1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Three Months Ended Commission File Number March 31, 1996 00-17303 VECTOR AEROMOTIVE CORPORATION (Exact name of registrant as specified in its charter) NEVADA 33-025-4334 (State of Incorporation) (I.R.S. Employer Identification No.) 7601 CENTURION PARKWAY JACKSONVILLE, FLORIDA 32256 (Address of principal executive offices) (904) 645-0505 (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 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 [ ] State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. Common Stock, $.01 par value per share; 53,562,087 shares outstanding as of May 10, 1996 2 Vector Aeromotive Corporation Condensed Balance Sheets (Unaudited) March 31, December 31, 1996 1995 ----------- ------------ Assets - ----------------------------------------------------------- Current assets: Cash and cash equivalents $ 1,090,457 $ 12,370 Inventories 1,380,833 801,560 Prepaid expenses 167,534 279,306 Accounts and other receivable 7,427 - ----------- ----------- Total current assets 2,646,251 1,093,236 Property and equipment 749,172 618,083 Other assets 141,905 195,250 ----------- ----------- $ 3,537,328 $ 1,906,569 =========== =========== Liabilities and Stockholders' Equity - ----------------------------------------------------------- Current liabilities: Accounts payable $ 668,238 $ 1,498,667 Accrued expenses 550,605 632,891 Loans payable to related party 178,200 1,178,200 Customer deposits 50,000 40,000 ----------- ----------- Total current liabilities 1,447,043 3,349,758 ----------- ----------- Condintencies - Note 4 Total liabilities 1,447,043 3,349,758 Stockholders' Equity Common stock, par value $.01 per share, 530,831 426,646 600,000,000 shares authorized; issued and outstanding: 53,083,199 in 1996 and 42,664,699 in 1995 Capital in excess of par value 36,565,703 31,873,608 Accumulated deficit (35,006,249) (33,743,443) ----------- ----------- Total stockholders' equity 2,090,286 (1,443,189) ----------- ----------- $ 3,537,328 $ 1,906,569 =========== =========== See accompanying notes to unaudited condensed financial statements. 1 3 Vector Aeromotive Corporation Condensed Statements of Operations (Unaudited) Three Months Three Months Ended Ended March 31, 1996 March 31, 1995 -------------- -------------- Sales $ 149,470 - Cost of sales 167,413 - ----------- ----------- Gross profit (loss) (17,943) - Costs and expenses: Manufacturing overhead $ 194,899 - General and administrative 612,891 624,515 Research and development 473,076 785,181 ----------- ----------- Total costs and expenses 1,280,865 1,409,696 ----------- ----------- Operating loss (1,298,809) (1,409,696) Other income (expense) Interest and other income 36,002 80,747 ----------- ----------- Net loss $(1,262,806) $(1,328,949) =========== =========== Net loss per share $ (0.02) $ (0.03) =========== =========== Weighted average common shares outstanding 50,575,366 39,324,144 =========== =========== See accompanying notes to unaudited condensed financial statements. 2 4 Vector Aeromotive Corporation Condensed Statement of Shareholders' Equity (Unaudited) Common Stock ------------------------- Capital in Excess Accumulated Shares Amount of Par Value Deficit Total ------------------------------------------------------------------------------ Balance, December 31, 1995 42,664,699 $426,646 $31,873,608 $(33,743,443) $(1,443,189) Issuance of shares for cash 10,000,000 100,000 4,604,733 4,704,733 Exercise of stock options and warrants 418,500 4,185 87,362 91,547 Net loss (1,262,806) (1,262,806) ---------------------------------------------------------------------------- Balance, March 31, 1996 53,083,199 $530,831 $36,565,703 $(35,006,249) $ 2,090,285 ============================================================================ See accompanying notes to unaudited condensed financial statements. 3 5 Vector Aeromotive Corporation Condensed Statements of Cash Flows (Unaudited) Three Months Three Months Ended Ended March 31, 1996 March 31, 1995 -------------- -------------- Cash flows from operating activities: Net loss $(1,262,806) $(1,365,390) Adjustments to reconcile net loss to net cash used in operating activities Depreciation and amortization 59,031 29,590 Increase (decrease) from changes in Inventories (579,273) (180,000) Prepaid expenses and other assets 104,345 209,011 Accounts payable (830,429) (95,964) Accrued expenses (82,286) (15,267) Customer deposits 10,000 (35,000) ----------- ----------- Net cash from operating activities (2,581,418) (1,416,579) Cash flows used in investing activities: Acquisition of property and equipment (136,775) (111,861) ----------- ----------- Net cash used in investing activities (136,775) (111,861) Cash flows from financing activities: Proceeds from issuance of common stock and warrants 4,704,733 6,000,000 Proceeds from exercise of warrants 91,547 (398,403) Repayment of loan payable to related party (1,000,000) ----------- ----------- Net cash from financing activities 3,796,280 5,601,597 Net increase (decrease) in cash and cash equivalents 1,078,087 4,073,157 Cash and cash equivalents, beginning of period 12,370 7,809 ----------- ----------- Cash and cash equivalents, end of period $ 1,090,457 $ 4,080,966 =========== =========== See accompanying notes to unaudited condensed financial statements. 4 6 NOTES TO FINANCIAL STATEMENTS 1. Basis of Presentation The accompanying unaudited condensed financial statements 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 the Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with the Notes to Financial Statements contained in the Company's Annual Report on form 10-K for the year ended December 31, 1995. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 1996 are not necessarily indicative of the results that may be expected for the year ended December 31, 1996. 2. Inventories The components of inventory consist of the following: March 31, March 31, 1996 1995 ---------- --------- Raw Material $ 530,785 $286,347 Work-in-Progress 353,443 - Finished Goods 496,605 180,000 ---------- -------- Total $1,380,833 $486,347 ========== ======== 5 7 3. Stock Offerings On January 24, 1996, the Company completed a Share Purchase Agreement with V'Power Corporation which provided for the Company's issuance of 10,000,000 common shares to V'Power Corporation at a price of $.45 per share. The Share Purchase Agreement also provided that the Company, in exchange for $500,000, enter into an option agreement whereby the Company issued to V'Power Corporation an option to acquire 50,000,000 additional common shares at a price of $.45 per share expiring on January 24, 1997. The Company received cash proceeds under this Share Purchase Agreement of $4,000,000, which was net of the payment of a $1,000,000 note payable to V'Power Corporation that was outstanding at December 31, 1995. V'Power currently owns 37,333,333 shares, or approximately 70%, of the Company's common stock. During the first quarter of 1996, the Company issued 418,500 shares upon exercise of warrants outstanding at an exercise price of $.22 per share. 4. Contingencies As described below, the Company and Gerald A. Wiegert are parties to certain legal proceedings which arose principally in connection with the termination in 1993 of Mr. Wiegert as the Company's Chairman, President and Chief Executive Officer. The Company is also a party to certain legal proceedings against persons who acted with Mr. Wiegert in defiance of the Company's Board of Directors. In order to gain undisputed access and control over the Company's facilities, assets and business operations, on March 24, 1993, the Company filed an action in the Superior Court of California, Los Angeles County captioned as Vector Aeromotive Corporation v. Gerald A. Wiegert, requesting declaratory relief and a temporary restraining order. On September 14, 1993, the court granted the Company's motion for summary judgment on the declaratory judgment contained in the amended complaint. Specifically, the court entered an order (i) declaring that the Board properly exercised its authority to remove Mr. Wiegert as an officer of the Company; (ii) enjoining Mr. Wiegert from any further dealing with the property or interests of the Company; and (iii) calling for an orderly transfer of day-to-day management of the Company to the Board. To date, the Company believes that Mr. Wiegert has complied with the September 14, 1993 court order by refraining from participation in Company affairs and by transferring day-to-day management of the Company to the Board. 6 8 Although the court granted summary judgment in favor of the Company on its claim for declaratory relief and undisputed, physical control of the Company has been returned to the Board, all other claims in the Company's amended complaint are pending. These claims seek monetary damages in an amount to be proven at trial. Mr. Wiegert has asserted various claims against the Company, including claims for unpaid rent on the Company's former principal facility, which was leased by the Company from Mr. Wiegert; breach of employment agreement; and for the return of business assets which Mr. Wiegert alleges are owned by him rather than by the Company. These claims have been asserted in a separate action filed in the Superior Court of California for Los Angeles County on September 27, 1993 captioned Gerald A. Wiegert v. Vector Aeromotive Corporation. Mr. Wiegert's complaint was dismissed by the court because it contained claims which should have been asserted as cross-claims within the Company's original action against Mr. Wiegert. In February 1994, Mr. Wiegert filed a cross-complaint against the Company, its directors, and its outside securities counsel alleging, among other things, breach of employment contract; breach of covenant of good faith and fair dealing; intentional and negligent misrepresentation; interference with contractual advantage and business interest; negligent and intentional infliction of emotional distress; and libel and slander. The Company has challenged the legal sufficiency of the cross-complaint, including subsequent amendments thereof, resulting in elimination of all claims except the claims concerning breach of employment contract by the Company, unpaid rent, conversion, libel and slander. The Company plans to file a motion for summary judgment for the purpose of eliminating Mr. Wiegert's causes of action for conversion, libel, slander and conspiracy. In another action filed by Mr. Wiegert as general partner of Vector Car entitled Vector Car v. Vector Aeromotive Corporation, et al., Mr. Wiegert alleges that the Company assumed a Vector Car debt owed to him of approximately $325,000 and that the Company is obligated to Vector Car under the terms of a $250,000 promissory note payable to Vector Car. The Company intends to vigorously defend this action. The three aforementioned actions between the Company and Mr. Wiegert are expected to be tried in late 1996. 7 9 PART I - FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION General In March 1996, the Company sold the first of the newly launched Vector M12 exotic sports car. Production of the M12 is currently at the rate of 2 per month and the Company plans to produce at a rate of 12 cars per month by mid 1997. Results of Operations For the period ended March 31, 1996, the Company had a net loss of $1,262,806 compared to $1,328,949 for the comparable period of 1995. Cost of sales related to this sale was significantly higher than costs per vehicle anticipated later this year when production efficiencies are expected to increase substantially. Gross profit as a percentage of sales will, however, continue through the second quarter to be depressed by costs associated with the start-up of production. The Company's manufacturing overhead consists of the costs associated with its purchasing, quality, manufacturing engineering and operations management departments. Costs related to these departments totaled $194,899 in the first quarter of 1996. General and administrative expenses decreased approximately 2% compared to the first quarter of 1995. Reductions in legal expenses and consulting fees were offset by new staffing and related costs of the Company's sales and marketing department. Research and development costs proceeded into the first quarter of 1996 for continuing development on the M12, including addressing development issues specifically related to the vehicle's electrical system and refining manufacturing and assembly procedures. These costs were $473,076 or 40% lower than the first quarter of 1995. Liquidity and Capital Resources As previously reported, the Company entered into an agreement in January 1996 from which $3.7 million, net of stock offering costs, and the repayment of $1,000,000 previously loaned in 1995 was received. As of March 31, 1996, the balance of the Company's cash and equivalents is approximately $1 million. Cash used during the first quarter of 1996 was primarily for completion of development and production of the first M12s. 8 10 Although the Company anticipates generating an increasing revenue stream from M12 sales, the Company expects continued losses and negative cash flow through mid-1996. Because of the delay in production start-up and the resulting delay in vehicle sales, there can be no assurance that the Company's current funds will be adequate until the Company achieves positive cash flow through vehicle sales. The Company has no commitment from others to provide additional capital, and there can be no assurance that such funding will be available when needed, or if available, that its terms will be favorable or acceptable to the Company. Should the Company be unable to obtain additional capital, when and if needed it could be forced to either curtail operations or cease business activities altogether. ITEM 3. EXHIBITS AND REPORTS ON THE FORM 8-K The Company filed a Form 8-K on January 31, 1996 reporting under Item 5. Other Events. Exhibits 27.01 Financial Data Schedule (for SEC use only) 9 11 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. VECTOR AEROMOTIVE CORPORATION Date: May 14, 1996 By: /s/ D. Peter Rose - ----------------------------- ------------------------------- D. Peter Rose President Date: May 14, 1996 By: /s/ Janna L. Connolly - ----------------------------- ------------------------------- Janna L. Connolly Chief Accounting Officer 10