U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 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 No. 0-16176
McLAREN PERFORMANCE TECHNOLOGIES, INC.
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(Exact name of small business issuer as specified in its charter)
Delaware 84-1016459
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
32233 West Eight Mile Road
Livonia, Michigan 48152
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(Address of principal executive offices) (Zip Code)
(248) 477-6240
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(Issuer's telephone number)
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(Former name, former address and former fiscal year,
if changed since last report)
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 [_]
Applicable only to issuers involved in bankruptcy proceedings during the
preceding five years:
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
There were 11,941,532 shares of the Registrant's common stock outstanding as of
December 31, 2001.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
McLAREN PERFORMANCE TECHNOLOGIES, INC.
FORM 10-QSB
INDEX
Page
Part I. Financial Information 1
Item 1. Financial Statements 1
Consolidated Condensed Unaudited Balance Sheet as of
December 31, 2001 1
Consolidated Condensed Unaudited Income Statement for the
three month periods ended December 31, 2001 and 2000 2
Consolidated Condensed Unaudited Statements of Cash Flow for
the three month periods ended December 31, 2001 and 2000 3
Notes to Consolidated Condensed Unaudited Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
Part II. Other Information and Signatures 7
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MCLAREN PERFORMANCE TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED UNAUDITED BALANCE SHEET
As of December 31, 2001
Assets
Current assets:
Cash and cash equivalents $ 210,682
Accounts receivable, net of allowance for doubtful accounts
of $65,000 2,949,820
Inventories 475,155
Prepaid expenses and other 380,922
------------
Total current assets 4,016,579
Property and equipment, net of accumulated depreciation
and amortization 7,977,337
Intangible assets, net of accumulated amortization 1,963,756
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Total assets $ 13,957,672
============
Liabilities and stockholders' equity
Current liabilities:
Line of credit payable $ 369,230
Accounts payable 2,588,244
Customer deposits 60,000
Accrued payroll and related costs 155,573
Other accrued liabilities 242,439
Current portion of capital lease obligations 275,233
Current portion of long term debt 1,677,495
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Total current liablities 5,368,214
Capital lease obligations, net of current portion 656,174
Long-term debt, net of current portion 4,254,164
Deferred taxes 761,904
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Total liablities 11,040,456
Stockholders' equity:
Preferred stock, $.001 par value
Authorized--10,000,000 shares
No shares issued or outstanding --
Common stock, $.00001 par value
Authorized--20,000,000 shares
Issued and outstanding 11,941,532 shares 119
Additional paid in capital 16,838,188
Accumulated deficit (13,809,062)
Less: Treasury stock, 8,500 shares (81,907)
Accumulated comprehensive loss (30,122)
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Total stockholders' equity 2,917,216
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Total liabilities and stockholders' equity $ 13,957,672
============
See accompanying notes to consolidated condensed unaudited financial statements.
1
MCLAREN PERFORMANCE TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED UNAUDITED STATEMENTS OF OPERATIONS
For the three months ended December 31, 2001 and 2000
2001 2000
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Revenues:
License and royalties $ 189,685 $ 140,275
Service and product revenues 3,854,272 2,849,802
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Total Revenues 4,043,957 2,990,077
Cost of revenues 3,112,531 1,861,855
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Gross profit 931,426 1,128,222
Operating expenses:
Research and development 52,358 56,343
Litigation and related costs 1,443 179,996
Selling, general and administrative 1,040,691 880,439
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1,094,492 1,116,778
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Income(loss) from operations (163,066) 11,444
Other income(expense)
Interest income 704 1,703
Interest expense (135,096) (89,269)
Other (8,771) 16,916
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(143,163) (70,650)
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Loss before income taxes (306,229) (59,206)
Credit for income taxes (31,983) --
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Net loss $ (274,246) $ (59,206)
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Basic and diluted net loss per share $ (0.02) $ (0.01)
============ ============
Weighted average number of basic and diluted common
shares outstanding 11,871,656 10,083,452
============ ============
Comprehensive loss:
Net loss $ (274,246) $ (59,206)
Foreign currency translation adjustment (6,196)
Unrealized gain on available for sale securities -- 6,744
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Comprehensive loss $ (280,442) $ (52,462)
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See accompanying notes to consolidated condensed unaudited financial statements.
2
MCLAREN PERFORMANCE TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED UNAUDITED STATEMENTS OF CASH FLOWS
For the three months ended December 31, 2001 and 2000
2001 2000
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Cashflows from operating activities
Net loss $(274,246) $ (59,206)
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation and amortization 308,520 164,315
(Gain) loss on disposal of equipment -- (2,336)
Gain on foreign currency translation (6,196)
Decrease in deferred taxes (6,065)
Changes in operating assets and liabilities:
Accounts receivable 230,829 195,161
Inventories 373,013 (2,102)
Prepaid expenses and other (96,480) 25,733
Accounts payable 112,953 203,246
Customer deposits -- (294,314)
Accrued payroll and related costs (142,311) (164,162)
Other accrued liablities (13,577) (61,544)
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Net cash provided by operating activities 486,440 4,791
Cash flows from investing activities:
Purchases of available for sale securities -- (438)
Additions to property and equipment (191,838) (197,597)
Proceeds from disposal of equipment -- 81,730
Additions to intangible assets -- (52,516)
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Net cash used in investing activities (191,838) (168,821)
Net cash from financing activities
Net change in line of credit (230,770) (30,000)
Proceeds from issuance of common stock 223,000 391,400
Repayments of notes payable (283,843) (485,136)
Repayments under capital lease obligations (66,103) (1,902)
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Net cash used in financing activities (357,716) (125,638)
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Net decrease in cash and cash equvalents (63,114) (289,668)
Cash and cash equivalents at beginning of period 273,796 455,369
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Cash and cash equivalents at end of period $ 210,682 $ 165,701
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Unrealized gain on available for sale securities $ -- $ 6,744
========= =========
See accompanying notes to consolidated condensed unaudited financial statements.
3
MCLAREN PERFORMANCE TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED CONDENSED UNAUDITED FINANCIAL STATEMENTS
PRESENTATION
The financial statements included herein have been prepared by McLaren
Performance Technologies, Inc.(the "Company") without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission and include all
adjustments which are, in the opinion of management, necessary for a fair
presentation. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States have been condensed or omitted pursuant to such
rules and regulations. The Company believes that the disclosures are adequate to
make these financial statements not misleading; however, it is suggested that
these financial statements and the accompanying notes to the financial
statements be read in conjunction with the financial statements and notes
thereto in the Company's Annual Report on Form 10-KSB for the fiscal year ended
September 30, 2001. The financial data for the interim period may not
necessarily be indicative of results to be expected for the year.
In the opinion of the Company, these unaudited financial statements
contain all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the financial position of McLaren Performance
Technologies, Inc. as of December 31, 2001 and the results of the Company's
operations and its cash flow for the three months then ended.
NET LOSS PER SHARE
Net loss per share is based on the weighted average number of
common and common equivalent shares outstanding. Common stock equivalents were
not considered in this calculation, as their effect would be antidilutive.
EQUITY TRANSACTIONS
During October 2001, the Company sold an additional 229,592 shares of
its common stock to EMM McLaren Investment Company, L.L.C., an existing
shareholder, in a private placement offering. Proceeds totaled $225,000.
REPORTABLE SEGMENTS
McLaren Performance Technologies, Inc. has three reportable segments.
McLaren Engines derives its revenues from designing, developing, fabricating,
testing and validating engines and related components for the automotive OEM's.
McLaren Traction Technologies derives revenues from license fees and royalties
relating to its GERODISC technology, as well as from performing research and
development on a fee for service basis. McLaren Performance Products is a
specialty manufacturer of automotive powertrain products.
The accounting policies of the reportable segments are the same as that
of the Company. The Company evaluates performance based on income or loss from
operations before income taxes, and accounts for inter-segment sales as if they
were to third parties.
4
Financial information by reportable segment for the three months ended December
31, 2001 and 2000 is as follows:
Three months ended December 31
2001 2000
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Revenues:
McLaren Traction $ 234,685 $ 141,213
McLaren Engines 3,120,692 2,873,514
McLaren Performance Products 726,508
Intercompany eliminations (37,928) (24,650)
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$ 4,043,957 $ 2,990,077
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Income (loss) before income taxes:
McLaren Traction $ 70,064 $ (222,145)
McLaren Engines (100,403) 422,823
McLaren Performance Products (94,026)
McLaren Corporate (181,864) (259,884)
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$ (306,229) $ (59,206)
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NEW ACCOUNTING PRONOUNCEMENT
In June 2001, the FASB issued SFAS 142, "Goodwill and Other Intangible
Assets." Under Statement 142, goodwill and indefinite lived intangible assets
are no longer amortized but are reviewed annually for impairment, or more
frequently if impairment indicators arise. Separable intangible assets that have
finite lives will continue to be amortized over their useful lives. The Company
intends to conform to the requirements of the new SFAS upon its required
adoption date of October 1, 2002. The Company has not yet determined the impact
the SFAS will have on the recorded value of its goodwill
5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 2001 VERSUS THREE MONTHS ENDED DECEMBER 31, 2000
The Company experienced a net loss of $274,246 for the three months
ended December 31, 2001 compared to a net loss of $59,206 for the three months
ended December 31, 2000.
Revenues of the Company were $4,043,957 for the quarter compared to
$2,990,077 for the corresponding period ending December 31, 2000. The increase
of approximately 35% was due, in part, to the McLaren Performance Products
division and the increase in McLaren Engines sales. However, the increase at
McLaren Engines is largely attributable to the sale of component parts to
support engine development services, which although constituting an increase in
revenue, such revenue has minimal gross margin.
Cash flow from operations was $486,440 for the period ended December 31,
2001 compared to $4,791 for the same period last year. The significant increase
is due, in part, to effective systems in the business operation segment.
The Company's operational performance was hindered by several factors,
including, the general downturn in the automotive segment. Other factors
influencing the operational performance of the Company were a lack of Engine
Audit testing, which had comprised a substantial portion of the gross profit for
the quarter ending December 31, 2000, and a decrease of dynamometer testing in
the Engines business unit. These factors are the result of an end of calendar
year seasonal influence. By comparison, for the three months ended December 31,
2000, this calendar year end seasonality was offset by an unusually high demand
for Engine Audit testing (the validation testing of engines as they come off the
assembly line). With budgets replenished for 2002 customers (OEM's) along with
the slow turnaround of the economy, management believes that these areas will
begin to rebound with new opportunities presenting themselves.
Significant Events
In October 2001, the Company sold an additional 229,592 shares of its
common stock under the terms and conditions of the Stock Option Agreement with
EMM McLaren Investment Company, L.L.C. The gross proceeds of the sale were
$225,000.
Subsequent Events
The Company is currently in the process of renewing its operating lines of
credit facility, which expired in January 2002. Management anticipates renewing
these lines of credit on the same terms and conditions as in the prior
agreements.
6
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS. None
ITEM 2. CHANGES IN SECURITIES.
On October 25, 2001, EMM McLaren Investment Company, L.L.C. ("EMM")
exercised options to purchase 229,592 shares of the Company's Common Stock
pursuant to the McLaren Stock Option Agreement dated August 1, 2001. On December
7, 2001, the Company issued a warrant to purchase 43,376 warrant shares
exercisable, at $1.00 per share, on or before February 28, 2003 and a warrant to
purchase 43,367 warrant shares exercisable, at $2.00 per share, on or before
February 27, 2004 to EMM.
The shares and the warrants issued to EMM have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"). The Company
claims exemption from registration under Section 4(2) of the Securities Act and
Regulation D promulgated thereunder based upon EMM's knowledge, sophistication,
investment intent and status as an "accredited investor," as well as the private
nature of the transaction.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
The Company is currently in default of a bank note related to the
former Santa Barbara, CA Traction Operations. The total arrearage to date is
approximately $375,000. The bank note represents approximately 2.7% of total
assets of the Company. The financial institution is unrelated to the existing
banking relationship comprising the balance of outstanding debt. The Company is
continuing to make monthly interest payments while negotiating the terms and
conditions to extend the obligation. The Company is also seeking to obtain new
financing agreements with unrelated institutions.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY 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. No reports on Form 8-K were filed during the
quarter for which this report is filed.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the Registrant has caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
McLAREN PERFORMANCE TECHNOLOGIES, INC.
Date: February 14, 2002
/s/ Chris J. Panzl
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Chris J. Panzl, Chief Financial Officer
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