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 January 31, 1997
----------------
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
U.S. ELECTRICAR, INC.
---------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-3056150
- ------------------------------- ------------------------------------
(State of other jurisdiction of (IRS employer identification number)
incorporation or organization)
5 Thomas Mellon Circle, Suite 305
San Francisco, CA 94134
----------------------------------
(Address of Principal Executive Offices and Zip Code)
Indicate by check mark whether he 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 March 11, 1997, there were 126,231,929 shares of Common Stock, no par
value, outstanding.
INDEX
U.S. ELECTRICAR, INC.
Page No.
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PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) ............................................ 3
Consolidated Balance Sheets:
January 31, 1997 and July 31, 1996 ......................................... 3
Consolidated Statements of Operations:
Three and Six months ended January 31, 1997 and 1996 ........................ 4
Consolidated Statements of Cash Flows:
Six months ended January 31, 1997 and 1996 .................................. 5
Notes to Consolidated Financial Statements:
for the Three and Six months ended January 31, 1997 and 1996 ................ 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ......................................... 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ........................................................... 14
Item 2. Changes in Securities ....................................................... 14
Item 3. Defaults upon Senior Securities ............................................. 14
Item 4. Submission of Matters to a Vote of Security Holders ......................... 14
Item 5. Other Information ........................................................... 15
Item 6. Exhibits and Reports on Form 8-K ............................................ 16
SIGNATURE ..................................................................................... 17
EXHIBIT INDEX.................................................................................. 18
2
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
U.S. ELECTRICAR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share data)
- -----------------------------------------------------------------------------------------------------------------
As of As of
January 31, 1997 July 31, 1996
---------------- -------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 10 $ 13
Accounts receivable, net of allowances of $434 and $596 679 856
Inventory 1,969 2,387
Prepaids and other current assets 178 184
-------- --------
Total Current Assets 2,836 3,440
PROPERTY, PLANT AND EQUIPMENT - NET 1,274 835
OTHER ASSETS 47 88
-------- --------
TOTAL ASSETS $ 4,157 $ 4,363
======== ========
LIABILITIES AND SHAREHOLDERS' (DEFICIT)
CURRENT LIABILITES:
Accounts payable $ 2,896 $ 2,868
Accrued payroll and related expense 594 441
Accrued warranty expense 974 1,156
Reserve for lease obligations 70 112
Accrued Interest 649 208
Other accrued expenses 1,000 721
Customer deposits and deferred revenue 451 323
Capital leases payable 369 0
Bonds and notes payable 9,257 7,283
-------- --------
Total Current Liabilities 16,260 13,112
LONG TERM DEBT 3,987 3,987
SHAREHOLDERS' (DEFICIT):
Series A preferred stock - No par value; 30,000,000 shares authorized;
3,821,000 and 4,010,000 shares issued and outstanding at 1/31/97
and 7/31/96 2,800 2,983
Series B preferred stock - No par value; 5,000,000 shares authorized;
1,587,000 shares issued and outstanding 3,175 3,175
Stock notes receivable (1,098) (1,061)
Common Stock - No par value; 300,000,000 shares authorized; 126,209,000
and 120,220,000 shares issued and outstanding at 1/31/97 and 7/31/96 60,699 59,157
Accumulated deficit (81,666) (76,990)
-------- --------
Total Shareholders' (Deficit) (16,090) (12,736)
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT) $ 4,157 $ 4,363
======== ========
<FN>
Note: The balance sheet at July 31, 1996 has been derived from the audited financial statements at that date.
See notes to consolidated financial statements.
</FN>
3
U.S. ELECTRICAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except for per share and share data)
- -------------------------------------------------------------------------------------------------------------------------------
Three Months Ended January 31 Six Months Ended January 31,
--------------------------------- ----------------------------------
1997 1996 1997 1996
------------- ------------- ------------- -------------
NET SALES $ 371 $ 917 $ 898 $ 3,011
COST OF SALES 649 1,168 1,412 3,489
------------- ------------- ------------- -------------
GROSS MARGIN (278) (251) (514) (478)
------------- ------------- ------------- -------------
OTHER COSTS AND EXPENSES:
Research & development 467 380 633 716
Selling, general & administrative 887 1,446 1,487 2,683
Interest and financing fees 373 486 412 913
Acquisition of a research company 1,630
------------- ------------- ------------- -------------
Total other costs and expenses 1,727 2,312 4,162 4,312
------------- ------------- ------------- -------------
LOSS BEFORE GAIN ON DEBT
RESTRUCTURING (2,005) (2,563) (4,676) (4,790)
GAIN ON DEBT RESTRUCTURING 107 390
------------- ------------- ------------- -------------
NET LOSS $ (2,005) $ (2,456) $ (4,676) $ (4,400)
============= ============= ============= =============
PER COMMON SHARE:
Loss before gain on debt restructuring $ (0.016) $ (0.044) $ (0.038) $ (0.084)
Gain on debt restructuring 0.002 0.007
============= ============= ============= =============
Net loss per common share $ (0.016) $ (0.042) $ (0.038) $ (0.077)
============= ============= ============= =============
WEIGHTED AVERAGE SHARES
OUTSTANDING 126,196,062 58,220,984 123,725,462 56,873,171
4
U.S. ELECTRICAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
- ---------------------------------------------------------------------------------------------------------------
Six Months Ended January 31
-----------------------------
1997 1996
------- -------
OPERATIONS
Net loss $(4,676) $(4,400)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation and Amortization 275 694
Change in allowance for doubtful accounts 0 (21)
Provision to reduce inventory values (31) (1,724)
Debt restructuring 0 0
Purchase of a research company 1,630 0
Stock option compensation 0 0
Interest income on stock notes receivable (37) (35)
Accretion on royalties payable 0 27
Change in operating assets and liabilities:
Accounts Receivable 188 (274)
Inventory 478 2,872
Prepaids and other assets 100 (110)
Accounts payable and accrued expenses 453 542
Customer deposits and deferred revenue (7) (463)
------- -------
Net cash used by operating activities (1,627) (2,892)
------- -------
INVESTING:
Repayments on advances to Systronix Corporation 209
Purchases of property, plant and equipment, net of disposals (95) 86
------- -------
Net cash provided by investing activities 114 86
------- -------
FINANCING:
Payments on notes payable (672) (58)
Borrowings on notes payable 2,182 2,288
Proceeds from issuance of common stock 701
------- -------
Net cash provided by financing activities 1,510 2,931
------- -------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (3) 125
CASH AND EQUIVALENTS:
Beginning of period 13 319
------- -------
End of period $ 10 $ 444
======= =======
5
U.S. ELECTRICAR, INC, AND SUBSIDIARIES
CONSOLIDATED STSTEMENTS OF CASH FLOWS (Continued)
(UNAUDITED)
(In thousands)
- ---------------------------------------------------------------------------------------------------------------------------
Six Months Ended January 31,
----------------------------
1997 1996
-------- -------
NONCASH INVESTING AND FINANCING ACTIVITIES:
Conversion of Series A preferred stock to common stock $ 140 1,134
Conversion of Series S bonds to common stock 210
Conversion of convertible notes to common stock 600
Assumption of notes payable in connection with acquisition 800
Note issued in connection with acquisition 830
Note assumed by buyer in connection with divestiture (1,013)
Conversion of accrued interest to notes payable 147
Acquisition of capital assets through capital leases 361
Decrease in accounts receivable from divestiture of IEV 365
Decrease in inventory from divestiture of IEV 470
Decrease in accounts payable and accrued expenses from
divestiture of IEV (172)
Increase in inventory from acquisition of Systronix Corporation (499)
Increase in prepaids from acquisition of Systronix (94)
Increase in accounts payable and accrued expenses from
acquisition of Systronix (361)
Increase in customer deposits from acquisition of Systronix 135
6
U. S. ELECTRICAR, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
For the Three and Six Months Ended January 31, 1997 and 1996
NOTE 1 - Basis of Presentation
The accompanying unaudited financial statements have been prepared from the
records of the Company without audit, and in the opinion of management, include
all adjustments (consisting of only normal recurring accruals) necessary to
present fairly the financial position at January 31, 1997 and the interim
results of operations and cash flows for the three and six month periods ended
January 31, 1997 and 1996. The balance sheet at July 31, 1996, 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 July 31, 1996 and
January 31, 1997 inventories are reported at market value. The inventory
valuation adjustments are estimates based on sales of inventory subsequent to
July 31, 1996, and the projected impact of certain economic, marketing and
business factors. Warranty reserves and certain accrual 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 July 31, 1996. 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 July 31, 1996, 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.
The results of operations for the three and six month periods presented herein
are not necessarily indicative of the results to be expected for the full year.
NOTE 2 - Going Concern
The Company has experienced recurring losses from operations and use of cash
from operations and had an accumulated deficit of $76,990,000 at July 31, 1996
and $81,666,000 at January 31, 1997. A substantial portion of the losses are
attributable to research, development and other start-up costs associated with
the Company's focus on the development and manufacture of electric vehicles,
including electric powered buses, the conversion of gas powered cars and light
trucks to electric power and off-road electric powered industrial vehicles.
During the three years ended July 31, 1996, the Company obtained approximately
$45 million (net of debt repayments) in cash from financial activities through
private placements of common stock and Series A preferred stock, the exercise of
options and warrants, and the issuance of convertible subordinated notes payable
and secured convertible bonds and notes. During the six months ended January 31,
1997, the Company raised an additional $1,510,000, net of repayments, through
the issuance of secured convertible debt.
7
It is management's intention to complete its debt restructuring and to seek
additional financing through private placements as well as other means.
Subsequent to January 31, 1997, in February, 1997, the Company reached an
agreement with Hyundai Motor Company ("HMC") and Hyundai Electronics Industries
Co., Ltd. ("HEI") whereby HMC and HEI shall collectively invest $3.6 million in
the Company and secure a technology license for an additional payment of $2.0
million. The Company expects the transactions to close in March 1997 with $5.45
million to have been received by the Company by the closing and the balance to
be received over 6 years.
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. Cash flows from operations for the
foreseeable future may not be sufficient to enable the Company to meet its
obligations. Market conditions and the Company's financial position may inhibit
its ability to achieve profitable operations.
These factors as well as the future availability 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, and/or seek protection under
applicable state and federal bankruptcy and insolvency laws.
NOTE 3 - Inventories
Inventories are comprised of the following (in thousands):
January 31, 1997 July 31, 1996
---------------- -------------
(unaudited)
Finished Goods $755 $1,000
Work-in-process 501 710
Raw materials 1,022 1,450
Valuation adjustment (309) (773)
------- -------
$1,969 $2,387
======= =======
8
U.S. ELECTRICAR, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 4 - 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):
January 31, 1997 July 31, 1996
--------------- -------------
Series S secured convertible bonds, interest at 10%;
principal and interest due March 1997, secured by
the personal property of the parent company. $3,000 $3,000
Convertible secured notes under a Supplemental Loan
Agreement with ITOCHU Corporation; interest at 10%,
principal and interest due April 1997, secured by
the personal property of the parent company. 3,000 3,000
Convertible secured note (acquisition of Nordskog);
due January 1997, with interest at 9% payable
quarterly; secured by certain machinery and
equipment of the subsidiary; in September 1996, the
assets associated with the previous acquisition of
Nordskog were sold in exchange for the assumption of
this note - 1,013
Secured promissory note - Credit Managers
Association of California ("CMAC") as exclusive
agent for Non-Qualified Creditors; interest at 3%,
with principal and interest due April 1999; secured
with an interest in a sinking fund escrow consisting
of 10% of any financing received subsequent to April
1996; the Board of Directors may waive the sinking
fund set aside on a case-by-case basis 95 95
Secured subordinated promissory note - CMAC as
exclusive agent for Qualified Creditors; interest
at 3%, with principal and interest due April 1999;
secured with an interest in a sinking fund escrow
as noted above 560 560
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; secured with an interest in a
sinking fund escrow as noted above; payments on this
note are subordinated to payment in full on all
principal and accrued interest owed on the above
3-year non-qualified and qualified notes 3,332 3,332
Promissory note - accrued interest on Nordskog
convertible secured note converted to a new note;
due upon receipt of additional financing by the
Company, with interest at 9%. 147 -
9
January 31, July 31,
1997 1996
------- -------
NOTE 4 - Long-Term Debt (Continued)
Promissory note payable to principals of Systronix
Corporation in connection with the acquisition of
Systronix; interest at 10%, due April 1, 1997 480 --
Convertible secured promissory note payable to
Itochu Corporation; interest at 10%, due December
1997; convertible into common stock at $0.30 per
share 1,050 100
Convertible secured promissory note payable to
Fontal International, Ltd.; interest at 10%, due
in April, 1997; convertible into common stock at
$0.30 per share 1,150 --
Convertible secured promissory note payable to
Fontal International, Ltd.; interest at 10% due
July, 1997; convertible into common stock at $0.30
per share 260 --
Other 170 170
------- -------
13,244 11,270
Less current maturities 9,257 7,283
------- -------
$ 3,987 $ 3,987
======= =======
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The matters addressed in this report, with the exception of the historical
information presented, incorporate certain forward-looking statements involving
risks and uncertainties, including the risks discussed in the report under the
heading "Certain Factors That May Affect Future Results", as reported by the
Company in the Form 10-K filed with the Commission on November 12, 1996.
GENERAL
U.S. Electricar, Inc. and Subsidiaries (the "Company") develops, converts,
assembles, manufactures and distributes battery-powered electric vehicles,
including on-road pick-up trucks, passenger cars, buses and delivery vehicles,
and a variety of off-road industrial vehicles. The Company's product lines
included converted vehicles (originally built to be powered by internal
combustion engines) and vehicles that are built specifically to be battery
powered. The Company's fiscal year ends July 31. All year references refer to
fiscal years.
During 1994 and the first half of 1995, the Company's approach to its business
was to establish manufacturing, marketing and support functions of a large scale
company so that the transition from development and prototype activities to
volume production of on-road electric vehicles could be made as quickly as
possible once component parts design, systems integration and assembly processes
were developed. The Company raised approximately $38 million to fund its
activities during this period. However, the Company was not able to achieve
volume production primarily because the development of such designs and
processes were not completed prior to the company's capital becoming severely
depleted which occurred in the second half of 1995. The Company incurred losses
totaling $62,586,000 during 1994 and 1995.
The Company was forced to severely curtail its activities in the second half of
1995 due to a lack of funds. Certain facilities were closed and operations were
consolidated, and the Company initiated programs to restructure its debt and
raise interim funding.
During 1996, the Company restructured a significant portion of its debt and
raised approximately $5 million in interim funding. However, its operations
continued to be impacted by an insufficient amount of funds to adequately
support its planned sales volumes and product development programs. The Company
curtailed the manufacture and sale of off-road industrial vehicles in the third
and fourth quarters of 1996 and reduced the carrying values of the assets
associated with this product line. In 1996, the Company incurred a loss of
$9,354,000.
In September 1996, a substantial portion of the assets of Industrial Electric
Vehicles, Inc., (formerly Nordskog Electric Vehicles, Inc. (Nordskog), prior to
its acquisition by the Company) were sold. Consideration for this sale included
the assumption of, and release of liability for, the note payable that totaled
$1,013,000 at July 31, 1996 to Nordskog.
On October 25, 1996, the Company acquired substantially all the tangible and
intangible assets, and assumed certain liabilities, of Systronix Corporation
(Systronix), for stock, note and cash.
LIQUIDITY AND CAPITAL RESOURCES
`
The Company has experienced significant recurring cash flow shortages due to
operating losses primarily attributable to research, development ,administrative
and other expenses associated with the Company's efforts to become an
international manufacturer and distributor of electric vehicles. Cash flows from
operations have been extremely negative and have not been sufficient to meet the
Company's obligations as they came due. The Company has therefore had to raise
11
funds through numerous financial transactions and from various resources. At
least until the Company reaches break-even volume in sales and develops and/or
acquires the capability and technology necessary to manufacture and sell its
electric vehicles profitably, it will need to continue to rely extensively on
cash from debt and equity financing. The Company anticipates that it will
require substantial additional outside financing for at least two more years.
During the six months ended January 31, 1997, the Company spent $1,627,000 in
cash on operating activities to fund the net loss of $4,676,000 resulting from
factors explained in the following section of this discussion and analysis.
Accounts receivable, exclusive of the divestiture of the industrial electric
vehicles business, decreased by $188,000. The reduction of accounts receivable
attributable to this divestiture was $365,000, net of allowances. Inventory, net
of the divestiture of the industrial electric vehicles business, which reduced
inventory by $470,000, and the acquisition of Systronix Corporation, which
increased inventory by $499,000, decreased by $478,000.
The operations of the Company during the six months ended January 31, 1997 were
financed primarily by $472,000 received from the issuance of promissory notes,
an additional $810,000 received from Fontal International, Ltd. and $900,000
received from Itochu Corporation, for the issuance of convertible secured
promissory notes. Repayments on the promissory notes were made in the amount of
$322,000 during the period. In addition, payments of $350,000 were made during
the period against the $829,978 promissory note issued to the principals of
Systronix Corporation, the payment schedule was amended, and the maturity date
of the note was extended to April 1, 1997.
IF THE COMPANY IS UNABLE TO RESTRUCTURE ITS DEBT OR OTHERWISE REFINANCE OR
CONVERT SUCH DEBT, AND ADDITIONAL FUNDING IS NOT AVAILABLE, THE COMPANY WOULD BE
FORCED TO SEEK PROTECTION UNDER APPLICABLE STATE AND FEDERAL BANKRUPTCY AND
INSOLVENCY LAWS.
AS OF MARCH 11, THE COMPANY HAS COMMITMENTS FOR FUNDS TOTALING OVER $5.0 MILLION
(See Item 5, below), WHICH THE COMPANY EXPECTS TO RECEIVE IN MARCH 1997.
HOWEVER, SIGNIFICANT ADDITIONAL FUNDING WILL BE NEEDED IN 1997 AND 1998. THERE
CAN BE NO ASSURANCE THAT ADDITIONAL FUNDS WILL BE AVAILABLE FROM ANY SOURCE AT
THE TIME THE COMPANY WILL NEED SUCH FUNDS. THE INABILITY OF THE COMPANY TO
OBTAIN ADDITIONAL FUNDING ON TERMS ACCEPTABLE TO THE COMPANY WILL HAVE A
MATERIAL ADVERSE EFFECT ON ITS BUSINESS. THE FUTURE AVAILABILITY 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, AND/OR SEEK
PROTECTION UNDER APPLICABLE STATE AND FEDERAL BANKRUPTCY AND INSOLVENCY LAWS.
RESULTS OF OPERATIONS
Net sales declined $546,000, or 59.5%, in the second quarter of 1997 from the
second quarter of 1996, and declined $2,113,000, or 70.2%, in the first half of
1997 from the first half of 1996. The decline in sales was primarily due to the
Company's inability to raise the funds necessary to continue its operations at
the same levels as the first quarter of 1996. Significant declines occurred in
all product lines.
12
Sales of converted sedans and light trucks declined from 4 units in the second
quarter of 1996 to 3 units in the second quarter of 1997, and unit sales for the
first half of 1997 were down 60.5% to 15 units from 38 units in the first half
of 1996. Total revenue from this product line was $106,000 in the second quarter
of 1997 and $515,000 in the first half, down 10.2% and 58.2%, respectively from
the corresponding periods of 1996. There were no sales of industrial vehicles
and associated parts and service in the second quarter of 1997, since this
business was sold on September 5, 1996. Sales for this product line in 1996 were
$697,000 in the second quarter and $1,341,000 in the first half. The Company
realized revenues of $144,000 in the second quarter of 1997 from various
engineering contracts of the Components Division, acquired in October, 1996.
Cost of sales as a percent of sales increased to 174.9% in the second quarter of
1997 from 127.4% in the second quarter of 1996, and cost of sales as a percent
of sales increased to 157.2% in the first half of 1997 from 115.9% in the first
half of 1996. The increase in costs was largely due to the low levels of
production and high costs from purchasing parts in small quantities. Efforts to
reduce manufacturing overhead continue, but the costs are still high relative to
the low levels of production.
Research and development expense increased in the second quarter of 1997 by
$87,000, or 22.9%, from the second quarter of 1996. The Company has reduced its
technical staff and curtailed purchasing engineering services due to a severe
lack of funds. In October, 1996, the Company acquired Systronix Corporation,
which is primarily a research company at the present time. For the first half of
1997, research and development expense decreased $83,000, or 11.6% from the
first half of 1996.
Selling, general and administrative expense decreased $559,000, or 38.7% in the
second quarter of 1997, and decreased $1,196,000, or 44.6% in the first half of
1997, from the corresponding periods in 1996. This was primarily as a result of
a significant reduction in staff and outside services due to the aforementioned
lack of funds.
Interest and financing fees in the second quarter of 1997 declined $113,000, or
23.3%, from the second quarter of 1996. For the first half of 1997, interest and
financing fees decreased $501,000, or 54.9% from the first half of 1996. During
1996, the Company converted $15,548,000 of principal and accrued interest to
common stock, resulting in a significant decrease in interest expense.
Additional borrowing in 1997 resulted in an increase in interest expense in the
second quarter of 1997 compared to the first quarter.
As a result of the foregoing changes in net sales, cost of sales, other costs
and expenses, the acquisition of a research company and the gain on debt
restructuring, the net loss decreased $451,000, or 18.4%, from $2,456,000 in the
second quarter of 1996 to $ 2,005,000 in the second quarter of 1997. For the
first half of 1997, the net loss increased $276,000, or 6.3% to $4,676,000 from
$4,400,000 in the first half of 1996.
13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings:
On May 20, 1996, a suit was filed by a shareholder against the
company, one of its former officers, and a third party
individual in the San Francisco Superior Court. The suit
alleges that the individual made fraudulent and negligent
misrepresentations to induce the shareholder to purchase
shares of Company stock for 100,000; that the former officer
concealed material facts from the shareholder; and that
defendants (including the Company) all breached fiduciary
duties to the shareholder. The complaint seeks compensatory
damages, punitive damages, attorneys fees and and costs, and
other relief. The Company believes the allegations against it
are without merit. The Company sought dismissal of such
claims, by demurring to the Complaint and the First Amended
Complaint. The demurrer to the First Amended Complaint was
sustained without leave to amend. Judgement was entered in
favor of the Company and its former officer on February 7,
1997.
On January 16, 1997, the Company was served a Complaint for
Damages originally filed in San Francisco Superior Court on
September 30, 1996 against the Company by Anthony O. Vicari,
Plaintiff in Propria Persona. The Complaint alleges that on or
about October, 1994, plaintiff and the Company entered into an
oral agreement whereby the plaintiff agreed to seek and
arrange a joint business venture agreement for the manufacture
and sale of of the Company's electric vehicles to Grupo
Industrial CASA, S.A. de C.V., a Mexican Corporation, and that
the Company agreed to compensate the plaintiff for said
services in the amount of one million dollars and to issue to
plaintiff eighty thousand shares of Company stock. The
Complaint further alleges that the Company breached the oral
agreement on or about December 20, 1994. The Complaint seeks
compensatory damages in an unspecified amount, punitive
damages, the issuance of eighty thousand shares of stock, and
attorney fees and costs. On February 18, 1997, the Company
filed an Answer to the Complaint wherein the Company denies
the allegations and seeks dismissal of the Complaint.
Item 2. Changes in Securities:
None.
Item 3. Defaults Upon Senior Securities:
None. See Item 5 for debt maturing in the near future.
Item 4. Submission of Matters to a Vote of Securities Holders:
None.
14
Item 5. Other Information:
(a) Agreement with Hyundai
On February 27, 1997, the Company executed a definitive Stock
Purchase Agreement and Technology License Agreement with
Hyundai Motor Company ("HMC") and Hyundai Electronics
Industries Co., Ltd. ("HEI"). Under the terms of the Stock
Purchase Agreement, HMC and HEI shall collectively receive
12,000,000 shares of stock in the Company for an investment of
$3.6 million, or $0.30 per share. The shares to be issued have
not been registered under the Securities Act of 1933 in
reliance upon Regulation S, promulgated thereunder. Pursuant
to the Technology License Agreement, HMC and HEI shall pay
$2.0 million for a permanent license to use certain technical
data in the manufacture and assembly of the PantherTM series
of electric drivetrains designed by the Company's Components
Division for use within motor vehicles built by Hyundai or its
subsidiaries. The Company expects the transactions to close in
March 1997 with $5.45 million to be received by the Company at
closing, and the balance to be paid over 6 years.
(b) Fontal Convertible Debt
On March 6, 1997, the Company and Fontal International, Ltd.,
Geneva, Switzerland, executed a Loan Agreement whereby Fontal
extended a loan to the Company in the amount of $200,000. The
Loan was evidenced by a Promissory Note which provides for a
due date of July 15, 1997, an interest rate of ten percent
(10%) per annum, and the right to convert principal and
accrued interest at any time, in one or more installments,
into shares of the Company's common stock at the conversion
rate described below. The note and any shares issuable upon
conversion thereof have not been registered under the
Securities Act of 1933 in reliance upon Regulation S
promulgated thereunder.
The number of shares to be issued pursuant to any election to
convert any or all of the Loan amount shall equal the quotient
obtained by dividing (x) the amount of the loan to be
converted, by (y) the conversion price of $0.30 per share. The
total number issuable pursuant to such conversion of principal
is therefore 666,667 shares.
(c) Certain Debt Maturities
Series S Bonds: The Company has outstanding Series S secured
convertible bonds in the principal amount of $3.0 million. The
maturity date on these bonds is March 25, 1997.
ITOCHU: The Company has outstanding secured notes under a
Supplemental Loan Agreement with ITOCHU Corporation in the
principal amount of $3.0 million. The maturity date on these
notes is April 17, 1997.
Systronix: In connection with the acquisition on October 25,
1996, of all of the assets and certain liabilities of
Systronix Corporation, the Company issued an $829,978.39
Promissory Note due November 25, 1996, secured by the acquired
assets pursuant to a security agreement ("the Note"). Payments
of $350,000 have been made on the note, the payment schedule
was amended, and the maturity date of the note was extended to
April 1, 1997.
15
Item 6. Exhibits and Reports on Firm 8-K:
(a) Exhibits: 10.98 Stock Purchase Agreement and
Technology License Agreement dated February 27, 1997
by and between the Company and Hyundai Motor Company
and Hyundai Electronics Industries Co., Ltd.
(b) Reports on Form 8-K
The Company filed a report on Form 8-K with the
Commission on January 10, 1997 reporting the
execution of a Supplemental Loan Agreement with
ITOCHU Corporation whereby ITOCHU extended a $900,000
convertible loan to the Company. The Company filed a
report on Form 8-K with the Commission on January 30,
1997 reporting the execution of Loan Agreements with
Fontal International, Ltd. whereby Fontal extended
two convertible loans to the Company in the aggregate
amount of $260,000. The Company filed a report on
Form 8-K with the Commission on February 26, 1997
reporting the execution of a Loan Agreement with
Fontal International, Ltd. whereby Fontal extended a
$140,000 convertible loan to the Company, and
reporting the execution of a Supplemental Loan
Agreement with ITOCHU Corporation whereby ITOCHU
extended a $400,000 convertible loan to the Company.
16
SIGNATURE
Pursuant to the requirements of Section 13 or 15 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 on March 11, 1997.
U.S. ELECTRICAR, INC.
(Registrant)
/s/ Roy Y. Kusumoto
- --------------------------------------------------------------------------------
By: Roy Y. Kusumoto, Chief Executive Officer, President and
Acting Chief Financial Officer
(Principal executive officer and principal financial and accounting officer)
17
EXHIBIT INDEX
Exhibit No. Description Page No.
- --------------------------------------------------------------------------------
10.98 Stock Purchase Agreement and Technology License
Agreement dated February 27, 1997 by and between the
Company andHyundai Motor Company and Hyundai
Electronics Industries Co., Ltd. 19
27 Financial Data Schedule 63
18