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
or
(___) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period From ____________ To _______________.
Commission File No. 0-25184
ENOVA SYSTEMS, INC.
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(Exact name of registrant as specified in its charter)
CALIFORNIA 95-3056150
- ---------- ----------
(State or other jurisdiction of (IRS employer identification number)
incorporation or organization)
19850 South Magellan Drive Torrance, CA 90502
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(Address of Principal Executive Offices and Zip Code)
Registrant's telephone number, including area code (310) 527-2800
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 periods 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 (___)
As of May 13, 2001, there were 244,316,000 shares of Common Stock, no par value,
outstanding.
1
INDEX
ENOVA SYSTEMS, INC.
Page No.
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PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)......................................3
Balance Sheets:
March 31, 2001 and December 31, 2000..................................3
Statements of Operations:
Three months ended March 31, 2001 and 2000............................4
Statements of Cash Flows:
Three months ended March 31, 2001 and 2000............................5
Notes to Financial Statements:
for the Three months ended March 31, 2001 and 2000....................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................................9
Item 3. Quantitative and Qualitative Disclosure about Market Risk............13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ...................................................14
Item 2. Changes in Securities and Use of Proceeds............................14
Item 3. Defaults upon Senior Securities......................................14
Item 4. Submission of Matters to a Vote of Security Holders..................14
Item 5. Other Information....................................................14
Item 6. Exhibits and Reports on Form 8-K.....................................14
SIGNATURE.....................................................................15
EXHIBIT INDEX ................................................................16
2
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ENOVA SYSTEMS, INC.
BALANCE SHEETS
(In thousands, except for share and per share data)
- ------------------------------------------------------------------------------------------------------------------------------------
As of As of
March 31, December 31,
2001 2000
-------- --------
ASSETS (Unaudited)
CURRENT ASSETS:
Cash $ 521 $ 1,310
Accounts receivable 1,437 1,004
Inventory 683 406
Stockholder receivable 25 25
Prepaids and other current assets 126 68
-------- --------
Total Current Assets 2,792 2,813
PROPERTY, PLANT AND EQUIPMENT - NET 187 214
OTHER ASSETS 68 67
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TOTAL ASSETS $ 3,047 $ 3,094
======== ========
LIABILITIES AND SHAREHOLDERS' (DEFICIT)
CURRENT LIABILITES:
Accounts payable $ 266 $ 106
Accrued payroll and related expense 338 301
Other accrued expenses 111 119
Bonds and notes payable 120 129
-------- --------
Total Current Liabilities 835 655
ACCRUED INTEREST PAYABLE 543 514
LONG TERM PAYABLES 210 210
CAPITAL LEASE OBLIGATIONS 37 31
LONG TERM DEBT 3,332 3,332
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TOTAL LIABILITIES $ 4,957 $ 4,742
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SHAREHOLDERS' (DEFICIT):
Series A preferred stock - No par value; 30,000,000 shares authorized;
2,844,000 shares issued and outstanding at 3/31/01 and 12/31/00 1,867 1,867
Series B preferred stock - No par value; 5,000,000 shares authorized;
1,217,000 shares issued and outstanding at 3/31/01 and 12/31/00 2,434 2,434
Stock notes receivable (1,149) (1,149)
Common Stock - No par value; 500,000,000 shares authorized; 244,316,000
and 244,249,000 shares issued and outstanding at 3/31/01 and 12/31/00 75,685 75,680
Common stock subscribed 15 13
Additional paid-in capital 6,372 6,372
Accumulated deficit (87,134) (86,865)
-------- --------
Total Shareholders' (Deficit) (1,910) (1,648)
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT) $ 3,047 $ 3,094
======== ========
Note: The balance sheet at December 31, 2000 has been derived from the audited
financial statements at that date. See notes to financial statements.
3
ENOVA SYSTEMS, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except for per share and share data)
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Three Months Ended
March 31
------------------------------
2001 2000
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NET SALES $ 1,115 $ 630
COST OF SALES 658 457
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GROSS MARGIN 457 173
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OTHER COSTS AND EXPENSES:
Research & development 267 107
Selling, general & administrative 448 411
Interest and financing fees 28 68
Other (income)/expense 0 (9)
Interest income (16) (23)
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Total other costs and expenses 727 554
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LOSS FROM CONTINUING OPERATIONS $ (270) $ (381)
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GAIN ON DEBT RESTRUCTURING 0 127
NET LOSS $ (270) $ (254)
============= =============
NET LOSS PER COMMON SHARE: $ (0.01) $ (0.01)
============= =============
WEIGHTED AVERAGE SHARES
OUTSTANDING 244,271,333 232,627,663
4
ENOVA SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
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Three Months Ended March 31
----------------------------
2001 2000
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OPERATIONS
Net loss $ (269) $ (252)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation and Amortization 46 35
Change in operating assets and liabilities:
Accounts Receivable (433) (112)
Inventory (277) (20)
Stockholder receivable 0 38
Prepaids and other assets (58) 7
Accounts payable and accrued expenses 218 (337)
------- -------
Net cash used by operating activities (773) (641)
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INVESTING:
Purchases of property, plant and equipment, net of disposals (19) (12)
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Net cash used by investing activities (19) (12)
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FINANCING:
Issuance of notes payable (3) 0
Re-purchase of common stock 0 (100)
Proceeds from issuance of common stock 6 1,244
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Net cash provided by financing activities 3 1,155
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NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (789) 502
CASH AND EQUIVALENTS:
Beginning of period 1,310 1,465
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End of period $ 521 $ 1,967
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5
ENOVA SYSTEMS, INC.
STATEMENTS OF CASH FLOWS (Continued)
SUPPLEMENTAL CASH FLOW INFORMATION
(UNAUDITED)
(In thousands)
- --------------------------------------------------------------------------------
Three Months
Ended March 31
-----------------
2001 2000
---- ----
Cash paid for interest $-- $23
NONCASH INVESTING AND FINANCING ACTIVITIES:
Conversion of Series A preferred stock to common stock $-- $50
Conversion of debt to common stock $-- $ 6
Conversion of accrued interest to equity $-- $39
Issuance of common stock for services $ 1 $17
6
ENOVA SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
For the Three Months Ended March 31, 2001 and 2000
NOTE 1 - Basis of Presentation
The accompanying unaudited financial statements have been prepared from the
records of the Company without audit and have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not contain all the information and notes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation of the financial position
at March 31, 2001 and the interim results of operations and cash flows for the
three months ended March 31, 2001 have been included. The balance sheet at
December 31, 2000, presented herein, has been prepared from the audited
financial statements of the Company for the fiscal year then ended.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the Company to make estimates and assumptions
affecting the reported amounts of assets, liabilities, revenues and expenses,
and the disclosure of contingent assets and liabilities. The December 31, 2000
and March 31, 2001 inventories are reported at market value. Inventories have
been valued on the basis that they would be used, converted and sold in the
normal course of business. Certain accrued expenses are based upon an analysis
of future costs expected to be incurred in meeting contracted obligations. The
amounts estimated for the above, in addition to other estimates not specifically
addressed, could differ from actual results; and the difference could have a
significant impact on the financial statements.
Accounting policies followed by the Company are described in Note 1 to the
audited financial statements for the fiscal year ended December 31, 2000.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted for purposes of the interim financial statements.
The financial statements should be read in conjunction with the audited
financial statements, including the notes thereto, for the year ended December
31, 2000, which are included in the Company's Form 10-K Annual Report Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934 as filed with the
Securities and Exchange Commission.
Loss per common share is computed using the weighted average number of common
shares outstanding. Since a loss from operations exists, a diluted earnings per
share number is not presented because the inclusion of common stock equivalents,
consisting of Series A and B preferred stock, unexercised stock options and
warrants, would be anti-dilutive.
The results of operations for the three months ended March 31, 2001 presented
herein are not necessarily indicative of the results to be expected for the full
year.
7
NOTE 2 - Inventories
Inventories are comprised of the following (in thousands):
March 31, December 31,
2001 2000
---- ----
(unaudited)
Raw materials 683 406
$683 $406
==== ====
NOTE 3 - Notes and Bonds Payable, Long-Term Debt and Other Financing
Notes and bonds payable and long-term debt are comprised of the following (in
thousands):
March 31, December 31,
2001 2000
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Secured subordinated promissory note - CMAC as
exclusive agent for Non-Qualified Creditors;
interest at 3% for the first 5 years, 6% for years
6 and 7, and then at prime plus 3% through date of
maturity; interest payments are made upon payment
of principal, with principal and interest due no
later than April 2016; with an interest in a
sinking fund escrow with a zero balance as of
December 31, 2000 and March 31, 2001. The sinking
fund escrow requires the Company to fund the
account with 10% of future equity financing,
including convertible debt converted to equity. 3,332 3,332
Other 120 120
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3,452 3,452
120 120
------- -------
Less current maturities $ 3,332 $ 3,332
======= =======
8
ENOVA SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The following information should be read in conjunction with the consolidated
interim financial statements and the notes thereto in Part I, Item I of this
Quarterly Report and with Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in the Company's Annual report on
Form 10-K for the year ended December 31, 2000. The matters addressed in this
Management's Discussion and Analysis of Financial Condition and Results of
Operations, with the exception of the historical information presented contains
certain forward-looking statements involving risks and uncertainties. Our actual
results could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including the risks discussed herein
and in the report under the heading "Certain Factors That May Affect Future
Results" following this Management's Discussion and Analysis section, and
elsewhere in this report.
GENERAL
In July 2000, the Company changed its name to Enova Systems, Inc. The Company,
previously U.S. Electricar, Inc., a California Corporation (the "Company"), was
incorporated on July 30, 1976.
The Company's fiscal year ends December 31. All year references refer to fiscal
years.
Enova Systems believes it is a leader in the development and production of
commercial digital power management systems. The Company is now building, under
contract with global vehicle and technology companies, efficient, robust, cost
effective digital power processing and energy management enabling technologies
for electric, hybrid electric and fuel cell powered vehicles. These power
management technologies are now being applied to commercialization of fuel cell
power generation for stationary non-automotive applications.
The Company's business activities continue to be focused on the development of
electric and hybrid electric drive systems and related components, fuel cell
power management systems for both mobile and stationary power applications,
vehicle systems integration and the performance of various engineering
contracts.
In January 2001, the Company engaged the services of Merrill Lynch to assist
Enova in bringing in new investment capital as well as achieving full NASDAQ
listing for its stock. The Company currently is listed on the NASDAQ OTC
Bulletin Boards under the symbol ENVA. Merrill Lynch advisors have been actively
meeting with the Company's management and Board of Directors to implement a
strategy to achieve these goals and increase the Company's market value.
The Company is working with Ecostar Electric Drive Systems, a joint venture of
Ford, Daimler Chrysler and Ballard Power to develop and manufacture low voltage
electric drive system components for use in Ford's Global Th!nk City. Ford has
announced that an all electric vehicle is scheduled to be introduced in early
2002 for markets in North America. Enova is designing and manufacturing the
electronics for the drive system as well as certain auxiliary components. The
prototype systems are currently undergoing pre-production testing and validation
in the Ford Th!nk city car. Enova continues to develop its relationship with
Hyundai, Ecostar and other OEMs and Tier-One suppliers for sales of its
automotive products. The Company offers its modular drive systems to Original
Equipment Manufacturers or OEMs and other customers. These drive systems have
been installed in various vehicles operating in North America, Europe and Asia.
9
Enova is effecting a marketing strategy to penetrate global alternative markets
for its drive system and its electric power management components. Enova has
entered into a development, manufacturing and marketing agreement with Wrights
Environment, a division of Wrights Bus, one of the largest low-floor bus
manufacturers in the United Kingdom, to develop, manufacture and integrate pure
electric and hybrid electric drive systems into Wrights' low floor, mid-size
buses for sale in the United Kingdom and the European Continent. Enova has
delivered both a hybrid electric (utilizing the Capstone Microturbine as its
power source) and a pure electric PantherTM 120kW drive system to Wrights for
integration into their Crusader II bus.
Enova has also delivered two of its 120 kW hybrid drive systems to Eco Power
Technology (EPT) in Italy. The Company has also completed its 40kW Fast Charger
system and will deliver it to EPT upon completion of final testing. EPT has
prospectively ordered an additional 15 120kW hybrid systems and 3 additional
fast charger units. EPT is an integrator of medium size transit buses for the
Italian shuttle bus market.
The Company is pursuing, with fuel cell manufacturers, the development of power
management systems for stationary power fuel cell applications. It is the
Company's belief that utilizing its power management systems for stationary
applications for fuel cells will open new markets for Enova. The Company has
begun initial discussions with various fuel cell manufacturers for Enova to
provide power processing and fuel cell energy management systems.
Enova's alliance with Capstone Turbine jointly develop and market hybrid
electric drive systems using Capstone's microturbine continues to create new
opportunities. The Company is teamed with Capstone to use their microturbines in
Enova's drive systems for Wrights Bus and EPT as well as other potential
customers being sought by both Enova and Capstone.
The Company's engineering contracts with the U. S. Government's Defense Advanced
Research Project Agency, or DARPA, and the Department of Transportation, or DOT,
continue to progress on schedule. These programs include the development of an
airport electric passenger tram system for the Honolulu Airport and an EV
commercialization program for the State of Hawaii. The Company's contract with
the U.S. Department of Transportation to design and test this tram system
utilizes the Panther 120kW drive system. The tram is being developed in
conjunction with APS, an electric bus manufacturer in Oxnard, California. This
tram, capable of carrying 100 passengers, is anticipated to be delivered in the
second quarter of 2001 to the Honolulu, Hawaii Airport for test and evaluation.
The Company intends to market this tram system to international markets for
application to other airports, national and recreational parks and other high
capacity transit applications. The commercialization program has been enhanced
to include the testing of 15 Hyundai Santa Fe electric vehicles in Honolulu
Hawaii prior to their entry into the U.S. markets. An agreement has been signed
between the State of Hawaii, Hyundai Motor Company and Enova to implement the
Santa Fe evaluation program which will include fast charge capabilities.
Additionally, the Company is integrating, in conjunction with DOT and the State
of Hawaii, its drive systems into several vehicles. Enova is integrating a
PantherTM 120kW drive system into an Enoa trolley for evaluation in the Hawaii
tourist market. Enoa is a major in the Hawaii tourist industry providing scenic
transportation services to the islands. Enova will also be upgrading eight
Chevrolet S-10 trucks owned by the City of Honolulu to its PantherTM 60kW drive
system including its Battery Care Unit (BCU-II) to incorporate fast-charge
capability for Hawaii. Finally, the Company is converting an Eldorado 30-foot
bus utilizing its PantherTM 120kW drive system for the Hickam Air Force base in
Honolulu, Hawaii. All of these programs are funded in conjunction with the
Hawaii Electric Vehicle Development Project, the U.S. Department of
Transportation and State of Hawaii.
The development of Enova's 240kW drive system continues to progress. Enova is
working in conjunction with other leading edge motor and gear manufacturers to
develop a truly robust, efficient and powerful drive system for heavy-duty
applications including transit buses, heavy-duty trucks and other applications.
The Company is continually creating new alliances in these markets for
introduction in early 2002.
10
The Company continues to build on its relationship with Hyundai Motor Company of
Korea, or HMC, the world's seventh largest automobile manufacturer, with
engineering contracts to design, develop and test electric and hybrid electric
drive systems and related products. The Company recently completed it Fuel Cell
EV program with HMC and is developing other programs with HMC to develop hybrid
and fuel cell powered drive systems.
The Company's stationary power development of its power management systems is
also moving forward. In the stationary power management field, Enova is
developing applications for its products in the telecommunications and
distributed generation markets. Enova has presented its concepts to various fuel
cell manufacturers and other key players in the energy field and believes new
products and marketing opportunities will come from these alliances in the near
future.
LIQUIDITY AND CAPITAL RESOURCES
The Company has experienced cash flow shortages due to operating losses
primarily attributable to research, development, marketing and other costs
associated with the Company's strategic plan to become an international
manufacturer and supplier of electric propulsion and power management systems
and components. Cash flows from operations have not been sufficient to meet the
Company's obligations as they came due. The Company has therefore had to raise
funds through several financial transactions. At least until the Company reaches
breakeven volume in sales and develops and/or acquires the capability to
manufacture and sell its products profitably, it will need to continue to rely
on cash from external financing. The Company anticipates that it will require
additional outside financing to meet research and development expenditures for
the foreseeable future.
During the three months ended March 31, 2001, the Company spent $773,000 in cash
on operating activities to fund the net loss of $270,000 resulting from factors
explained in the following section of this discussion and analysis. Accounts
receivable increased by $443,000 due to increased activity pertaining to the
Ecostar program, the Company having completed the final phase of the prototype
development and has begun to manufacture, with Hyundai Autonet, the confirmation
prototype hardware. Inventory increased by $277,000 from December 31, 2000 for
the Ecostar program as well as the Hawaii airport tram program and other
programs.
Current liabilities increased by a net of $218,000 due to purchases made in
connection with various on-going development programs. Interest accruing on
notes payable decreased by $40,000 for the three months ended March 31, 2001
compared with the similar period in 2000 due the elimination of the Carl Perry
note, previously the Itochu note.
The operations of the Company during the first quarter of fiscal 2001 were
financed primarily by the funds received on engineering contracts and sales of
drive system components as well as cash reserves provided by prior equity
financings. It is management's intention to continue its debt restructuring and
support current operations through sales of products and technology consulting,
as well as seek additional financing through private placements and other means
to increase research and development. As of May 13 2001, the Company has been
advised that Jagen Pty., Ltd. intends to exercise its warrants for 41,666,667
shares of common stock by the end of May 2001 for a total infusion of $2.5
million.
The future unavailability or inadequacy of financing to meet future needs could
force the Company to delay, modify, suspend or cease some or all aspects of its
planned operations.
11
RESULTS OF OPERATIONS
Net sales in the three months ending March 31, 2001 increased by $485,000 from
the corresponding quarter in 2000. The increase as compared with the prior year
was due to the Company's expanded customer base and its increasing penetration
into domestic and international markets for its electric and hybrid-electric
power management systems and technology. Development contracts with Hyundai
Motor Company, Ecostar Electric Drive Systems (for the Ford Th!nk city Car) and
the U.S. Government account for a majority of the Company's sales in the first
quarter of 2001.
Cost of sales in the quarter ended March 31, 2001 increased to $658,000 compared
to cost of sales of $457,000 for the same three month period in 2000. The
increase corresponds to increased sales over the similar period in 2000. The
gross profit margin increased due to the nature of the sales in the first
quarter which were primarily engineering development of the Ecostar system.
Research and development expense increased in the first quarter of 2001 to
$267,000 as compared with $107,000 in the first quarter of 2000. Enova
continually seeks to increase its technical staff for development of the new
products and enhancement of existing products including the 240kW drive system,
the Fuel Cell Care Unit and other mobile and stationary power management
applications.
Selling, general and administrative expense increased $37,000 for the three
months ended March 31, 2001 from the previous year's comparable period. The
Company continues to expand its sales and marketing efforts to attract new
customers and partners for the sale and distribution of its products. Enova has
begun to increase its public image by attending various trade shows, investment
seminars and government technical symposiums. These events are sponsored by
major industry groups (Electric Vehicle Association of America), investment
banks (Merrill Lynch, Credit Suisse) and governmental agencies (U.S. Department
of Transportation and U.S. Department of Energy).
Interest and financing fees decreased to $28,000 in the first quarter of 2001
from $68,000 in the first quarter of 2000. Interest costs have decreased due to
the reduction of outstanding debt.
The Company incurred a net loss from continuing operations of $270,000 in the
first quarter of 2001 compared to a net loss of $381,000 in the first quarter of
2000.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
This Form 10-Q contains forward looking statements concerning our existing and
future products, markets, expenses, revenues, liquidity, performance and cash
needs as well as our plans and strategies. These forward-looking statements
involve risks and uncertainties and are based on current management's
expectations and we are not obligated to update this information. Many factors
could cause actual results and events to differ significantly from the results
anticipated by us and described in these forward looking statements including,
but not limited to, the following risk factors.
Net Operating Losses. The Company has experienced recurring losses from
operations and had an accumulated deficit of $87,134,000 at March 31, 2001.
There is no assurance, however, that any net operating losses will be available
to the Company in the future as an offset against future profits for income tax
purposes.
Continued Losses. For the three months ended March 31, 2001 and 2000, the
Company had net losses of $270,000 and $254,000 respectively on sales of
$1,115,000 and $630,000, respectively.
12
Nature of Industry. The electric vehicle ("EV") and Hybrid EV ("HEV") industry
continues to be subject to rapid technological change. There are many large and
small companies, both domestic and foreign, now in, poised to enter, or entering
this industry. Most of the major domestic and foreign automobile manufacturers
(1) have produced electric and hybrid vehicles, and/or (2) have developed
improved electric storage, propulsion and control systems, and/or (3) are now
entering or have entered into production. Various non-automotive companies are
also developing improved electric storage, propulsion and control systems.
Growth of the present limited demand for electric vehicles depends upon (a)
future regulation and legislation requiring more use of non-polluting or
low-emission vehicles, (b) the environmental consciousness of customers and (c)
the ability of electric and hybrid-electric vehicles to successfully compete
with vehicles powered with internal combustion engines on price and performance.
Changed Legislative Climate. Because vehicles powered by internal combustion
engines cause pollution, there has been significant public pressure in Europe
and Asia, and enacted or pending legislation in the United States at the federal
level and in certain states, to promote or mandate the use of vehicles with no
tailpipe emissions ("zero emission vehicles") or reduced tailpipe emissions
("low emission vehicles"). Legislation requiring or promoting zero or low
emission vehicles is necessary to create a significant market for electric
vehicles. The California Air Resources Board (CARB) has recently confirmed its
mandatory limits for zero emission and low emission vehicles. There can be no
assurance, however, that further legislation will be enacted or that current
legislation or state mandates will not be repealed or amended, or that a
different form of zero emission or low emission vehicle will not be invented,
developed and produced, and achieve greater market acceptance than electric
vehicles. Extensions, modifications or reductions of current federal and state
legislation, mandates and potential tax incentives could adversely affect the
Company's business prospects if implemented.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In June 2000, a lawsuit, Fontal International, Ltd. versus Enova Systems, Inc.,
a California Corporation, was filed in the United States District Court, Central
District of California. The suit alleges breach of contract with respect to
certain warrants to purchase 10,833,332 shares of Enova System's common
stock.(1) The suit seeks to have Enova Systems issue 10,000,000 shares of common
stock for release of said warrants or to have Enova Systems declare that the
exercise period for said warrants is extended for five years from the date of
delivery. The suit also seeks unspecified monetary damages. The Company
maintains that these warrants have expired and therefore the plaintiff has no
claim to them.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities:
None.
Item 4. Submission of Matters to a Vote of Securities Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits:
None
(b) Reports on Form 8-K
The Company filed no current reports on Form 8-K during the quarter
ended March 31, 2001.
(1) In May 1996, the Company issued warrants to Fontal. The warrants were
exercisable at $0.30 per share in cash, or could be exercised without the
payment of cash if the average market value of the Company's common stock
for the 20 consecutive trading days preceding the exercise date was equal
to or greater than $0.60 per share, and the average trading volume was in
excess of 100,000 share per day for the same preceding 20 trading day
period. The warrants expired, by their original terms, on May 1, 1997. The
holders of these warrants claim the Company had agreed to extend the term
of these warrants for as much as an additional five years. The Company
believes these claims are without merit and that the warrants have expired.
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.
Date: May 14, 2001
ENOVA SYSTEMS, INC.
(Registrant)
/s/ Carl D. Perry
- --------------------------------------------------------------------------------
By: Carl D. Perry, Chief Executive Officer and Acting Chief Financial Officer
(Duly Authorized Officer, Principal Financial Officer and Principal
Accounting Officer)
15
EXHIBIT INDEX
Exhibit No. Description Page No.
- --------------------------------------------------------------------------------
None
16