our financial results
for fiscal year 2001.
Results of Operations
First Quarter 2001 Compared with First Quarter 2000
- ---------------------------------------------------
Revenues. Revenues for the three months ended March 31, 2001 (the "First
Quarter") were $2,335,000 as compared with revenues of $954,000 for the three
months ended March 31, 2000 (the "First Quarter 2000"). This increase of
$1,381,000, or 144%, is due to the increase in customer platforms in the First
Quarter 2001. We had two primary customers during the First Quarter 2001,
Johnson Controls Incorporated and NHK Spring Company, LTD, and provided CCS for
three platforms, the Lincoln Navigator, Lexus LS 430 and Toyota Celsior as
compared to one customer, Johnson Controls, and one platform, the Lincoln
Navigator, in the First Quarter 2000. The additional customer and platforms
resulted in higher sales volume in 2001 as the number of CCS units shipped
increased to approximately 36,000 or 171%, in the First Quarter 2001 from
approximately 13,000 in the First Quarter 2000. Prices of CCS units were
unchanged in the First Quarter 2001 as compared to the fourth quarter of 2000.
Cost of Sales. Cost of sales increased to $2,035,000 in the First Quarter
2001 from $845,000 in the First Quarter 2000. This increase of $1,190,000, or
140%, is due to the higher sales volume of CCS units in the First Quarter 2001.
The gross margin increased to 12.9% compared to 11.4% for 2000 due to fixed
costs being spread over the higher production volume in 2001. We anticipate
cost of sales to increase in absolute dollars while decreasing as a percentage
of revenue. Cost of sales includes tooling costs and related reimbursements.
Net reimbursements of $55,000 and $7,000 were recorded for the First Quarter of
2001 and the First Quarter of 2000, respectively.
(12)
Research and Development Expenses. Research and development expenses
decreased to $735,000 in First Quarter 2001 from $848,000 in First Quarter 2000.
This $113,000, or 13%, decrease was due primarily to the discontinued investment
in our Ameriguard product offset by increased funding of the next generation CCS
device.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $1,404,000 in First Quarter 2001 compared
to $1,320,000 in the First Quarter 2000. This $84,000, or 6%, increase was due
to the expenses associated with the opening of our European offices and
professional fees. We also recorded $73,000 in amortization for the warrants
granted to Ford Motor Company relating to the Value Participation Agreement in
the First Quarter 2001, compared to zero in the First Quarter 2000. These
higher costs were offset by a decrease in compensation related expense due to a
$415,000 bonus accrued in the First Quarter of 2000, compared to no accrual in
the First Quarter 2001.
We group development and prototype costs and related reimbursements in
research and development. This is consistent with accounting standards applied
in the automotive industry. Costs for tooling, net of related reimbursements,
are included in cost of sales. This classification has been made for all years
presented.
Liquidity and Capital Resources
As of March 31, 2001, we had net working capital of $1,492,000. We also
had cash and cash equivalents of $520,000 at March 31, 2001.
On March 28, 2001 we entered into a manufacturing and supply agreement with
Ferrotec Corporation, a Tokyo-based manufacturer. The agreement grants to
Ferrotec the exclusive right to manufacture CCS units in certain countries, for
ultimate distribution by us to our customers within those countries, with the
understanding that we will enter into good faith negotiations with Ferrotec to
establish a joint venture for the purpose of purchasing, marketing, selling and
distributing the CCS units in those countries. The countries include China,
Japan, Taiwan, Korea, India, Thailand, Vietnam, Malaysia, Indonesia and the
Philippines. The initial term of the agreement begins April 1, 2001 and expires
on April 1, 2011. Ferrotec paid us $2,000,000 for the exclusive manufacturing
rights on April 6, 2001. Concurrently, Ferrotec entered into a subscription
agreement with us, whereby Ferrotec purchased 200,000 unregistered shares of our
common stock at $5 per share and paid us an additional $1,000,000. The
subscription agreement grants Ferrotec demand registration rights beginning one
year from the closing of the subscription agreement and piggy-back registration
rights if we propose to register any securities before then.
Our principal sources of operating capital have been the proceeds of our
various financing transactions and, to a lesser extent, CCS product revenues and
sale of prototypes to customers.
As of March 31, 2001, our cash and cash equivalents decreased by $2,332,000
in the First Quarter 2001 from $2,852,000 at December 31, 2000. Cash used in
operating activities amounted to $2,269,000, which was mainly attributable to
the net loss of $1,823,000. Investing activities used $60,000 to purchase
equipment. Financing activities used $3,000 in capital lease payments. The
cash and cash equivalents at March 31, 2001 do not include the $3,000,000
received from Ferrotec on April 6, 2001.
In May 2001, we announced that CCS has been selected to be included in
four additional automotive platforms, which are expected to be introduced over
the next 18 months and bringing to eight the total number of automotive
platforms where CCS has been selected to be included as either an
(13)
optional or standard feature. For confidentiality reasons, however, we are not
permitted to identify the four additional automotive platforms and the
automotive and seat manufacturers at this time.
Until we are selling units in the automotive market with an appropriate
margin and volume, we expect to incur losses for the foreseeable future. There
can be no assurance that profitability can be achieved in the future. The
volume production we expect for the Lincoln Navigator SUV, Lincoln Blackwood,
Lexus LS 430 and Toyota Celsior as well as the four new platforms will not
generate sufficient revenue to meet our operating needs. Sufficient volume will
not be reached in the near term, as automotive industry development timing tends
to be relatively long. Although we are working with many automobile
manufactures for future introduction of our CCS technology, most of them will
not introduce the product until the 2003 model year (2002 calendar year) and
beyond.
Larger orders for the CCS products will require significant expenses for
tooling and to set up manufacturing and/or assembly processes. We also expect
to require significant capital to fund other near-term production engineering
and manufacturing, as well as research and development and marketing of these
products. We do not intend to pursue any more significant grants or development
contracts to fund operations and therefore are highly dependent on current
working capital sources.
Based on our current operating plan, we believe existing cash and working
capital are not sufficient to meet our anticipated financial requirements. We
believe that current cash balances, together with the funds from the
manufacturing and supply agreement with Ferrotec Corporation, will be sufficient
to meet our operating needs through the end of the second quarter of 2001.
We will need to raise additional cash from financing sources before we can
achieve profitability from our operations. We are currently attempting to
obtain a line of credit secured by receivables, and are considering pursuit of
additional funds through additional debt or equity financing or through
strategic corporate partnerships. We also plan to reduce discretionary spending
to the extent feasible. There can be no assurance that any additional financing
will be available on acceptable terms, if at all. Failure to raise additional
capital would have a material adverse effect on our ability to continue as a
going concern and to achieve our intended business objectives.
Other Information
Certain matters discussed or referenced in this report, including our
intention to develop, manufacture and market the CCS product, our expectation of
increased revenues and continuing losses, our financing requirements, our
capital expenditures and our prospects for the development of platforms with
major automotive manufacturers, 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 our 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 our
products, our ability to develop, market and manufacture such products
successfully, the viability and protection of our patents and other proprietary
rights, and our ability to obtain new sources of financing. Additional risks
associated with us and our business and prospects are described in our Annual
Report on Form 10-K for the year ended December 31, 2000.
(14)
ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Our exposure to market risk for changes in interest rates relate primarily
to our investment portfolio. We place our investments in debt instruments of
the U.S. government and in high-quality corporate issuers. We seek to ensure
the safety and preservation of its invested funds by limiting default risk and
market risk. We have no investments or transactions denominated in foreign
country currencies and therefore are not subject to foreign exchange risk.
There have been no material changes with respect to market risk since the
Form 10-K was filed for our year ended December 31, 2000.
(15)
PART II
OTHER INFORMATION
ITEM 2. Changes in Securities and Use of Proceeds
-----------------------------------------
On March 28, 2001, we entered into a subscription agreement with Ferrotec
Corporation, a Tokyo-based manufacturer, pursuant to which Ferrotec purchased
200,000 unregistered shares of our common stock at $5 per share and paid us
$1,000,000 on April 6, 2001. The subscription agreement grants Ferrotec demand
registration rights beginning one year from the closing of the subscription
agreement and piggy-back registration rights if we propose to register any
securities before then. Concurrently, we entered into a manufacturing and
supply agreement with Ferrotec, which grants to Ferrotec the exclusive right to
manufacture CCS units in certain countries, for ultimate distribution by us to
our customers within those countries, with the understanding that we will enter
into good faith negotiations with Ferrotec to establish a joint venture for the
purpose of purchasing, marketing, selling and distributing the CCS units in
those countries. The countries include China, Japan, Taiwan, Korea, India,
Thailand, Vietnam, Malaysia, Indonesia and the Philippines. The initial term of
the manufacturing agreement begins April 1, 2001 and expires on April 1, 2011.
Ferrotec paid us $2,000,000 for the exclusive manufacturing rights on April 6,
2001. The shares of Common Stock were exempt from registration under Regulation
S of the Securities Act of 1933.
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
10.1 Manufacturing and Supply Agreement with Ferrotec Corporation
dated March 28, 2001 (1)
10.2 Subscription Agreement with Ferrotec Corporation dated March
28, 2001 (1)
10.3 Amended and Restated 1997 Stock Incentive Plan (2)
(1) Filed herewith.
(2) Incorporated by reference from Appendix A to the Company's
Definitive Proxy Statement on Schedule 14A filed with the
Securities and Exchange Commission on May 1, 2001 (file no.
000-21810)
(b) Reports on Form 8-K
On February 20, 2001, the Company filed a Current Report on Form 8-
K (event dated February 20, 2001) to report under item 5 (other
events)
(16)
Signatures
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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, 2001 /s/ Richard A. Weisbart
-----------------------
Richard A. Weisbart
President, Chief Executive Officer
and Chief Financial Officer
/s/ Craig P. Newell
-------------------
Craig P. Newell
Vice President, Finance
(Chief Accounting Officer)
(17)