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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
[FEE REQUIRED]
For the fiscal year ended December 31, 1999
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
[NO FEE REQUIRED]
For the transition period from to
Commission file number 0-21810
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AMERIGON INCORPORATED
(Exact name of registrant as specified in its charter)
California 95-4318554
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(I.R.S. Employer
(State or other jurisdiction of Identification No.)
incorporation or organization)
5462 Irwindale Avenue,
Irwindale, California 91706-2058
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(Address of principal executive
offices) (Zip Code)
Registrant's telephone number, including area code: (626) 815-7400
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, no par value
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(Title of Class)
Class A Warrants
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K [_]
The aggregate market value of the voting stock held by non-affiliates of the
registrant, computed by reference to the average bid and asked prices of such
stock as of March 9, 2000, was $35,814,169 (For purposes of this computation,
the registrant has excluded the market value of all shares of its Common Stock
reported as being beneficially owned by executive officers and directors of
the registrant; such exclusion shall not be deemed to constitute an admission
that any such person is an "affiliate" of the registrant.)
At March 9, 2000, the registrant had issued and outstanding 1,910,089 shares
of Class A Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE.
Portions of the registrant's definitive proxy statement for its 2000 Annual
Meeting of Shareholders to be filed with the Commission within 120 days after
the close of the registrant's fiscal year are incorporated by reference into
Part III.
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AMERIGON INCORPORATED
ITEM 1. BUSINESS
General
Amerigon Incorporated (the "Company") is a developer, marketer and
manufacturer of proprietary high technology electronic components and systems
for sale to car and truck original equipment manufacturers ("OEMs"). The
Company is currently focusing the majority of its efforts on the introduction
of its primary product, a Climate Control Seat(TM) ("CCS(TM)") which provides
year round comfort by providing both heating and cooling to seat occupants.
The Company recently began shipping the CCS product to Johnson Controls, Inc.
("JCI"), a worldwide automotive seat supplier. In November 1999, JCI began
supplying the Lincoln Mercury Division of Ford Motor Company ("Ford") with the
Company's CCS product for installation in the 2000 model year Lincoln
Navigator SUV.
Additionally, the Company has a product still under development. The
AmeriGuard(TM) radar-based speed and distance sensor system alerts drivers to
the presence of objects near the vehicle.
Financial Information About Industry Segments
The Company's business segment information is incorporated herein by
reference from Note 16 of the Company's financial statements and related
financial information indexed on page F-1 of this report and incorporated by
reference into this report.
Business Strategy
The Company's strategy is to build upon the existing relationships with
automobile manufacturers and their suppliers currently in place and to become
the leading provider of climate controlled seating to the automotive
marketplace. Key elements of the Company strategy include:
. Increasing market penetration with global automotive companies.
. Continuing to partner with major automotive seat companies.
. Completing the next generation of the CCS technology.
. Continuing to expand its intellectual property.
Products
Climate Control Seat System
The Company's CCS system utilizes a combination of an exclusive license of
patented technology and three of the Company's own patents to manufacture a
system to actively manage the seat surface temperature to enhance the year
round temperature comfort of automobile passengers. The CCS uses small
thermoelectric heat pumps, which are solid-state electronic devices, which
generate heat or cooling depending upon the polarity of the current applied to
the circuit.
This thermoelectric device is the heart of a compact heat pump built by the
Company. Air is forced through the heat pump and thermally conditioned based
upon the switch input from the occupant. The conditioned air is then
circulated utilizing ducts in the seat to provide temperature comfort for the
occupant. Each seat has individual electronic controls to adjust the level of
heating or cooling. The CCS uses substantially less energy than conventional
air conditioners by focusing the cooling directly on the passengers through
the seat, rather than cooling the entire ambient air volume and the interior
surfaces of the vehicle.
In the past two years, the Company has supplied prototype seats containing
its CCS system to virtually every major automobile manufacturer and seat
supplier. The Company was selected by Ford to supply the CCS product to JCI
for installation in the 2000 model year Lincoln Navigator SUV. Approximately
47,000 Lincoln Navigators were produced in the 1998 calendar year. The CCS
product is being offered as an optional feature on
1
this vehicle, replacing the traditional seat heater. Initial production
shipments to JCI commenced in late November 1999. The Company is also in final
pre-production preparation to supply its CCS products to a major Japanese
automotive manufacturer for installation in a 2001 model year luxury vehicle.
The Company is working with many other automotive OEMs and their seat
suppliers in an effort to have the CCS product included in other models
commencing with the 2002 model year and beyond. The Company currently has
active development programs on other vehicle platforms, but no assurance can
be given that its CCS system will be implemented in any of these vehicles.
On March 27, 2000, the Company entered into a Value Participation Agreement
("VPA") with the Ford Motor Company ("Ford"). Pursuant to the VPA, Ford agreed
that, through December 31, 2004, the Company has the exclusive right to
manufacture and supply CCS units to Ford's tier 1 suppliers for installation
in Ford, Lincoln and Mercury branded vehicles produced and sold in North
America (other than Ford branded vehicles produced by Auto Alliance, Inc.).
Ford is not obligated to purchase any CCS units under the VPA.
The CCS product has reached the stage where it can be mass-produced for a
particular OEM. However, since each vehicle's seats are not the same, the
Company must tailor its CCS components to meet each seat design. If an OEM
wishes to integrate the CCS unit into a seat, it will provide the Company with
one of its automotive seats to be modified so that a CCS unit may be installed
as a prototype. The seat is then returned to the OEM for evaluation and
testing. If the OEM accepts the product, a program can then be launched to put
the CCS in a particular model on a production basis, but it normally takes one
to two years from the time an OEM decides to include the CCS in a car model to
actual volume production for that model vehicle. During that process, the
Company derives minimal revenue from prototype sales and development contracts
but generally obtains no significant revenue until volume production begins.
Radar for Maneuvering Applications
Several automotive OEMs are now offering ultrasonic or infrared laser
distance sensors for parking aids and there are infrared and radar sensors
being used for adaptive cruise control. The Company believes that its radar
technology offers superior performance to ultrasonic as defined by easier
packaging, no styling impact and all-weather performance. Competitive products
in the automotive industry have utilized ultrasonic and infrared sensors which
require direct line of sight from the sensor to the target and infrared
requires installation with optical lenses. The Company uses swept-range radar,
which transmits millions of short radio impulses every second. The Company's
system is designed to operate with a five-meter range from the perimeter of
the vehicle. AmeriGuard radar is intended for precision parking, back-up
warning, side object detection, lane change, and safety restraint. The
Company's radar technology is less susceptible to environmental conditions,
such as dirt, rain, fog or snow than ultrasonic and infrared sensors and can
even penetrate plastic, allowing it to be mounted inside plastic bumpers or
tail light assemblies.
Between 400,000 and 500,000 heavy truck vehicles are produced globally each
year. In addition, by Company estimates, there are four to five million heavy
trucks in service globally. Each of these vehicles operates daily in tight
maneuvering situations and could benefit significantly from back-up warning
and side object warning systems. The Company has identified this global truck
population to be its target market and is developing products to service these
needs.
The Company has applied its technology to develop demonstration prototypes
of a back-up warning system (BWS) and a side object detector (SOD). The BWS is
activated when the vehicle is put into reverse and detects objects behind the
vehicle while providing an audible/visual signal to alert the driver. The SOD
detects objects to the side of the vehicle when the driver attempts to turn or
change lanes and emits an audible warning signal.
On April 2, 1998, the Company entered into a joint research project with New
Mexico State Highway and Transportation Department (NMSHTD) Research Bureau to
evaluate the Company's radar for New Mexico's Highway Maintenance and
Construction Departments. In the project, the Company's radar sensors were
installed in heavy construction equipment used by the department. A special
user interface was designed by the Company to warn vehicle operators if an
object is behind the vehicle when it is in reverse. Detected objects included
people, posts, vehicles, walls and other structures. Two phases of the three-
phase project were successfully
2
completed in 1998 and the NMSHTD Research Bureau approved the final phase of
the project in December 1998. This final phase consists of 60 vehicles which
have been equipped with back-up warning systems for extensive field test and
evaluation. The NMSHTD operates a fleet of approximately 5,000 vehicles and
successful completion of Phase III may result in the installation of the
Company's radar product in some of those vehicles.
The Company believes it has generated interest in its radar product from
other State Departments of Transportation. Management believes there may be a
market opportunity to equip trucks and heavy construction equipment with its
radar product as an after-market item. In addition, management believes there
is an opportunity to sell the radar product by including the product in
systems manufactured by one or more truck lighting suppliers. The Company is
currently working to obtain a development program with one of the leading
suppliers of lighting systems for trucks and buses with a goal of integrating
the Company's radar product into these lighting systems. Although the
Company's radar technology could be adapted to passenger vehicles, given the
lengthy time period from prototype to commercial sales to automotive OEMs,
this is not a near term prospect. The Company believes that success in the
heavy truck market will lead to automotive market interest.
Considerable research and development will be required to develop this radar
technology into finished products, including design and development of
application software, antenna systems and production engineering to reduce
costs and increase reliability. The Company expects that approximately
$1,500,000 will be expended over the next year in development to bring the
product to market. The Company does not expect to generate any significant
revenue from its radar technology in the immediate future. No assurance can be
given that the Company will be successful in reducing costs or increasing
reliability or that the Company will be able to develop its radar technology
into finished products.
Disposition of Electric Vehicle Operations
The Company was originally founded to focus on advanced automotive
technologies, including electric vehicles ("EV"). As a recipient of a number
of federal and state government grants relating to the development of EV, the
Company spent many years developing and conducting research on EV, and had
research and development contracts with commercial companies relating to EV.
The Company incurred substantial losses from EV activities, including
significant cost overruns on an EV development contract. By December 31, 1997,
the Company had completed substantially all work on its EV contracts.
During 1997, the Company's Board of Directors decided to focus primarily on
the CCS and AmeriGuard radar products. After trying and failing to obtain
either a strategic partner who would provide financing for an EV joint
venture, or a purchaser for its EV assets, the Board of Directors decided to
suspend funding the EV program (effective August 1998) because it was
generating continuing losses and utilizing resources that the Board felt would
be better utilized in development of the CCS and radar products. In March
1999, the Board of Directors agreed to form a subsidiary to hold the Company's
EV operations. The Company then sold to Dr. Lon Bell, a significant
shareholder, officer and director of the Company, a 15% interest in the EV
subsidiary for $88,000. In May 1999, the shareholders voted to sell the
remaining interest, 85%, of the EV subsidiary to Dr. Bell in exchange for all
of his Class B Common Stock.
Interactive Voice Systems (IVS(TM))
In 1997, the Company entered into a joint venture agreement with Yazaki
Corporation ("Yazaki") to develop and market the Company's voice activated
navigation technology. Under the terms of the agreement, IVS, Inc. ("IVS(TM)")
was created with Yazaki owning a majority interest in IVS and the Company
owning a minority interest (16% on a fully diluted basis). The Company
received $1,800,000 in cash and a note receivable for $1,000,000 in
consideration for net assets related to the Company's voice interactive
technology totaling approximately $89,000. In addition, the Company incurred
costs of $348,000 associated with the sale. At the end of 1998, due to delays
in product development, Yazaki decided to discontinue funding for the joint
venture. The Company did not provide any further funds to continue IVS's
operation in 1999. IVS declared bankruptcy on September 30, 1999.
3
Research and Development
The Company's research and development activities are an essential component
of the Company's efforts to develop future products for introduction in the
marketplace. The Company's research and development activities are expensed as
incurred. These expenses include direct expenses for wages, materials and
services associated with development contracts, grant program activities, and
the development of its products, excluding expenses associated with projects
that are specifically funded by development contracts or grant agreements from
customers (which are classified Development Contract Costs in the Company's
Statements of Operations). Research and development expenses do not include
any portion of general and administrative expenses.
The Company continues to do additional research and development to advance
the design of the CCS product with the goal of making the unit less complex,
easier to package and less expensive to manufacture and install. There can be
no assurance that this development program will result in improved products. A
patent application has been approved (but a patent has not yet been issued)
for a modified version of the CCS.
Research and development expenses for the Company's CCS technology include
not only development of next generation technologies but also application
engineering, which is engineering to adapt its CCS components to meet the
design criteria of a particular vehicle's seat. Each vehicle's seats are not
the same and each has different configuration requirements. The costs incurred
in this adaptation process are accounted for as research and development
expense.
The total amounts spent for research and development activities in the year
ended December 31, 1999, 1998 and 1997 were $2,478,000, $3,202,000 and
$2,072,000, respectively. Included in these amounts for each of such periods
were $43,000, $43,000 and $168,000, respectively, in payments for license
rights to technology and minimum royalties. The Company's research and
development expenses fluctuate significantly from period to period, due both
to changing levels of research and development activity and changes in the
amount of such activities that are covered by customer contracts or grants.
Marketing and Sales
The Company is a second-tier supplier to car and truck OEMs. As such, the
Company's marketing efforts are focused on car and truck OEMs and their
direct, or tier 1, suppliers. The Company has not and does not expect to
market directly to consumers. For the CCS system, the Company's strategy has
been to convince the major automobile companies that the CCS is an attractive
feature which will meet with consumer acceptance and which has favorable
economics, including high gross margins to the OEM. The OEM then directs the
Company to work with their seat supplier to incorporate the CCS into future
seat designs. The Company also markets directly to the major domestic and
foreign automotive seat suppliers.
For the radar product, the Company's efforts are focused on truck lighting
manufacturers as well as major truck fleet operators who may be interested in
the Company's radar product as an after-market item. The Company does not use
general advertising, but instead concentrates on direct contact with
prospective customers and business partners.
In the automotive components industry, products typically proceed through
five stages of research and development before reaching commercialization.
Initial research on the product concept comes first, in order to assess its
technical feasibility and economic costs and benefits, and often includes the
development of an internal prototype for the supplier's own evaluation of the
product. If the product appears feasible, a functioning prototype or
demonstration prototype is manufactured by the component supplier to
demonstrate and test the features of the product. This prototype is then
marketed to automotive companies to generate sales of evaluation prototypes
for internal evaluation by the automobile manufacturer. If the automobile
manufacturer demonstrates interest in the product after testing initial
evaluation prototypes, it typically works with the component supplier to
refine the product and then purchase second and subsequent generation
engineering prototypes for further evaluation. Finally, the automobile
manufacturer determines to either purchase the component for a production
vehicle or terminate its interest in the component.
4
The time required to progress through these five stages of commercialization
varies widely. The most significant factor influencing the time required to
complete the product sales cycle relates to the required level of integration
of the component into other vehicle systems. Products that are installed by
the factory generally require a medium amount of time for evaluation since
other vehicle systems are affected and because a decision to introduce the
product into the vehicle is not easily reversed. The CCS product has a
moderate effect on other vehicle systems and is a factory-installed item. The
Company's radar system could be sold as an after-market item or could be
factory installed and, if the latter, would have a greater impact on other
vehicle systems.
The Company's ability to successfully market its CCS and radar products will
in large part be dependent upon the willingness of automobile manufacturers
and other OEMs to incur the substantial expense involved in the purchase and
installation of its products and systems, and ultimately, upon the acceptance
of these products by consumers. The Company should begin obtaining consumer
feedback soon, as the CCS product has already been installed in model year
2000 Lincoln Navigator vehicles.
Manufacturing, Contractors and Suppliers
The Company currently has limited manufacturing capacity for CCS systems.
The Company intends to further develop its manufacturing capability in order
to implement its business plan, control product quality and delivery, shorten
product development cycle times, and protect and further develop proprietary
technologies and processes. This capability is expected to be developed
internally through the purchase of new equipment and the hiring of additional
personnel. Management anticipates purchasing equipment for a second production
line in March 2000 in anticipation of increased production for model year 2001
vehicles. There can be no assurance that the efforts to establish the
Company's manufacturing operations for any of its products will not exceed
estimated costs or take longer than expected or that other anticipated
problems will not arise that will materially adversely affect the Company's
operations, financial condition and/or business prospects.
The Company relies on various vendors and suppliers for the components of
its products. The Company expects that it will procure these components
through purchase orders with no guaranteed supply arrangements. While the
Company believes that there are a number of alternative sources for most of
these components, certain components, including thermoelectric devices, are
only available from a limited number of suppliers. The loss of any significant
supplier, in the absence of a timely and satisfactory alternative arrangement,
or an inability to obtain essential components on reasonable terms or at all,
could materially adversely affect the Company's business and operations. The
inability to obtain an adequate supply of these thermoelectric devices could
impact the Company's growth. The Company's business and operations could also
be materially adversely affected by delays in deliveries from suppliers.
Proprietary Rights and Patents
The Company has historically acquired existing technologies through licenses
and joint development contracts in order to optimize its expenditure of
capital and time, and sought to adapt and commercialize such technologies in
automotive products which were suitable for mass production. The Company also
developed new technologies or furthered the development of acquired
technologies through internal research and development efforts by its
engineers.
The Company has adopted a policy of seeking to obtain, where practical, the
exclusive rights to use technology related to its products through patents or
licenses for proprietary technologies or processes. The Company currently has
several license arrangements.
CCS
Pursuant to an Option and License Agreement with Feher Design, Inc.
("Feher"), Feher has granted to the Company an exclusive worldwide license to
use specific CCS technologies covered by three patents held by Feher. The
license with respect to technology subject to a Feher patent expires upon the
expiration of the Feher patent covering the relevant technology. The first of
these three patents expires on November 17, 2008. As part of the agreement,
all intellectual property developed by the Company related to variable
temperature seats is
5
owned by the Company but such licensor will have the right to license the
Company's technology on a non-exclusive basis for use in products other than
products intended for use in cars, trucks, buses, vans and recreational
vehicles.
In addition to the aforementioned license rights to the CCS technology, the
Company holds three issued patents on a variable temperature seat climate
control system. The Company also has one additional patent pending with
respect to certain improvements to the CCS technology developed by the
Company. The Company is aware that an unrelated party filed a patent
application in Japan on March 30, 1992 with respect to technology similar to
the CCS technology. However, to date, this application remains subject to
examination and no patent has been issued to the party filing such
application. If such patent were to issue and be upheld, it could have a
material adverse effect upon the Company's intellectual property position in
Japan.
Radar For Maneuvering and Applications
Pursuant to a License Agreement with the Regents of the University of
California (Lawrence Livermore National Laboratory) (the "Regents"), the
Regents granted the Company a limited, exclusive license to use certain
technology covered by patents held by the Regents in the following three
passenger vehicle applications: intelligent cruise control, air bag crash
systems, and position sensors. This license required the Company to achieve
commercial sales of products by the end of 1998. Commercial sales were defined
as sales of non-prototype products to at least one OEM. Since commercial sales
volumes were not achieved, the exclusivity on the license has lapsed. Although
the Company retains this license on a non-exclusive basis, other companies may
also acquire rights to the license and develop products based on the
technology.
As of December 31, 1999, the Company also had two additional patents pending
on its radar technology.
General
Because of rapid technological developments in the automotive industry and
the competitive nature of the market, the patent position of any component
manufacturer is subject to uncertainties and may involve complex legal and
factual issues. Consequently, although the Company either owns or has licenses
to certain patents, and is currently processing several additional patent
applications, it is possible that no patents will be issued from any pending
applications. Claims allowed in any existing or future patents issued or
licensed to the Company may be challenged, invalidated, or circumvented, and
any rights granted under such patents may not provide adequate protection.
There is an additional risk that the Company may be required to participate in
interference proceedings to determine the priority of inventions or may be
required to commence litigation to protect its rights, which could result in
substantial costs.
The Company's products may conflict with patents that have been or may be
granted to competitors or others. Such other persons could bring legal actions
claiming damages and seeking to enjoin manufacturing and marketing of the
affected products. Any such litigation could result in substantial cost to the
Company and diversion of effort by its management and technical personnel. If
any such actions are successful, in addition to any potential liability for
damages, the Company could be required to obtain a license in order to
continue to manufacture or market the affected products. There can be no
assurance that the Company would prevail in any such action or that any
license required under any such patent would be made available on acceptable
terms, if at all. Failure to obtain needed patents, licenses or proprietary
information held by others may have a material adverse effect on its business.
In addition, if the Company becomes involved in litigation, it could consume a
substantial portion of its time and resources. However, the Company has not
received any notice that its products infringe on the proprietary rights of
third parties.
The Company also relies on trade secrets that it seeks to protect, in part,
through confidentiality and non-disclosure agreements with employees,
customers and other parties. There can be no assurance that these agreements
will not be breached, that the Company will have adequate remedies for any
such breach or that the trade secrets will not otherwise become known to or
independently developed by competitors. To the extent that consultants, key
employees or other third parties apply technological information independently
developed by them or by others to the Company's proposed projects, disputes
may arise as to the proprietary rights to such
6
information that may not be resolved in the Company's favor. The Company may
be involved from time to time in litigation to determine the enforceability,
scope and validity of proprietary rights. Any such litigation could result in
substantial cost and diversion of effort by the Company's management and
technical personnel. Additionally, with respect to licensed technology, there
can be no assurance that the licensor of the technology will have the
resources, financial or otherwise, or desire to defend against any challenges
to the rights of such licensor to its patents.
The enactment of the legislation implementing the General Agreement on Trade
and Tariffs has resulted in certain changes to United States patent laws that
became effective on June 8, 1995. Most notably, the term of patent protection
for patent applications filed on or after June 8, 1995 is no longer a period
of 17 years from the date of grant. The new term of a United States patent
will commence on the date of issuance and terminate 20 years from the earliest
effective filing date of the application. Because the time from filing to
issuance of an automotive technology patent application is often more than
three years, a 20-year term from the effective date of filing may result in a
substantially shortened term of patent protection, which may adversely impact
the Company's patent position. If this change results in a shorter period of
patent coverage, the business could be adversely affected to the extent that
the duration and/or level of the royalties the Company may be entitled to
receive from a collaborative partner, if any, is based on the existence of a
valid patent.
Competition
The automotive components and systems business is highly competitive. The
Company may experience competition directly from automobile manufacturers or
other major suppliers, most of which have the capability to manufacture
competing products. Many of the Company's existing and potential competitors
have considerably greater financial and other resources than the Company,
including, but not limited to, an established customer base, greater research
and development capability, established manufacturing capability and greater
marketing and sales resources. The Company also competes indirectly with
related products that do not offer equivalent features to its products, but
can substitute for its products, such as heated seats, ventilated seats and
ultrasonic radar products. The Company believes that its products will compete
on the basis of price, performance and quality.
CCS
The Company is not aware of any competitors that are offering systems for
both active heating and cooling of automotive car seats, although substantial
competition exists for the supply of heated-only seats and several companies
are offering a product which circulates ambient air through a seat without
active cooling. In addition, Mercedes Benz and Saab offer options on certain
new models which combine heated seats with circulation of ambient air. It is
possible that competitors will be able to expand or modify their current
products by adding a cooling function to their seats based upon a technology
not covered by patented technology the Company owns or licenses. CCS competes
indirectly with alternative methods of providing passenger climate control in
a vehicle such as heating and air conditioning systems, which are currently
available for almost all vehicles.
Radar for Maneuvering and Applications
The potential market for automotive radar has attracted many automotive
electronic companies who have developed a variety of radar technologies.
Several automotive OEMs are now offering ultrasonic or infrared laser distance
sensors for parking aids and there are infrared and radar sensors being used
for adaptive cruise control. These companies have far greater technical,
financial and other resources than the Company. While the Company believes
that its licensed radar technology has competitive advantages which are
protected by intellectual property rights in the applications the Company is
developing, it is possible that the market will not accept radar products or
that competitors will find ways to offer similar products without infringing
on intellectual property rights.
Employees
As of December 31, 1999, the Company had 65 employees and 3 outside
contractors. None of the employees are subject to collective bargaining
agreements. The Company considers its employee relations to be satisfactory.
7
Risk Factors
This Report contains forward-looking statements within the meaning of the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. Reference is made in particular to the description of the Company's
plans and objectives for future operations, assumptions underlying such plans
and objectives and other forward-looking statements included in this section,
"Item 1 Business," "Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations," and in other places in this Report. Such
statements may be identified by the use of forward-looking terminology such as
"may," "will" "expect" "believe," "estimate," "anticipate" "intend,"
"continue," or similar terms, variations of such terms or the negative of such
terms. Such statements are based on management's current expectations and are
subject to a number of factors and uncertainties which could cause actual
results to differ materially from those described in the forward-looking
statements. The Company expressly disclaims any obligation or undertaking to
release publicly any updates or revisions to any forward-looking statements
contained herein to reflect any change in the Company's expectations with
regard thereto or any change in events, conditions or circumstances on which
any such statement is based. Factors which could cause such results to differ
materially from those described in the forward-looking statements include
those set forth below.
Risks Relating to the Company's Business
Early Stage of Commercialization
Although the Company began operations in 1991, the Company is only in the
early stages of commercial manufacturing and marketing of its products. The
Company originally focused its efforts on developing electric vehicles and
other automotive systems. Because the electric vehicle market did not develop
as rapidly as the Company anticipated, it substantially scaled back its
efforts in that area beginning in 1997 and completely disposed of its electric
vehicle business in June 1999 to focus completely on the CCS and AmeriGuard
radar products. In December 1997, the Company received its first production
order for the CCS product but shipments of production units in 1998 were
minimal. The Company commenced initial production shipments to JCI in late
November 1999 to supply its CCS product to JCI for installation in the 2000
model year Lincoln Navigator SUV. There can be no assurance that sales will
significantly increase, or that the Company will become profitable.
Substantial Operating Losses Since Inception
The Company has incurred substantial operating losses since its inception.
As of December 31, 1999 and December 31, 1998, the Company has accumulated
deficits since inception of $43,880,000 and $36,305,000, respectively. The
accumulated deficits are attributable to the costs of developmental and other
start-up activities, including the industrial design, development and
marketing of its products and a significant loss incurred on a major electric
vehicle development contract. Of the $23 million the Company spent between
inception and 1996, $18 to $21 million of that amount was spent on electric
vehicles or integrated voice technology, another discontinued product. As is
typical for a development company transitioning for the first time into a
production company, the Company has continued to incur losses due to
continuing expenses without significant revenues or profit margins on the sale
of products, and expects to incur significant losses for the foreseeable
future.
Need for Additional Financing
As is customary for a development stage company only now initiating
production, the Company has experienced negative cash flow from operations
since its inception and has expended, and expects to continue to expend,
substantial funds to continue in its development and marketing efforts. In
addition, as the CCS product now requires production in larger quantities, the
Company will incur increased manufacturing costs. The Company has not
generated and does not expect to generate in the near future sufficient
revenues from the sales of its principal products to cover its operating
expenses. The Company will require additional financing through bank
borrowings, debt or equity financing or otherwise to finance its operations.
No assurance can be given that such alternate funding sources can be obtained
or will provide sufficient financing for the Company.
8
Dependence on Acceptance by Consumers; Market Competition
The Company has engaged in a lengthy development process on the CCS product
which involved developing a prototype for proof of concept and then adapting
the basic system to actual seats provided by various automotive OEMs and their
seat suppliers. In the last two years, the Company has supplied prototype
seats containing its CCS system to virtually every major car manufacturer. As
a result of this process, the Company has been selected by Ford to supply its
CCS product to JCI for installation in the 2000 model year Lincoln Navigator
SUV. The CCS product is being offered as an optional feature on this vehicle.
The Company commenced initial production shipments to JCI in late November
1999. The Company is working with many other automotive OEMs and their seat
suppliers in an effort to have the CCS product included in other models
commencing with the 2002 model year and beyond. It currently has active
development programs on nine other vehicle platforms, but no assurance can be
given that the Company's CCS system will be implemented in any of these
vehicles. Furthermore, there is no assurance that consumers will accept or
desire this CCS product. This may prevent the CCS product from becoming a
standard (as opposed to an optional) feature in vehicles and also may prevent
other automotive OEMs from adopting this CCS product as an optional or
standard feature for other models.
Dependence on Relationships with Third Parties
The Company's ability to successfully market and manufacture its products is
dependent on relationships with both third party suppliers and customers.
The Company's success in marketing the CCS product is dependent on
acceptance of the product by automotive OEMs and their seat suppliers. The CCS
product is being offered as an optional feature on the 2000 model year Lincoln
Navigator SUV and the Company is working with many other automotive OEMs and
their seat suppliers in an effort to have the CCS product included in other
models commencing with the 2001 model year and beyond. However, there is no
assurance that automotive OEMs will accept this product.
The Company relies on various vendors and suppliers for the components of
the CCS product and procures these components through purchase orders, with no
guaranteed supply arrangements. While the Company believes that there are a
number of alternative sources for most of these components, certain
components, including thermoelectric devices, are only available from a
limited number of suppliers. The loss of any significant supplier, in the
absence of a timely and satisfactory alternative arrangement, or an inability
to obtain essential components on reasonable terms or at all, could materially
adversely affect the Company's business, operations and cash flows.
In light of the lengthy sales cycles to automotive OEMs and recent successes
with the Company's radar products in tests with trucks and heavy construction
equipment, the Company has decided to focus its radar product in the truck and
heavy construction equipment market rather than sales to automotive OEMs for
passenger vehicles. The Company is currently working to obtain a development
program with one of the world's leading suppliers of lighting systems for
trucks and buses with a goal of integrating the Company's radar product into
its lighting systems for heavy trucks. However, the Company does not yet have
a commitment from this company and, in any event, the success of this approach
will depend in part on the other party's own competitive, marketing and
strategic considerations, including the relative advantages of alternative
products being developed and/or marketed by such party.
Limited Manufacturing Experience
To date, the Company has been engaged in only limited manufacturing in small
quantities, and there can be no assurance that the efforts to establish
manufacturing operations for any of its products will not exceed estimated
costs or take longer than expected or that other unanticipated problems will
not arise which will materially adversely affect the Company's operations,
financial condition and/or business prospects. Automobile manufacturers demand
on-time delivery of quality products, and some have required the payment of
substantial financial penalties for failure to deliver components to their
plants on a timely basis. Such penalties, as well as costs to avoid them, such
as working overtime and overnight air freighting parts that normally are
shipped by
9
other less expensive means of transportation, could have a material adverse
effect on the Company's business and financial condition. Moreover, the
inability to meet demand for the Company's products on a timely basis would
materially adversely affect its reputation and prospects.
Limited Marketing Capabilities; Uncertainty of Market Acceptance
Because of the sophisticated nature and early stage of development of its
products, the Company will be required to educate potential customers and
successfully demonstrate that the merits of the Company's products justify the
costs associated with such products. In certain cases, however, the Company
will likely encounter resistance from customers reluctant to make the
modifications necessary to incorporate the Company's products into their
products or production processes. In some instances, the Company may be
required to rely on its distributors or other strategic partners to market its
products. The success of any such relationship will depend in part on the
other party's own competitive, marketing and strategic considerations,
including the relative advantages of alternative products being developed
and/or marketed by any such party. There can be no assurance that the Company
will be able to market its products properly so as to generate meaningful
product sales.
Time Lag from Prototype to Commercial Sales
The sales cycle in the automotive components industry is lengthy and can be
as long as five years or more for products that must be designed into a
vehicle, since some companies take up to five years to design and develop a
car. Even when selling parts that are neither safety-critical nor highly
integrated into the vehicle, there are still many stages that an automotive
supply company must go through before achieving commercial sales. The sales
cycle is lengthy because an automobile manufacturer must develop a high degree
of assurance that the products it buys will meet customer needs, interface as
easily as possible with the other parts of a vehicle and with the automobile
manufacturer's production and assembly process, and have minimal warranty,
safety and service problems. As a result, from the time that an OEM develops a
strong interest in the Company's CCS product, it normally will take several
years before the CCS is available to consumers in that OEM's vehicles.
Radar Technology Still in Development Stage
In contrast to CCS, which has begun commercial production, the Company's
AmeriGuard product is still in a developmental stage. As with all development
projects, the Board of Directors will monitor its progress and future
prospects carefully. If the current test with the New Mexico Highway and
Transportation Department is unsuccessful or the Company's efforts to obtain a
development program with a supplier of truck lighting systems fail, the Board
may reconsider its decision to continue development of the radar technology.
Competition; Possible Obsolescence of Technology
The automotive component industry is subject to intense competition.
Virtually all of the Company's competitors are substantially larger in size,
have substantially greater financial, marketing and other resources than the
Company, and have more extensive experience and records of successful
operations than the Company. Competition extends to attracting and retaining
qualified technical and marketing personnel. There can be no assurance that
the Company will successfully differentiate its products from those of its
competitors, that the marketplace will consider the Company's current or
proposed products to be superior or even comparable to those of its
competitors, or that it can succeed in establishing relationships with
automobile manufacturers. Furthermore, no assurance can be given that the
competitive pressures the Company faces will not adversely affect its
financial performance. Due to the rapid pace of technological change, as with
any technology-based product, the Company's products may be rendered obsolete
by future developments in the industry. The Company's competitive position
would be adversely affected if it was unable to anticipate such future
developments and obtain access to the new technology.
10
Limited Protection of Patents and Proprietary Rights
As of December 31, 1999, the Company owned three patents and had three
patents pending. The Company is also the licensee of sixteen patents. The
Company believes that patents and proprietary rights have been and will
continue to be very important in enabling it to compete. There can be no
assurance that any new patents will be granted or that the Company or its
licensors' patents and proprietary rights will not be challenged or
circumvented or will provide it with any meaningful competitive advantages or
that any pending patent applications will issue. Furthermore, there can be no
assurance that others will not independently develop similar products or will
not design around any patents that have been or may be issued to the Company's
licensors or itself. Failure to obtain patents in certain foreign countries
may materially adversely affect the Company's ability to compete effectively
in certain international markets. The Company is aware that an unrelated party
filed a patent application in Japan on March 30, 1992 with respect to certain
improvements to the CCS technology.
The Company holds current and future rights to licensed technology through
licensing agreements requiring the payment of minimum royalties and must
continue to comply with these licensing agreements. Failure to do so or loss
of such agreements could materially and adversely affect the Company's
business.
The Company also relies on trade secrets that it seeks to protect, in part,
through confidentiality and non-disclosure agreements with employees,
customers, suppliers and other parties. There can be no assurance that these
agreements will not be breached, that the Company would have adequate remedies
for any such breach or that its trade secrets will not otherwise become known
to or independently developed by competitors. To the extent that consultants,
key employees or other third parties apply technological information
independently developed by them or by others to the Company's proposed
projects, disputes may arise as to the proprietary rights to such information
which may not be resolved in the Company's favor. The Company may be involved
from time to time in litigation to determine the enforceability, scope and
validity of proprietary rights. Any such litigation could result in
substantial cost to the Company and diversion of effort by its management and
technical personnel. Additionally, with respect to licensed technology, there
can be no assurance that the licensor of the technology will have the
resources, financial or otherwise, or desire to defend against any challenges
to the rights of such licensor to its patents.
Exclusive License on Heated and Cooled Seats; Non-Exclusive License on Radar
Technology
In 1997, the Company negotiated an exclusive license with the licensor of
the CCS technology for the manufacture and sale of licensed products for
installation or use in automobiles, trucks, buses, vans and recreational
vehicles. As part of the agreement, all intellectual property developed by the
Company related to variable temperature seats is owned by it but such licensor
will have the right to license the Company's technology on a non-exclusive
basis for use in products other than in products used in respect to cars,
trucks, buses, vans and recreational vehicles.
The Company's license from Lawrence Livermore National Laboratory (LLNL) for
one type of radar technology became non-exclusive as of December 31, 1998. The
lack of exclusivity means that the Company has reduced intellectual property
protection for products developed based on this license and faces possible
competition from other companies who can also acquire this license from LLNL.
Special Factors Applicable to the Automotive Industry in General
Automotive customers typically reserve the right to unilaterally cancel
contracts completely or to require unilateral price reductions. Although they
generally reimburse companies for actual out-of-pocket costs incurred with
respect to the particular contract up to the point of cancellation, these
reimbursements typically do not cover costs associated with acquiring general
purpose assets such as facilities and capital equipment, and may be subject to
negotiation and substantial delays in receipts. Any unilateral cancellation
of, or price reduction with respect to, any contract that the Company may
obtain could reduce or eliminate any financial benefits anticipated from such
contract and could have a material adverse effect on its financial condition
and results of operations.
11
Dependence on Key Personnel; Need to Retain Technical Personnel
The Company's success will depend to a large extent upon the continued
contributions of Richard A. Weisbart, President and Chief Executive Officer,
and Dr. Lon E. Bell. The Company has obtained key-person life insurance
coverage in the amount of $2,000,000 on the life of Dr. Bell. The loss of the
services of Dr. Bell, Mr. Weisbart or any of the Company's executive personnel
could have a material adverse effect on the Company. The Company's success
will also depend, in part, upon the Company's ability to retain qualified
engineering and other technical and marketing personnel. There is significant
competition for technologically qualified personnel in the geographical area
of the Company's business and the Company may not be successful in recruiting
or retaining sufficient qualified personnel.
Reliance on Major Contractors; Risks of International Operations
The Company has in the past engaged certain outside contractors to perform
product assembly and other production functions for the Company, and the
Company anticipates that it may desire to engage contractors for such purposes
in the future. The Company believes that there are a number of outside
contractors that provide services of the kind that have been used by the
Company in the past and that the Company may desire to use in the future.
However, no assurance can be given that any such contractors would agree to
work for the Company on terms acceptable to the Company or at all. The
Company's inability to engage outside contractors on acceptable terms or at
all would impair the Company's ability to complete any development and/or
manufacturing contracts for which outside contractors' services may be needed.
Moreover, the Company's reliance upon third party contractors for certain
production functions will reduce the Company's control over the manufacture of
its products and will make the Company dependent in part upon such third
parties to deliver its products in a timely manner, with satisfactory quality
controls and on a competitive basis.
Furthermore, the Company may engage contractors located in foreign
countries. Accordingly, the Company will be subject to all of the risks
inherent in international operations, including work stoppages, transportation
delays and interruptions, political instability, foreign currency
fluctuations, economic disruptions, the imposition of tariffs and import and
export controls, changes in governmental policies and other factors which
could have an adverse effect on the Company's business. See also "Risk of
Foreign Sales."
Potential Product Liability
The Company's business will expose it to potential product liability risks
which are inherent in the manufacturing, marketing and sale of automotive
components. In particular, there may be substantial warranty and liability
risks associated with its products. If available, product liability insurance
generally is expensive. While the Company presently has $6,000,000 of product
liability coverage with an additional $1,000,000 in product recall coverage,
there can be no assurance that the Company will be able to obtain or maintain
such insurance on acceptable terms with respect to other products it may
develop, or that any insurance obtained will provide adequate protection
against any potential liabilities. When and if high volume production begins,
the Company expects to purchase additional insurance coverage. This is
expected to occur with the current policy renewal period of May 1, 2000. In
the event of a successful claim against it, a lack or insufficiency of
insurance coverage could have a material adverse effect on the Company's
business and operations.
Risk of Foreign Sales
Many of the world's largest automotive OEMs are located in foreign
countries. Accordingly, the Company's business is subject to many of the risks
of international operations, including governmental controls, tariff
restrictions, foreign currency fluctuations and currency control regulations.
However, historically, substantially all of the Company's sales to foreign
countries have been denominated in U.S. dollars. As such, the Company's
historical net exposure to foreign currency fluctuations has not been
material. No assurance can be given that future contracts will be denominated
in U.S. dollars, however.
12
Risks Relating to Share Ownership
Controlling Shareholders
On March 29, 1999, the Company entered into a Securities Purchase Agreement
with Westar Capital II LLC ("Westar Capital II") and Big Beaver Investments
LLC ("Big Beaver") (the "Investors") pursuant to which the Investors invested
$9 million in Amerigon in return for 9,000 shares of Series A Preferred Stock
(which are convertible into Class A Common Stock at an initial conversion
price of $1.675 per common share) and Contingent Warrants. The Contingent
Warrants are exercisable only to the extent certain other warrants to purchase
Class A Common Stock are exercised, and then only to purchase a number of
shares in proportion to the shares purchased by the exercise of such other
warrants in an amount equal to the percentage interest in the Company that
they had after the initial investment (on an as converted basis). In
connection with this transaction, the Investors obtained the right to elect a
majority of the Company's directors as well as rights of first refusal on
future financing and registration rights. In addition, based upon the terms of
the Series A Preferred Stock the last sales price as of the close of trading
on December 31, 1999, the Investors have approximately 73.8% of the Company's
common equity (on an as converted basis, excluding options and warrants).
Other Significant Shareholders
As part of the VPA, the Company will grant to Ford warrants exercisable for
Class A Common Shares. A warrant for the right to purchase 82,197 shares of
Class A Common Stock at an exercise price of $2.75 per share was issued and
fully vested on March 27, 2000. Additional warrants will be granted and vested
based upon purchases by Ford of a specified number of CCS units in a given
year throughout the length of the VPA. The exercise price of these additional
warrants depends on when such warrants vest, with the exercise price
increasing each year. If Ford does not achieve specific goals in any year, the
VPA contains provisions for Ford to make up the shortfall in the next
succeeding year. If Ford achieves all of the incentive levels required under
the VPA, warrants will be granted and vested for an additional 986,364 shares
of Class A Common Stock. The total number of shares subject to warrants which
may become vested will be adjusted in certain circumstances for antidilution
purposes, including an adjustment for equity issuances of up to $15 million on
or before September 30, 2000, so that the percentage interest in the Company
represented by the aggregate number of shares subject to warrants is not
diluted by such issuances.
Fluctuations in Quarterly Results; Small "Float" and Possible Volatility of
Stock Price
The Company's quarterly operating results may fluctuate significantly in the
future due to such factors as acceptance of the Company's product by OEMs and
consumers, timing of its product introductions, availability and pricing of
components from third parties, timing of orders, foreign currency exchange
rates, technological changes and economic conditions, generally. Broad market
fluctuations in the stock markets can, obviously, adversely affect the market
price of the Class A Common Stock. In addition, failure to meet or exceed
analysts' expectations of financial performance may result in immediate and
significant price and volume fluctuations in the Class A Common Stock.
Without a significantly larger public float, the Company's Class A Common
Stock will be less liquid than stocks with broader public ownership, and as a
result, trading prices for the Company's Stock may significantly fluctuate and
certain institutional investors may be unwilling to invest in such a thinly
traded security.
Potential Conflicts of Interest
On March 16, 2000, the Company entered into a credit facility with Big Star
Investments LLC ("Big Star") (a limited liability company owned by Westar
Capital II and Big Beaver, the Company's two largest shareholders), for an
initial advance of $1.5 million and, at the Company's request and subject to
Big Star's sole discretion, additional advances of up to an additional $2.5
million. John W. Clark, a director of the Company, is a partner of Westar
Capital II. Oscar Marx, III, Chairman of the Board of the Company, is Chief
Executive Officer of Big Beaver and Paul Oster, a director of the Company, is
Chief Financial Officer of Big Beaver. Both
13
of these companies are partners in the credit facility. This transaction,
combined with Mr. Clark's, Mr. Marx's and Mr. Oster's membership on the Board
of Directors, could give rise to conflicts of interest.
Anti-Takeover Effects of Preferred Stock
The Series A Preferred Stock which is outstanding confers upon its holders
the right to elect five of seven members of the Board of Directors. In
addition, the Series A Preferred Stock will vote together with the shares of
Class A Common Stock on any other matter submitted to shareholders.
In addition, the Company's Board of Directors has the authority to issue up
to 5,000,000 shares of Preferred Stock and to determine the price, rights,
preferences and privileges of those shares without any further vote or action
by the shareholders. The rights of the holders of Class A Common Stock will be
subject to, and may be adversely affected by, the rights of the holders of any
shares of Preferred Stock that may be issued in the future. The issuance of
Preferred Stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire a majority of the
Company's outstanding voting stock.
Future Sales of Eligible Shares May Lower Price of Common Shares
The Company has 1,910,089 shares of Class A Common Stock outstanding as of
the close of trading on December 31, 1999, which are eligible for sale under
Rule 144 of the Securities Act of 1933, as amended. In addition, employees and
directors (who are not deemed affiliates) hold options to buy 871,180 shares
of Class A Common Stock. The Class A Common Stock to be issued upon exercise
of these options, has been registered, and therefore, may be freely sold when
issued. The Company also has outstanding warrants to buy 2,705,374 shares of
Class A Common Stock. Any shares registered will be eligible for resale. If
these shares are not sold they may be included in certain registration
statements to be filed by the Company in the future.
The Company may issue options to purchase up to an additional 598,653 shares
of Class A Common Stock under the Company's stock option plans, which will be
fully transferable when issued.
Furthermore, the Series A Convertible Preferred Stock is convertible into
5,373,134 shares of Class A Common Stock and the holders thereof possess
demand and piggyback registration rights. Future sales by them could depress
the market price of the Class A Common Stock.
Sales of substantial amounts of Class A Common Stock into the public market
could lower the market price of the Class A Common Stock.
Lack of Dividends on Common Stock
The Company has never paid any cash dividends on the Company's Common Stock
and does not anticipate paying dividends in the near future.
ITEM 2. PROPERTIES
The Company maintains its corporate headquarters, manufacturing and research
and development facilities in leased space of approximately 40,000 square feet
in Irwindale, California. The Company's lease expires December 31, 2002. The
current monthly rent under the lease is approximately $20,000. The Company has
other immaterial leased sales offices. The Company believes that these
facilities are adequate for their present requirements.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to litigation from time to time in the ordinary
course of its business, but there is no current pending litigation to which
the Company is a party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
14
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Company's Class A Common Stock trades on the Nasdaq SmallCap Market
under the symbol ARGNA. The Company's Class A Warrants trade on the Nasdaq
Bulletin Board under the symbol ARGNW. The following table sets forth the high
and low bid prices for the Class A Common Stock as reported on the Nasdaq
SmallCap Market for each quarterly period (or part thereof) from the beginning
of the first quarter of 1998 through fourth quarter of 1999. Such prices
reflect inter-dealer prices, without retail mark-up, mark-down or commission
and may not necessarily represent actual transactions.
High(1) Low(1)
------- ------
1998
1st Quarter................................................ $14.06 $5.00
2nd Quarter................................................ 6.88 3.13
3rd Quarter................................................ 3.59 1.25
4th Quarter................................................ 5.00 0.63
1999
1st Quarter................................................ 3.44 0.81
2nd Quarter................................................ 6.22 0.75
3rd Quarter................................................ 5.25 3.00
4th Quarter................................................ 4.91 2.00
- ---------------------
(1) Numbers adjusted to give effect to the 1-for-5 reverse stock split that
became effective on January 26, 1999, upon the filing of an amendment to
the Company's Articles of Incorporation. The Company's Class A Common
Stock began trading on the adjusted basis on the Nasdaq SmallCap Market on
January 28, 1999.
As of March 17, 2000, there were approximately 1,110 holders of record of
the Class A Common Stock (not including beneficial owners holding shares in
nominee accounts). The closing bid price of the Class A Common Stock on
December 31, 1999 was $3.00.
The Company has not paid any cash dividends since formation and, given the
Company's present financial status and their anticipated financial
requirements, does not expect to pay any cash dividends in the foreseeable
future.
On March 16, 2000, the Company obtained a loan from Big Star Investments for
an initial advance of $1.5 million and, at the Company's request and subject
to Big Star's sole discretion, additional advances of up to an additional $2.5
million, which bears interest at 10% per annum and matures on August 31, 2000.
Under the terms of the 2000 Bridge Loan, the principal and accrued interest is
convertible at any time into Class A Common Stock at a conversion price (the
"Conversion Price") equal to the average closing bid price of the Common Stock
during the 10 days preceding the date of the 2000 Bridge Loan (the "Market
Price"). The Conversion Price will be adjusted in the event the Company issues
in excess of $5 million of equity securities in an offering at an issuance
price that is less than the Market Price with respect to the 2000 Bridge Loan.
The adjusted conversion price in such case would be reduced to the issuance
price in such equity offering.
The warrant (the "Warrant") issued in connection with the 2000 Bridge Loan
provides for the purchase of an amount of Class A Common Stock up to 10% of
the principal amount of the 2000 Bridge Loan divided by the exercise price
(the "Exercise Price"). The Exercise Price for the Warrant is the same price
as the Conversion Price. The Warrant will expire if not exercised within 5
years from the date of the 2000 Bridge Loan. Under the terms of the 2000
Bridge Loan, the number of shares issued under the Bridge Loan and Warrant may
not exceed 19.99% of the current outstanding shares of Class A Common Stock.
The securities sold are exempt from registration under the Securities Act of
1933 (the "Securities Act"), as amended, under an exemption for non-public
offerings to accredited investors. Both Westar Capital II and Big Beaver are
accredited investors as defined in the Securities Act. The proceeds from the
sale of securities will be used for working capital and general corporate
purposes.
15
ITEM 6. SELECTED FINANCIAL DATA
Year Ended December 31,
------------------------------------------------
(In thousands except per share data)
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
Total revenues.............. $ 7,809 $ 7,447 $ 1,308 $ 770 $ 784
Net loss.................... (3,237) (9,997) (5,417) (7,704) (7,575)
Net loss per basic and
diluted share(1)........... (4.90) (12.30) (3.08) (4.03) (8.29)
Accumulated deficit......... (13,187) (23,184) (28,601) (36,305) (43,880)
As of December 31,
-------------------------------------
(In thousands)
1995 1996 1997 1998 1999
------ ------- ------- ------ ------
Working capital (deficit)................ $6,481 $(3,315) $ 8,826 $1,190 $1,481
Total assets............................. 8,995 3,922 10,568 2,644 3,721
Capitalized lease obligations............ 68 43 41 65 27
- ---------------------
(1) Numbers adjusted to give effect to the 1-for-5 reverse stock split that
became effective on January 26, 1999, upon the filing of an amendment to
the Articles of Incorporation of the Company. The Company's Class A Common
Stock began trading on the adjusted basis on the Nasdaq SmallCap Market on
January 28, 1999. See "Item 4 Submission of Matters to a Vote of Security
Holders."
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
financial statements of the Company and related notes thereto appearing
elsewhere in this report, and is qualified in its entirety by the same and by
other more detailed financial information appearing elsewhere in this report.
Overview
Amerigon Incorporated is in the business of developing and manufacturing
vehicle components for automotive OEMs. The Company was incorporated in
California on April 23, 1991 as a research and development entity focused on
creating electric vehicles ("EV"). During 1998, the Company decided to suspend
funding activities associated with EV and directed its resources to developing
and commercializing the Climate Control Seat(TM) ("CCS(TM)") and Radar for
Maneuvering and Safety ("AmeriGuard(TM)"), which are both products of the
Company's research. On May 26, 1999, the shareholders of the Company voted to
discontinue EV operations. As a result, the Company is now principally
positioned to bring to market the CCS and AmeriGuard product lines and,
accordingly, has incurred significant sales and marketing, prototype and
engineering expenses to gain orders for production vehicles.
The Company is now operating as a supplier to the auto industry. Inherent in
this market are costs and expenses well in advance of the receipt of orders
(and resulting revenues) from customers. This is due in part to OEM's
requiring the coordination and testing of proposed new components and sub-
systems. Revenues from these expenditures may not be realized for two to three
years as the OEMs tend to group new components and enhancements into annual or
every two to three year vehicle model introductions.
Results of Operations Year Ended December 31, 1999 Compared to Year Ended
December 31, 1998
Revenues. Revenues for year ended December 31, 1999 ("1999") were $784,000
as compared with revenues of $770,000 in the year ended December 31, 1998
("1998"). The change was due to a decrease in revenues generated by the direct
development contracts associated with the radar program of $304,000 offset by
the increase in product shipments for the CCS program of $318,000 as the
Company began shipping mass-volumes of its CCS in the fourth quarter of 1999.
16
Product Costs. Product costs increased from $48,000 in 1998 to $962,000 in
1999. During 1999, the Company continued to incur costs related to the ramp-up
of production of the Company's CCS units which began shipping in mass-volumes
starting in the fourth quarter 1999. The Company anticipates product costs to
increase in absolute dollars while decreasing as a percentage of revenue.
Development Contract Costs. Development contract costs increased to
$1,507,000 in 1999 from $1,364,000 in 1998. This was primarily due to the
costs incurred in conjunction with the pre-production of the CCS for a major
automotive supplier which is anticipated to be in production by mid 2000.
Research and Development Expenses. Research and development expenses
decreased to $2,478,000 in 1999 from $3,202,000 in 1998. The decrease was due
to the Company's shift of emphasis from research and development to direct
development contracts and pre-production efforts associated with the
anticipated contracts with CCS.
Selling, General and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses decreased to $3,481,000 in 1999 compared to
$4,098,000 in 1998. The change was due to a decrease in recruiting and other
outside/consulting services in 1999. The Company expects SG&A expenses to
increase as it hires additional employees in connection with the development
of the radar products and the commencement of production and marketing of the
CCS.
Interest Income. Net interest income in 1999 decreased to $105,000 due to a
decline in cash balances before the completion of the sale of Series A
Preferred Stock (See Note 8 to the financial statements). The Company also
incurred interest expense of $14,000 as a result of a bridge loan of
$1,200,000 and $9,000 associated with the amortization of deferred financing
costs.
Results of Operations Year Ended December 31, 1998 Compared to Year Ended
December 31, 1997
Revenues. Total revenues for the year ended December 31, 1998 ("1998")
decreased by $538,000, or approximately 41%, to $770,000, from $1,308,000 for
the year ended December 31, 1997 ("1997"). The decline was primarily due to
the completion of certain development contracts in 1997 and a reduced level of
development contract activity in 1998.
During 1998, development continued on CCS and the Company's radar system,
some of which was funded by development contracts. Development contract
revenue relating to the Company's CCS and radar products decreased to $752,000
in 1998, a decline of $556,000, or approximately 43% from the $1,308,000 in
such revenue recorded for 1997. The decrease in 1998 principally reflects the
Company's completion in 1997 of work on several development contracts. The
Company is not seeking to obtain new development contracts and continues to
focus its efforts on working toward production contracts for CCS and radar
sensor systems.
Development Contract Costs. Development contract costs decreased to
$1,364,000 in 1998 from $2,611,000 in 1997, primarily due to decreased
activity in the Company's electric vehicle program in 1997 and the end of
allocating administrative expenses to this category.
Research and Development. Research and development expenses increased by
$1,130,000 or approximately 55%, in 1998 to $3,202,000 from $2,072,000 in
1997. These expenses represent research and development expenses for which no
development contract has been obtained. The increase was due to an increase in
headcount, tooling expenditures, prototype materials, consulting and travel.
Selling, General and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses decreased by $373,000, or approximately 8%,
in 1998 to $4,098,000 from $4,471,000 in 1997. The decrease in 1998 was
primarily due a reclassification of certain expenses to research and
development, fees related to the electric vehicle development and fees related
to the formation of the joint venture in 1997.
Interest Income. Net interest income totaled $238,000 and $406,000 in 1998
and 1997, respectively. Interest income decreased due to a decline in cash
balances as a result of those funds being used in operations.
17
Liquidity and Capital Resources
As of December 31, 1999, the Company had working capital of $1,481,000.
On March 29, 1999, Big Star provided a secured credit facility (the "1999
Bridge Loan") to the Company for up to $1.2 million which beared interest at
10% per annum and matured on the earlier of September 30, 1999 or the
completion of an equity financing. As additional consideration for the 1999
Bridge Loan, the Company issued detachable five-year warrants to purchase
300,000 shares of Class A Common Stock at $1.03 per share, subject to
adjustment. The warrants were canceled upon the completion of a subsequent
equity investment with the Investors. The 1999 Bridge Loan was secured by a
lien on virtually all of the Company's assets. The 1999 Bridge Loan was
necessary to allow the Company to continue operations pending the closing of a
subsequent equity financing.
On June 8, 1999, the Company completed an equity financing (the "Preferred
Financing") with the Investors pursuant to which the Company sold 9,000 shares
of Series A Convertible Preferred Stock for $9,001,000. The Preferred Stock is
convertible into Class A Common Stock. In addition, the Company issued
warrants to purchase up to 1,229,574 shares of Class A Common Stock. The
warrants were exercisable only to the extent certain other warrants to
purchase Class A Common Stock are exercised and then only in an amount that
will enable the Investors to maintain the same percentage interest in the
Company that they have in the Company after the initial investment on a fully
converted basis. This transaction was approved by the shareholders at the 1999
Annual Meeting.
The Company's principal sources of operating capital have been the proceeds
of its various financing transactions and, to a lesser extent, revenues from
sale of CCS units to JCI, grants, development contracts and sale of prototypes
to customers.
The Company entered into a production contract with JCI for CCS units with
the initial shipments occurring in the fourth quarter of 1999. The Company has
spent to date $2,430,000 for tooling, equipment and materials related to this
contract and expects to spend an additional $730,000 for tooling, equipment
and materials for this product line in the first quarter of 2000. The
agreement with JCI has generated, to date, Product and Development Contract
revenues of $293,000 and $150,000, respectively.
As of December 31, 1999, the cash and cash equivalents decreased by $20,000
primarily due to the cash raised by the Preferred Financing offset by the cash
used in operating activities of $7,491,000, which was mainly attributable to
the net loss of $7,575,000. Investing activities used $869,000 as the Company
purchased production equipment and tooling for CCS production. Financing
activities provided $8,340,000 due primarily to $8,267,000 from net proceeds
of the Preferred Financing.
The Company's initial production orders will not provide adequate volumes to
achieve appropriate profit margins or a positive cash flow. These margins and
cash levels can only be achieved through the addition of future CCS production
orders, along with the introduction of Ameriguard. With these additional
programs, the Company expects to require significant capital to fund expenses
for tooling, the set up of manufacturing and/or assembly processes and other
near-term production engineering and manufacturing, as well as research and
development and marketing of these products.
On March 16, 2000, Big Star provided a senior secured convertible credit
facility (the "2000 Bridge Loan") to the Company for an initial advance of
$1.5 million and, at the Company's request and subject to Big Star's sole
discretion, additional advances of up to an additional $2.5 million, which
bears interest at 10% per annum and matures on August 31, 2000. The principal
and accrued interest of the 2000 Bridge Loan are convertible at any time into
Class A Common Stock at a conversion price (the "Conversion Price") equal to
the average closing bid price of the Common Stock during the ten days
preceding the date of the 2000 Bridge Loan (the "Market Price"). The
Conversion Price will be adjusted in the event the Company issues in excess of
$5 million of equity securities in an offering at an issuance price that is
less than the Market Price with respect to the 2000 Bridge Loan. The adjusted
conversion price in such case would be reduced to the issuance price in such
equity
18
offering. As additional consideration for the 2000 Bridge Loan, the Company
issued a warrant (the "Warrant") to purchase an amount of Class A Common Stock
up to 10% of the principal amount of the 2000 Bridge Loan divided by the
exercise price (the "Exercise Price"). The Exercise Price for the Warrant is
the same price as the Conversion Price. The Warrant will expire if not
exercised within 5 years from the date of the 2000 Bridge Loan. Under the
terms of the 2000 Bridge Loan, the number of shares issued under the Bridge
Loan and Warrant may not exceed 19.99% of the current outstanding shares of
Class A Common Stock. The 2000 Bridge Loan is secured by a lien on virtually
all of the Company's assets.
The Company will need to raise additional cash from financing sources to
fund its operations. There can be no assurance that funding sources will be
obtained or will provide sufficient financing for the Company.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's exposure to market risk for changes in interest rates relate
primarily to the Company's investment portfolio. The Company places its
investments in debt instruments of the U. S. government and in high-quality
corporate issuers. As stated in its policy, the Company seeks to ensure the
safety and preservation of its invested funds by limiting default risk and
market risk. The Company has no investments denominated in foreign country
currencies and therefore is not subject to foreign exchange risk.
The table below presents the carrying value and related weighted average
interest rates for the Company's investment portfolio. The carrying value
approximates fair value at December 31, 1999.
Average Rate of
Return at
Carrying December 31,
Value 1999
Marketable Securities (in thousands) (Annualized)
--------------------- ------------- ---------------
Cash equivalents.............................. $1,647 5.0%
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and related financial information required to be
filed hereunder are indexed on page F-1 of this report and are incorporated
herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
19
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated by reference from the
information contained under the captions entitled "Election of Directors,"
"Executive Officers" and "Section 16(a) Beneficial Ownership Reporting
Compliance" in the Company's definitive proxy statement to be filed with the
Commission in connection with the Company's 2000 Annual Meeting of
Shareholders.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from the
information contained under the captions entitled "Executive Compensation,"
"Executive Compensation Table," "Report of the Compensation Committee on
Executive Compensation," "Compensation Committee Interlocks and Insider
Participation," "Option Grant Table," "Aggregate Options Exercised and Year-
End Values," and "Performance Graph" in the Company's definitive proxy
statement to be filed with the Commission in connection with the Company's
2000 Annual Meeting of Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference from the
information contained under the caption entitled "Security Ownership of
Certain Beneficial Owners and Management" and "Escrow Shares" in the Company's
definitive proxy statement to be filed with the Commission in connection with
the Company's 2000 Annual Meeting of Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference from the
information contained under the caption entitled "Certain Transactions" in the
Company's definitive proxy statement to be filed with the Commission in
connection with the Company's 2000 Annual Meeting of Shareholders.
20
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements.
The following financial statements of the Company and report of
independent accountants are included in Item 8 of this Annual Report:
Page
---- ---
Report of Independent Accountants............................... F-2
Balance Sheets.................................................. F-3
Statements of Operations........................................ F-4
Statements of Shareholders' Equity (Deficit).................... F-5
Statements of Cash Flows........................................ F-6
Notes to Financial Statements................................... F-7
2. Financial Statement Schedule.
The following Schedule to Financial Statements is included herein:
Schedule II--Valuation and Qualifying Accounts, together with the report
of independent accountants thereon.
3. Exhibits.
The following exhibits are filed as a part of this report:
Exhibit
Number Description
------- ----------------------------------------------------------------------
3.1.1 Amended and Restated Articles of Incorporation (the "Articles") of the
Company(1)
3.1.2 Certificate of Amendment of Articles filed with the California
Secretary of State on December 5, 1996(3)
3.1.3 Certificate of Amendment of Articles filed with the California
Secretary of State on January 26, 1999(8)
3.2 Amended and Restated Bylaws of the Company(3)
4.1.1 Form of Warrant Agreement among the Company, the Underwriter and U.S.
Stock Transfer Corporation as Warrant Agent(3)
4.2 Form of Warrant Certificate for Class A Warrant(3)
4.3 Form of Specimen Certificate of Company's Class A Common Stock(1)
4.4 Escrow Agreement among the Company, U.S. Stock Transfer Corporation
and the shareholders named therein(1)
10.1 1993 Stock Option Plan, together with Form of Incentive Stock Option
Agreement and Nonqualified Stock Option Agreement(1)
10.4 Form of Underwriter's Unit Purchase Option(3)
10.5.1 Stock Option Agreement ("Bell Stock Option Agreement"), effective May
13, 1993, between Lon E. Bell and Roy A. Anderson(3)
10.5.2 List of omitted Bell Stock Option Agreements with Company directors(3)
10.6 Form of Indemnity Agreement between the Company and each of its
officers and directors(1)
21
Exhibit
Number Description
------- ----------------------------------------------------------------------
10.7 License Agreement, dated as of January 20, 1994, by and between the
Company and the Regents of the University of California, together
with a letter from the Regents to the Company dated September 19,
1996 relating thereto(3)**
10.7.1 Termination of Limited Exclusive License Agreement dated as of June
1998 between the Company and the Regents of the University of
California(7)
10.7.2 Limited Nonexclusive License Agreement dated as of June 1998 between
the Company and the Regents of the University of California(7)
10.8 Option and License Agreement dated as of November 2, 1992 between the
Company and Feher Design, Inc.(1)
10.9 Shareholders Agreement, dated May 13, 1993, by and among the Company
and the shareholders named therein(1)
10.10 Stock Purchase Agreement and Registration Rights Agreement between the
Company and Fidelity Copernicus Fund, L.P. and Fidelity Galileo Fund,
L.P., dated December 29, 1995(2)
10.11 Stock Purchase Agreement and Registration Rights Agreement between the
Company and HBI Financial Inc., dated December 29, 1995(2)
10.13 Joint Venture Agreement between Yazaki Corporation and Amerigon
Incorporated, dated July 22, 1997(5)
10.14 Amendment to Option and License Agreement between Amerigon and Feher
Design dated September 1, 1997(6)
10.15 Standard Lease dated January 1, 1998 between Amerigon and Dillingham
Partners(6)
10.16 Letter Agreement dated December 16, 1998 between the Company and
Sudarshan K. Maini
10.17 Securities Purchase Agreement dated March 29, 1999 by and among the
Company, Westar Capital II LLC and Big Beaver Investments LLC(7)
10.18 Credit Agreement dated March 29, 1999 between the Company and Big Star
Investments LLC(7)
10.19 Security Agreement dated March 29, 1999 between the Company and Big
Star Investments LLC(7)
10.20 Patent and Trademark Security Agreement dated March 29, 1999 between
the Company and Big Star Investments LLC(7)
10.21 Bridge Warrant dated March 29, 1999(7)
10.22 Share Exchange Agreement dated March 29, 1999 between the Company and
Lon E. Bell(7)
10.23 Credit Agreement dated March 16, 2000 between the Company and Big Star
Investments LLC
10.24 Security Agreement dated March 16, 2000 between the Company and Big
Star Investments LLC
10.25 Patent and Trademark Security Agreement dated March 16, 2000 between
the Company and Big Star Investments LLC
10.26 Bridge Loan Warrant dated March 16, 2000
10.27 Letter to Amerigon Incorporated Regarding Series A Preferred Stock
23.1 Consent of PricewaterhouseCoopers LLP
27 Financial Data Schedule
22
(b) Reports on Form 8-K.
During the quarter ended December 31, 1999, the Company filed no Current
Reports on Form 8-K.
- ---------------------
(1) Previously filed as an exhibit to the Company's Registration Statement on
Form SB-2, as amended, File No. 33-61702-LA, and incorporated by
reference.
(2) Previously filed as an exhibit to the Company's Current Report on Form 8-K
filed January 5, 1996 and incorporated by reference.
(3) Previously filed as an exhibit to the Company Registration Statement on
Form S-2, as amended, File No. 333-17401, and incorporated by reference.
(4) Previously filed as an exhibit to the Company's Current Report on Form 8-
K, event date June 16, 1997, and incorporated herein by reference.
(5) Previously filed as an exhibit to the Company's Current Report on Form 8-
K, event date July 22, 1997, and incorporated herein by reference.
(6) Previously filed as an exhibit to the Company's Current Report on Form 10-
K for the period ended December 31, 1997, and incorporated herein by
reference.
(7) Previously filed as an exhibit to the Company's Current Report on Form 10-
K for the period ended December 31, 1998 and incorporated herein by
reference.
(8) Previously filed as an exhibit to the Company's Current Report on Form 10-
Q for the period ended June 30, 1999 and incorporated herein by reference.
23
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Accountants.......................................... F-2
Balance Sheets............................................................. F-3
Statements of Operations................................................... F-4
Statements of Shareholders' Equity (Deficit)............................... F-5
Statements of Cash Flows................................................... F-6
Notes to Financial Statements.............................................. F-7
F-1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Amerigon Incorporated
In our opinion, the financial statements listed in the index appearing under
Item 14 (a) (1) on page 21 present fairly, in all material respects, the
financial position of Amerigon Incorporated at December 31, 1999 and 1998, and
the results of its operations and its cash flows for each of the three years
in the period ended December 31, 1999 in conformity with accounting principles
generally accepted in the United States. In addition, in our opinion, the
financial statement schedule listed in the index appearing under Item 14 (a)
(2) on page 21 presents fairly, in all material respects, the information set
forth therein when read in conjunction with the related financial statements.
These financial statements and financial statement schedule are the
responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements and financial statement schedule
based on our audits. We conducted our audits of these statements in accordance
with auditing standards generally accepted in the United States, which require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses, negative cash
flows from operations, has a significant accumulated deficit, and expects to
incur future losses. These factors raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 2. The accompanying financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
PRICEWATERHOUSECOOPERS LLP
Costa Mesa, California
February 4, 2000, except for Note 10, as
to which the date is March 30, 2000 and
for Note 17, as to which the date is March 27, 2000.
F-2
AMERIGON INCORPORATED
BALANCE SHEETS
(In thousands)
December 31,
-------------------------------
Pro Forma
1999
1999 1998 (Note 18)
-------- -------- -----------
(Unaudited)
ASSETS
Current assets:
Cash & cash equivalents....................... $ 1,647 $ 1,667 $ 1,647
Accounts receivable less allowance of $58 and
$101, respectively........................... 282 174 282
Inventory..................................... 490 105 490
Prepaid expenses and other assets............. 251 136 251
-------- -------- --------
Total current assets........................ 2,670 2,082 2,670
Property and equipment, net.................... 1,051 562 1,051
-------- -------- --------
Total assets................................ $ 3,721 $ 2,644 $ 3,721
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.............................. $ 592 $ 363 $ 592
Deferred revenue.............................. -- 44 --
Accrued liabilities........................... 597 485 597
-------- -------- --------
Total current liabilities................... 1,189 892 1,189
Long term portion of capital lease............. 11 26 11
-------- -------- --------
Total liabilities........................... 1,200 918 1,200
Mandatorily redeemable preferred stock:
Series A--Preferred Stock--no par value;
redeemable and convertible; 9 shares
authorized, 9 and none issued and outstanding
at December 31, 1999 and 1998; none issued
and outstanding pro forma; liquidation
preference of $9,315 (Note 8)................ 8,267 -- --
-------- -------- --------
Commitments (Note 13)
Shareholders' equity (deficit):
Preferred stock:
Series A--no par value; convertible; 9 shares
authorized, none issued and outstanding at
December 31, 1999 and 1998; 9 issued and
outstanding pro forma; liquidation
preference of $9,315 (Note 8)............... -- -- 8,267
Common stock:
Class A--no par value; 20,000 shares
authorized, 1,910 issued and outstanding at
December 31, 1999 and 1998 and pro forma.... 28,149 28,149 28,149
Class B--no par value; 600 shares authorized,
none issued and outstanding................. -- -- --
Paid-in capital............................... 10,059 9,882 10,059
Deferred compensation......................... (74) -- (74)
Accumulated deficit........................... (43,880) (36,305) (43,880)
-------- -------- --------
Total shareholders' equity (deficit)........ (5,746) 1,726 2,521
-------- -------- --------
Total liabilities and shareholders' equity
(deficit).................................. $ 3,721 $ 2,644 $ 3,721
======== ======== ========
The accompanying notes are an integral part of these financial statements
F-3
AMERIGON INCORPORATED
STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Year Ended December 31,
--------------------------
1999 1998 1997
-------- ------- -------
Revenues:
Product........................................... $ 336 $ 18 $ --
Development contracts............................. 448 752 1,308
-------- ------- -------
Total revenues.................................. 784 770 1,308
Costs and expenses:
Product........................................... 962 48 --
Development contracts............................. 1,507 1,364 2,611
Research and development.......................... 2,478 3,202 2,072
Selling, general and administrative............... 3,481 4,098 4,471
-------- ------- -------
Total costs and expenses........................ 8,428 8,712 9,154
-------- ------- -------
Operating loss..................................... (7,644) (7,942) (7,846)
Interest income.................................... 135 255 477
Interest expense................................... (30) (17) (71)
Gain (loss) on disposal of property and equipment.. (36) -- 2,363
-------- ------- -------
Loss before extraordinary item..................... (7,575) (7,704) (5,077)
-------- ------- -------
Extraordinary loss from extinguishment of
indebtedness...................................... -- -- (340)
-------- ------- -------
Net loss........................................... $ (7,575) $(7,704) $(5,417)
======== ======= =======
Deemed dividend to preferred shareholders (Note
8)................................................ (8,267) -- --
-------- ------- -------
Net loss available to common shareholders.......... $(15,842) $(7,704) $(5,417)
======== ======= =======
Basic and diluted net loss per share:
Loss before extraordinary item.................... $ (8.29) $ (4.03) $ (2.89)
Extraordinary loss from extinguishment of
indebtedness..................................... -- -- (0.19)
-------- ------- -------
Net loss........................................... $ (8.29) $ (4.03) $ (3.08)
======== ======= =======
Weighted average number of shares outstanding...... 1,910 1,910 1,758
======== ======= =======
The accompanying notes are an integral part of these financial statements
F-4
AMERIGON INCORPORATED
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
(In thousands)
Class A
Common Stock
-------------- Paid-in Deferred Accumulated
Shares Amount Capital Compensation Deficit Total
------ ------- ------- ------------ ----------- -------
Balance at December 31,
1996................... 814 $17,321 $ 3,115 $ -- $(23,184) $(2,748)
Issuance of common
stock (public
offering)............. 1,096 10,828 6,617 -- -- 17,445
Conversion of Bridge
Debentures into Class
A Warrants............ -- -- 150 -- -- 150
Net loss............... -- -- -- -- (5,417) (5,417)
----- ------- ------- ---- -------- -------
Balance at December 31,
1997................... 1,910 28,149 9,882 -- (28,601) 9,430
Net loss............... -- -- (7,704) (7,704)
----- ------- ------- ---- -------- -------
Balance at December 31,
1998................... 1,910 28,149 9,882 -- (36,305) 1,726
Issuance of warrants to
purchase Class A
Common Stock in
conjunction with
Bridge Loan Financing
(Note 10)............. -- -- 9 -- -- 9
Issuance of warrants to
purchase Class A
Common Stock in
exchange for
services.............. -- -- 1 -- -- 1
Issuance of shares in
consolidated
subsidiary to
shareholder........... -- -- 88 -- -- 88
Issuance of option to
purchase Class A
Common Stock.......... -- -- 79 (74) -- 5
Net loss............... -- -- -- -- (7,575) (7,575)
----- ------- ------- ---- -------- -------
Balance at December 31,
1999................... 1,910 $28,149 $10,059 $(74) $(43,880) $(5,746)
===== ======= ======= ==== ======== =======
The accompanying notes are an integral part of these financial statements
F-5
AMERIGON INCORPORATED
STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended December 31,
-------------------------
1999 1998 1997
------- ------- -------
Operating Activities:
Net loss........................................... $(7,575) $(7,704) $(5,417)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation and amortization..................... 344 582 162
Provision for doubtful accounts................... (43) 21 --
(Gain) loss from sale of assets................... 36 -- (2,363)
Compensation from grant of non-employee stock
options and warrants............................. 15 -- --
Change in operating assets and liabilities:
Accounts receivable.............................. (65) 60 933
Unbilled revenue................................. -- -- 1,157
Inventory........................................ (385) (70) (35)
Prepaid expenses and other assets................ (115) 60 548
Accounts payable................................. 229 (287) (1,265)
Deferred revenue................................. (44) (53) (57)
Accrued liabilities.............................. 112 164 (133)
------- ------- -------
Net cash used in operating activities........... (7,491) (7,227) (6,470)
------- ------- -------
Investing Activities:
Purchase of property and equipment................. (869) (449) (302)
Proceeds from sale of assets....................... -- 971 1,800
Purchase of short term investments................. (1,854) -- (2,400)
Sale of short term investments..................... 1,854 2,400 --
------- ------- -------
Net cash (used in) provided by investing
activities..................................... (869) 2,922 (902)
------- ------- -------
Financing Activities:
Proceeds from Series A Preferred Stock and
Warrants.......................................... 9,001 -- --
Cost of issuance of Series A Preferred Stock and
Warrants.......................................... (734) -- --
Proceeds from sale of common stock units........... -- -- 20,137
Cost of issuance of common stock units............. -- -- (2,542)
Repayment of line of credit........................ -- -- (1,187)
Repayment of capital lease......................... (15) (65) (2)
Proceeds from Bridge Financing..................... 1,200 -- --
Repayment of Bridge Financing...................... (1,200) -- (3,000)
Proceeds from notes payable to shareholder......... -- -- 250
Repayment of notes payable to shareholder.......... -- -- (450)
Sale of shares in consolidated subsidiary.......... 88 -- --
------- ------- -------
Net cash (used in) provided by financing
activities..................................... 8,340 (65) 13,206
------- ------- -------
Net (decrease) increase in cash and cash
equivalents.................................... (20) (4,370) 5,834
------- ------- -------
Cash and cash equivalents at beginning of
period......................................... 1,667 6,037 203
------- ------- -------
Cash and cash equivalents at end of period...... $ 1,647 $ 1,667 $ 6,037
======= ======= =======
Supplemental disclosures of cash flow information:
Cash paid for interest............................ $ 21 $ 17 $ 71
======= ======= =======
Supplemental schedule of non-cash activity
Purchase of equipment under capital lease......... $ -- $ 50 $ 23
======= ======= =======
The accompanying notes are an integral part of these financial statements
F-6
Note 1 -- The Company
Amerigon Incorporated (the "Company"), incorporated in California in April
1991, is a developer, marketer and manufacturer of proprietary, high
technology electronic components and systems for sale to car and truck
original equipment manufacturers ("OEMs"). The Company is currently focusing
the majority of its efforts on the introduction of its primary product, a
Climate Control Seat(TM) ("CCS(TM)"), which provides both heating and cooling
to seat occupants. The Company has one other product under development, the
AmeriGuard(TM) radar-based speed and distance sensor system, which alterts
drivers to the presence of objects near the vehicle.
Historically, the Company's operations have focused on the research and
development of technologies to adapt them for a variety of uses in the
automotive industry. In the automotive components industry, products typically
proceed through five stages of research and development and commercialization.
Initial research on the product concept comes first, in order to assess its
technical feasibility and economic costs and benefits, and often includes the
development of an internal prototype for the supplier's own evaluation of the
product. If the product appears feasible, a functioning prototype or
demonstration prototype is manufactured by the component supplier to
demonstrate and test the features of the product. This prototype is then
marketed to automotive companies to generate sales of evaluation prototypes
for internal evaluation by the automobile manufacturer. If the automobile
manufacturer remains interested in the product after testing initial
evaluation prototypes, it typically works with the component supplier to
refine the product and then purchase second and subsequent generation
engineering prototypes for further evaluation. Finally, the automobile
manufacturer determines to either purchase the component for a production
vehicle or terminate interest in the component.
Through September 30, 1999, the Company was in the development stage. During
the fourth quarter of 1999, the Company's planned principal operations
commenced with the first significant sales and production of CCS systems.
Accordingly, the Company is no longer considered a development stage company.
Disposition of Electric Vehicle Operations
The Company was originally founded to focus on advanced automotive
technologies, including electric vehicle systems ("EV"). As a recipient of a
number of federal and state government grants relating to the development of
EV, the Company spent many years developing and conducting research on EV, and
had research and development contracts with commercial companies relating to
EV. The Company incurred substantial losses from EV activities, including
significant cost overruns on an EV development contract. By December 31, 1997,
the Company had completed substantially all work on its EV contracts.
During 1997, the Company's Board of Directors decided to focus primarily on
the CCS and AmeriGuard radar products. After trying and failing to obtain
either a strategic partner who would provide financing for an EV joint
venture, or to purchase for its EV assets, the Board of Directors decided to
suspend funding the EV program (effective August 1998) because it was
generating continuing losses and utilizing resources that the Board felt would
be better utilized in development of the CCS and radar products. In June 1999,
the Company disposed of its electric vehicle operations (Note 14).
Note 2 -- Basis of Presentation
Basis of Presentation
The Company has suffered recurring losses and negative cash flows from
operations since inception and has a significant accumulated deficit and
expects to incur future losses. Consequently, in order to fund continuing
operations, the Company will need to raise additional financing. These
conditions raise substantial doubt about the Company's ability to continue as
a going concern. The Company's ability to continue as a going concern is
dependent upon its ability to generate sufficient cash flow to meet its
obligations as they come due. In this regard, on March 8, 2000, the Board of
Directors approved a financing transaction with an investor group to obtain a
bridge loan (Note 17), which is due at the earlier of August 31, 2000 or the
occurrence of certain Trigger Events, as described in Note 17. Management is
seeking additional sources of permanent equity or long term financing to fund
its operations. The outcome of such efforts to obtain additional financing
cannot be assured.
F-7
Note 2 -- Basis of Presentation (Continued)
The Company's financial statements have been prepared on the basis of
accounting principles applicable to a going concern. Accordingly, they do not
include any adjustments relating to the recoverability of the carrying amount
of recorded assets or the amount of liabilities that might result from the
outcome of these uncertainties.
Reverse Stock Split
On January 28, 1999, the Company effected a 1-for-5 reverse stock split.
Share information for all periods has been retroactively adjusted to reflect
the split.
Reclassifications
Certain prior year amounts have been reclassified to conform with current
period presentation.
Note 3 -- Summary of Significant Accounting Policies
Disclosures About Fair Value of Financial Instruments
The carrying amount of all financial instruments, comprising cash and cash
equivalents, accounts receivable, accounts payable, accrued expenses and
capital leases, approximate fair value because of the short maturities of
these instruments.
Use of Estimates
The presentation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original
maturities of less than 90 days to be cash equivalents.
Concentration of Credit Risk
Financial instruments, which subject the Company to concentration of credit
risk, consist primarily of cash equivalents and accounts receivable. Cash
equivalents are invested in a money market fund managed by a major U.S.
financial services company and the credit risk is considered limited. Credit
risk associated with accounts receivable is limited by the large size and
creditworthiness of the Company's commercial customers. The Company maintains
an allowance for uncollectable accounts receivable based upon expected
collectibility and generally does not require collateral.
Inventory
Inventory is valued at the lower of cost, based on the first-in, first-out
basis, or market.
Property and Equipment
Property and equipment, including additions and improvements, are recorded
at cost. Expenditures for repairs and maintenance are charged to expense as
incurred. When property or equipment is retired or otherwise disposed of, the
related cost and accumulated depreciation are removed from the accounts. Gains
or losses from retirements and disposals are recorded as other income or
expense. Long-lived assets to be held and used are reviewed for impairment
whenever events or changes in circumstances indicate that the related carrying
amount may not be recoverable. Management does not believe that there are any
material impairments at December 31, 1999 and 1998.
F-8
Note 3 -- Summary of Significant Accounting Policies (Continued)
Depreciation and amortization are computed using the straight-line method.
The estimated useful lives of the Company's property and equipment are as
follows:
Useful Life in Years
-------------------------
Description of property and equipment:
Equipment....................................... 5
Computer equipment.............................. 1 to 3
Leasehold improvements.......................... Shorter of estimated life
of term of lease
Production tooling.............................. Estimated life of tool
Product Revenues
Revenues from product sales are recognized at the time of shipment to the
customer. Provision for estimated future cost of warranty is recorded when
revenue is recognized.
Development Contract Revenues
The Company has had a series of fixed-price development contracts, which
included (1) specific engineering and tooling services to prepare the
Company's products and the related manufacturing processes for commercial
sales to OEMs and (2) prototype products developed during the research and
development process, some of which are sold to third parties for evaluation
purposes. Revenue is recognized on development contracts using the percentage
of completion method or, in the case of short duration contracts, when the
prototype or service is delivered. All amounts received from customers in
advance of the development effort are reflected on the balance sheet as
Deferred Revenue until such time as the contracted work is performed.
Research and Development Expenses
Research and development activities are expensed as incurred. Research and
development expenses associated with projects that are specifically funded by
development contracts are classified as costs of development contracts in the
Statements of Operations. All other research and development expenses that are
not associated with projects that are not specifically funded by development
contracts are classified as research and development. Research and development
excludes any overhead or administrative costs.
Accounting for Stock-Based Compensation
As permitted by Statement of Financial Accounting Standards ("SFAS") No.
123, "Accounting for Stock-Based Compensation," the Company accounts for its
stock-based compensation arrangements pursuant to Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and
complies with the disclosure provision of SFAS No. 123. Under APB No. 25,
compensation cost is recognized based on the difference, if any, on the date
of grant between the fair value of the Company's stock and the amount an
employee must pay to acquire the stock.
The Company accounts for non-employee stock-based awards in which goods or
services are the consideration received for the equity instruments issued in
accordance with the provision of SFAS No. 123 and Emerging Issues Task Force
No. 96-18, "Accounting for Equity Instruments that are Issued to other than
Employees for Acquiring, or in Conjunction with Selling, Goods or Services."
Income Taxes
Income taxes are determined under guidelines prescribed by SFAS No. 109,
"Accounting for Income Taxes." Under the liability method specified by
SFAS 109, deferred tax assets and liabilities are measured each year based on
the difference between the financial statement and tax bases of assets and
liabilities at the applicable enacted federal and state tax rates. A valuation
allowance is provided for the portion of net deferred tax assets when
management considers it more likely than not that the asset will not be
realized.
F-9
Note 3 -- Summary of Significant Accounting Policies (Continued)
Net Loss per Share
Under the provisions of SFAS 128, "Earnings per Share," basic loss per share
("Basic EPS") is computed by dividing net loss available to common
shareholders by the weighted average number of common shares outstanding
during the period. Diluted loss per share ("Diluted EPS") gives effect to all
dilutive potential common shares outstanding during a period. In computing
Diluted EPS, the treasury stock method is used in determining the number of
shares assumed to be purchased from the conversion of common stock
equivalents.
Because their effects are anti-dilutive, dilutive net loss per share for the
years ended December 31, 1999, 1998 and 1997 does not include the effect of:
December 31,
-----------------------------
1999 1998 1997
--------- --------- ---------
Stock options outstanding for:
1993 and 1997 Stock Option Plans............. 871,180 203,170 115,637
Options granted by an officer to directors
and officers................................ -- 118,422 119,768
Shares of Class A Common Stock issuable upon
the exercise of warrants.................... 2,705,374 1,430,800 1,471,751
Common stock issuable upon the conversion of
Series A Preferred Stock.................... 5,373,134 -- --
--------- --------- ---------
Total........................................ 8,949,688 1,752,392 1,707,156
========= ========= =========
Net loss available to common shareholders represents net loss for the year
ended December 31, 1999, increased by a non-cash deemed dividend of
$8,267,000, to the holders of Series A Preferred Stock (Note 8) resulting from
the beneficial difference between the conversion price and the fair market
value of Class A Common Stock on the date of issuance of the Series A
Preferred Stock.
Comprehensive Loss
For the years ended December 31, 1999, 1998 and 1997, there was no
difference between net loss and comprehensive loss.
Recent Accounting Pronouncement
Effective January 1, 1999, the Company adopted Statement of Position No. 98-
5, "Reporting on the Costs of Start-up Activities." SOP No. 98-5 requires that
all start-up costs related to new operations must be expensed as incurred. In
addition, start-up costs that were capitalized in the past must be written off
when SOP No. 98-5 is adopted. The implementation of SOP 98-5 did not have a
material effect on the financial statements.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." SAB No. 101 provides the SEC staff's views in applying generally
accepted accounting principles to selected revenue recognition issues. SAB No.
101, as amended, is required to be adopted by registrants no later than their
second fiscal quarter of the fiscal year beginning after December 15, 1999.
The Company is currently analyzing SAB No. 101, but believes that adoption of
this new accounting principle will not have a material effect on the Company's
financial statements.
F-10
Note 4 -- Details of Certain Financial Statement Components (in thousands)
December 31,
----------------
1999 1998
------- -------
Inventory:
Raw material.............................................. $ 398 $ 173
Work in Process........................................... 20 30
Finished goods............................................ 192 2
------- -------
610 205
Less: inventory allowance.................................. (120) (100)
------- -------
$ 490 $ 105
======= =======
Prepaid Expenses and Other Assets:
Deposits.................................................. $ 171 $ 104
Prepaid insurance......................................... 80 32
------- -------
$ 251 $ 136
======= =======
Property and Equipment:
Equipment................................................. $ 1,426 $ 1,000
Computer equipment........................................ 672 663
Leasehold improvements.................................... 252 225
Production tooling........................................ 527 330
------- -------
2,877 2,218
Less: accumulated depreciation and amortization............ (1,826) (1,656)
------- -------
$ 1,051 $ 562
======= =======
Accrued Liabilities:
Accrued salaries.......................................... $ 220 $ 201
Accrued vacation.......................................... 187 171
Other accrued liabilities................................. 190 113
------- -------
$ 597 $ 485
======= =======
Property and equipment includes assets acquired under capital leases of
approximately $50,000 at December 1999 and 1998, respectively, and accumulated
amortization of $13,000 and $10,000 at December 31, 1999 and 1998,
respectively.
Note 5 -- Income Taxes
There are no assets or liabilities for income taxes, nor income tax expense
included in the financial statements because the Company has losses since
inception for both book and tax purposes. The deferred tax assets and related
valuation allowance were comprised of the following at December 31 (in
thousands):
December 31,
----------------------------
1999 1998 1997
-------- -------- --------
Deferred tax assets:
Net Operating Loss............................ $ 15,316 $ 12,488 $ 9,755
Credits....................................... 798 718 551
Effect of State Taxes......................... (596) (480) (390)
Depreciation.................................. 253 219 74
Other......................................... 168 122 56
-------- -------- --------
Less: valuation allowance...................... 15,939 13,067 10,046
(15,939) (13,067) (10,046)
-------- -------- --------
Net deferred tax asset....................... $ -- $ -- $ --
======== ======== ========
F-11
Note 5 -- Income Taxes (Continued)
Realization of the future tax benefits related to the deferred tax assets is
dependent on many factors, including the Company's ability to generate taxable
income within the net operating loss carryforward period. Management has
considered these factors in reaching its conclusion that the Company's
deferred tax assets at December 31, 1999 should be fully reserved.
A reconciliation between the statutory federal income tax rate of 34% and
the effective rate of income tax expense for each of the three years ended
December 31, 1999 is as follows:
December 31,
---------------------
1999 1998 1997
----- ----- -----
Statutory federal income tax rate................... (34.0%) (34.0%) (34.0%)
Increase (decrease) in taxes resulting from:
State tax, net of federal benefit.................. (5.8%) (5.8%) (6.1%)
Nondeductible expenses............................. -- 0.1% (1.1%)
Change in valuation allowance..................... 39.8% 39.7% 41.2%
----- ----- -----
Effective Rate...................................... --% --% --%
===== ===== =====
At December 31, 1999 the Company has net operating loss carryforwards for
federal and state income tax purposes of approximately $40.1 million and $19.0
million, respectively, and tax credits for federal and state income tax
purposes of $488,000 and $310,000, respectively. The federal net operating
loss carryforwards expire in 2008 through 2019 and state net operating loss
carryforwards expire in 1999 through 2004.
Because of the "change of ownership" provision of the Tax Reform Act of
1986, utilization of the Company's net operating loss and research credit
carryforwards may be subject to annual limitation against income in future
periods. As a result of the annual limitation, a portion of these
carryforwards may expire before ultimately becoming available to reduce future
tax liabilities.
Note 6 -- Extraordinary Loss
In connection with the repayment of debt financing in 1997, the Company
recorded a non-cash charge of $340,000 resulting from the elimination of the
remaining unamortized portion of the deferred debt issuance costs.
Note 7 -- Bridge Note
On March 29, 1999, the Company entered into a Security Purchase Agreement
(the "Preferred Financing") with Westar Capital II and Big Beaver (Note 8) for
the sale of Series A Preferred Stock. In connection with the Preferred
Financing, prior to the close of the Preferred Financing, the investors
extended to the Company $1,200,000 in bridge notes bearing interest at 10% per
annum which were due and payable upon the earlier of the closing of the
Preferred Financing or September 30, 1999. At the close of the sale of the
Preferred Financing, the Company repaid the bridge notes and $14,000 in
interest to the investors with proceeds received from the sale of Series A
Preferred Stock. As discussed in Note 10, in conjunction with the issuance of
these bridge notes, the Company granted warrants to purchase 300,000 shares of
Class A Common Stock which were canceled upon the close of the Preferred
Financing.
Note 8 -- Redeemable and Convertible Preferred Stock
Under the terms of the Preferred Financing, on June 8, 1999, the Company
issued 9,000 shares of Series A Preferred Stock and warrants to purchase up to
1,229,574 shares of Class A Common Stock (Note 10) in exchange for $9,001,000.
Costs in connection with the financing were $734,000, resulting in net
proceeds of $8,267,000. The Series A Preferred Stock will initially be
convertible into 5,373,134 shares of Class A Common Stock.
F-12
Note 8 -- Redeemable and Convertible Preferred Stock (Continued)
Also in conjunction with the Preferred Financing, in accordance with
Emerging Issues Task Force Consensus No. 98-5, "Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently Adjustable
Conversion Ratios", the Company recorded a non-cash deemed dividend to the
Series A Preferred shareholders of $8,267,000, or $4.33 per weighted average
common share outstanding for the year ended December 31, 1999, resulting from
the difference between the conversion price of $1.675 and the closing price of
Class A Common Stock on the date of issuance, June 8, 1999 of $4.31.
Conversion
Each issued share of Series A Preferred Stock is immediately convertible, in
full and not in part, into shares of Class A Common Stock based on the formula
of $1,000 of the face value divided by the Conversion Price. The Conversion
Price is $1.675, subject to proportional adjustments for certain dilutive
issuance, splits and combinations and other recapitalizations or
reorganizations. A total of 5,373,134 shares of Class A Common Stock has been
reserved for issuance in the event of the conversion of Series A Convertible
Preferred Stock.
Voting Rights
The holder of each share of Series A Preferred Stock has the right to one
vote for each share of Class A Common Stock into which such Series A Preferred
Stock could then be converted. The holders of this Series A Preferred Stock,
as a class, have the right to elect five of the seven seats on the Board of
Directors of the Company.
Dividends
The Series A Redeemable and Convertible Preferred Stock will receive
dividends on an "as-converted" basis with the Class A Common Stock when and if
declared by the Board of Directors. The dividends are noncumulative and are
payable in preference to any dividends on common stock.
Liquidation Preference
Upon liquidation, dissolution or winding up of Amerigon, including a merger,
acquisition or sale of assets where there is a change in control, each share
of Series A Redeemable and Convertible Preferred Stock is entitled to a
liquidation preference of $1,000 plus 7% of the original issue price ($1,000)
annually for up to four years after issuance plus any declared but unpaid
dividends in priority to any distribution to the Class A Common Stock, which
will receive the remaining assets of Amerigon. As of December 31, 1999, the
liquidation preference was $9,315,000.
The Company's Certificate of Determination of Rights, Preferences and
Privileges of the Series A Preferred Stock ("Certificate") states that a
liquidation, dissolution or winding up of the Company shall be deemed to be
occasioned by (A) the acquisition of the corporation by another entity by
means of any transaction or series of related transactions (including, without
limitation, any reorganization, merger or consolidation) or (B) a sale of all
or substantially all of the assets of the corporation unless the corporation's
shareholders will immediately after such acquisition or sale hold at least 50%
of the voting power of the surviving or acquiring entity. This provision is
deemed to be a condition of redemption that is not solely within the control
of the issuer. As such, the Company is required to classify the Series A
Preferred Stock as mandatorily redeemable or mezzanine equity. In March 2000,
the holders of the Series A Preferred Stock agreed to amend the Certificate to
eliminate this provision (Note 18).
Redemption
On or after January 1, 2003, if the closing price of the Class A Common
Stock for the past 60 days has been at least four times the then Conversion
Price ($1.675 per share at December 31, 1999), Amerigon may redeem the Series
A Redeemable and Convertible Preferred Stock for an amount equal to the
liquidation preference.
F-13
Note 9 -- Common Stock
The Class A and Class B Common Stock are substantially the same on a share-
for-share basis, except that holders of outstanding shares of Class B Common
Stock will be entitled to receive dividends and distributions upon liquidation
at a per share rate equal to five percent of the per share rate received by
holders of outstanding shares of Class A Common Stock. The Class B Common
Stock is neither transferable nor convertible and is subject to cancellation
under certain circumstances. At December 31, 1999 and 1998, no shares of Class
B Common Stock were issued and outstanding. As discussed below, 600,000 shares
were held in escrow as Class A Common Stock at December 31, 1998, of which
518,580 were released as Class B Common Stock on April 30, 1999. These Class B
shares were reacquired and canceled as part of the sale of the EV subsidiary
in 1999 (Note 14).
Follow-on Public Offering of Class A Common Stock and Class A Warrants
On February 18, 1997, the Company completed a public offering of 17,000
units (the "Units"), each consisting of 56 shares of Class A Common Stock and
280 Class A Warrants to purchase, at $25.00 per share plus five warrants,
Class A Common Stock, resulting in the issuance of 952,000 shares of Class A
Common Stock and 4,760,000 Class A Warrants. In addition, on March 7, 1997,
the underwriter exercised an option to purchase an additional 2,550 Units or
142,800 shares of Class A Common Stock and 714,000 Class A Warrants
to cover over allotments. Proceeds to the Company, net of expenses of
$2,541,500, were approximately $17,445,000. Fees to the underwriter included
an option until February 12, 2002, to purchase 340 Units (the "Unit Purchase
Option") at 145% of the price to the public. The Unit Purchase Option is not
exercisable by the underwriter until February 12, 2000.
Escrow Agreement
Prior to the effective date of the June 1993 initial public offering of the
Company's common stock, 600,000 shares of the Company's Class A Common Stock
("Escrowed Contingent Shares") were deposited into escrow by the then existing
shareholders in proportion to their then current holdings. These shares were
scheduled to be released from escrow upon the earlier of (1) the attainment
during the period through December 31, 1998 of certain goals, as adjusted,
including prescribed earnings levels or (2) on April 30, 1999. All shares that
had not been released from escrow by April 30, 1999 were to be exchanged for
shares of Class B Common Stock, which then would be released from escrow to
the shareholders who remained either an employee, director or consultant of
the Company on April 30, 1999. As the Company did not achieve such goals, on
April 30, 1999, 518,580 shares held in escrow were automatically exchanged for
shares of Class B Common Stock and were released to Lon Bell, the only
remaining shareholder. The remaining 81,420 shares were canceled. In
conjunction with the sale of the EV subsidiary, (Notes 1 and 14), all shares
of Class B Common Stock were acquired by the Company and canceled.
Note 10 -- Stock Warrants
Warrants Issued in Connection with the Preferred Financing
In conjunction with the Preferred Financing (Note 8), the Company issued
contingent warrants to purchase shares of Class A Common Stock at exercise
prices ranging from $2.67 to $51.25 in exchange for $1,000. At December 31,
1999, the Company had outstanding contingent warrants to issue 1,229,574
shares of Class A Common Stock. Effective March 27, 2000, as a result of the
issuance to Ford Motor Company of a warrant to purchase shares of the
Company's Class A Common Stock (Note 17), the Company had outstanding
contingent warrants to issue 1,266,456 shares of Class A Common Stock. The
warrants can only be exercised to the extent that certain other warrants to
purchase Class A Common Stock are exercised by existing warrant holders and
then only in the proportion of the Company's equity purchased and at the same
exercise price as the exercising warrant holders. The proceeds of the
preferred financing were allocated between the preferred stock and the
warrants based on the relative fair values of the preferred stock and the
warrants. The value allocated to the warrants granted was less than $1,000.
The warrants are exercisable at any time prior to dates ranging from December
28, 2000 to March 23, 2004. None of the warrants had been exercised as of
December 31, 1999.
F-14
Note 10 -- Stock Warrants (Continued)
Also in conjunction with the Preferred Financing (Note 8), the Company
granted to financial advisors warrants to purchase 45,000 shares of Class A
Common Stock at exercise prices ranging from $2.67 to $5.30. The fair value of
the warrants granted, as determined using the Black-Scholes model was $1,000
and was reflected as paid-in capital. The warrants are exercisable at various
dates ranging from March to June 2004 and none had been exercised as of
December 31, 1999.
In conjunction with the issuance of bridge notes as described in (Note 7),
the note holders received warrants to purchase 300,000 shares of Class A
Common Stock at an exercise price of $1.03. Such warrants would only become
exercisable at anytime during a period beginning on the date that the
Preferred Financing was terminated and ending five years after such date, but
would terminate upon the closing of the Preferred Financing. The fair value of
the warrants granted was $9,000 and was recorded as interest expense. Upon the
closing of the Preferred Financing in June 1999, (Note 8), these warrants were
canceled.
Warrants Issued in Connection with Public Offerings
In connection with debt financing obtained in 1996 and the follow-on public
offering completed in 1997 (Note 9), at December 31, 1999, the Company had in
the aggregate 7,094,000 outstanding warrants to issue 1,418,800 shares of
Class A Common Stock (324,000 shares related to the 1996 debt financing and
1,094,800 shares related to the 1997 public offering). At December 31, 1999,
each registered warrant holder was entitled to convert five warrants for one
share of Class A Common Stock at an exercise price of $25.00.
Effective March 27, 2000, as a result of the issuance to Ford Motor Company
of a warrant to purchase shares of the Company's Class A Common Stock (Note
17) and subject to the surrender by holders of existing warrant certificates,
the Company had in the aggregate 7,343,880 outstanding warrants to issue
1,468,776 shares of Class A Common Stock. As of such date, each registered
warrant holder was entitled to convert five warrants for one share of Class A
Common Stock at an exercise price of $24.149.
On March 30, 2000, the Company announced its election to reduce by a factor
of five the number of outstanding warrants, rather than continue to require
five warrants to be exercised in order to acquire one share of Class A Common
Stock. Each warrant outstanding after making this adjustment will represent
the same interest as five outstanding warrants. As a result of this election
and subject to the surrender by holders of existing warrant certificates and
the cancellation of any warrants to acquire less than one share of Class A
Common Stock, the Company will have in the aggregate 1,468,776 outstanding
warrants to issue 1,468,776 shares of Class A Common Stock, with each
registered warrant holder entitled to convert one warrant for one share of
Class A Common Stock at an exercise price of $24.149.
The Company may, upon 30 days' written notice, redeem each Class A Warrant
in exchange for $.05 per Class A Warrant, provided that before any such
redemption, the closing bid price of the Class A Common Stock as reported by
the NASDAQ SmallCap Market or the closing bid price on any national exchange
(if the Company's Class A Common Stock is listed thereon) shall have, for 30
consecutive days ending within 15 days of the date of the notice of
redemption, averaged in excess of $43.75 (subject to adjustment in the event
of any stock splits or other similar events). As of December 31, 1999, the
Company had not exercised this option and none of these warrants had been
exercised.
In connection with the Company's June 1993 initial public offering of its
common stock, the Company issued to third parties warrants to purchase 12,000
shares of Class A Common Stock at $51.25 per share as a financial advisory
fee. These warrants expire on December 28, 2000 and none of the warrants had
been exercised as of December 31, 1999.
Note 11 -- Stock Options
1993 and 1997 Stock Option Plans
Under the Company's 1997 and 1993 Stock Option Plans (the "Plans"), as
amended in June 1995, 150,000 and 110,000 shares, respectively of the
Company's Class A Common Stock are reserved for issuance, pursuant
F-15
Note 11 -- Stock Options (Continued)
to which officers and employees of the Company as well as other persons who
render services to or are otherwise associated with the Company are eligible
to receive qualified ("incentive") and/or non-qualified stock options. On June
23, 1999, the Board of Directors approved an amendment to the 1997 Stock
Option Plan to increase the maximum number of shares of Common Stock that may
be delivered pursuant to all Options (including both Nonqualified Stock
Options and Incentive Stock Options) granted not to exceed 1,300,000 shares.
This amendment is subject to shareholder approval.
The Plans, which expire in April 2007 and 2003, respectively, are
administered by the Board of Directors or a stock option committee designated
by the Board of Directors. The selection of participants, allotment of shares,
determination of price and other conditions are determined by the Board of
Directors or stock option committee at its sole discretion, in order to
attract and retain personnel instrumental to the success of the Company.
Incentive stock options granted under both Plans are exercisable for a period
of up to ten years from the date of grant at an exercise price which is not
less than the fair market value of the Common Stock on the date of the grant,
except that the term of an incentive stock option granted under the Plans to a
shareholder owning more than 10% of the voting power of the Company on the
date of grant may not exceed five years and its exercise price may not be less
than 110% of the fair market value of the Common Stock on the date of the
grant.
Options Granted by Vice Chairman ("Bell Options")
Dr. Lon E. Bell, the Vice Chairman and founder of the Company, had granted
options to purchase shares of his Class A Common Stock, 75% of which were
Escrowed Contingent Shares (Note 9). The holder of these options could
exercise the portions of his options related to Escrowed Contingent Shares
only upon release of these shares from escrow as Class A Common Stock. As
discussed in Note 9, shares held in escrow were released on April 30, 1999 as
Class B Common Stock. As such, all options to purchase shares of Dr. Bell's
Class A Common Stock were canceled. In conjunction with the sale of the EV
subsidiary (Notes 1 and 14), all shares of Class B Common Stock were canceled.
The following table summarizes stock option activity:
1993 and 1997
Stock Option Plans Bell Options
------------------ -------------------
Weighted Weighted
Shares Number of Average Number of Average
Available Options Exercise Options Exercise
For Grant Granted Price Granted Price
--------- --------- -------- --------- --------
Outstanding at December 31,
1996....................... 312,059 53,165 $47.20 135,386 $12.00
Granted..................... (115,880) 115,880 17.50 -- --
Canceled.................... 76,323 (53,408) 46.10 (13,305) 33.45
Exercised................... -- -- -- (2,313) 5.75
--------- ------- ------ -------- ------
Outstanding at December 31,
1997....................... 272,502 115,637 18.45 119,768 13.55
Granted..................... (120,995) 120,995 6.15 -- --
Canceled.................... 27,370 (33,462) 13.15 (1,346) 5.75
--------- ------- ------ -------- ------
Outstanding at December 31,
1998....................... 178,877 203,170 11.95 118,422 13.25
Authorized.................. 1,150,000 -- -- -- --
Granted..................... (759,000) 759,000 3.16 -- --
Canceled.................... 28,776 (90,990) 8.03 (118,422) 13.25
--------- ------- ------ -------- ------
Outstanding at December 31,
1999....................... 598,653 871,180 $ 8.43 -- $ --
========= ======= ====== ======== ======
F-16
Note 11 -- Stock Options (Continued)
The following table summarizes information concerning currently outstanding
and exercisable stock options for the 1993 and 1997 Stock Option Plans as of
December 31, 1999:
Options Exercisable
Options Outstanding at at
December 31, 1999 December 31, 1999
-------------------------------------- ---------------------
Weighted- Weighted-
Weighted-Average Average Number Average
Range of Number Remaining Exercise Vested and Exercise
Exercise Prices Outstanding Contractual Life Price Exercisable Price
--------------- ----------- ---------------- --------- ----------- ---------
$ 1.55-
3.06 643,700 9.44 $ 3.05 120,414 $ 3.06
3.31- 3.88 91,000 8.88 3.59 -- --
4.00-11.40 56,220 8.86 7.15 8,067 10.34
13.15-18.15 75,000 2.16 17.25 64,998 17.11
20.30-51.85 5,260 2.44 21.13 5,259 21.13
------- -------
871,180 198,738
======= =======
The Company accounts for these plans under APB Opinion No. 25. Had
compensation expense for these plans been determined consistent with SFAS 123,
the Company's net loss and net loss per share would have been increased to the
pro forma amounts in the following table. The pro forma compensation costs may
not be representative of that to be expected in future years.
Years ended
December 31,
----------------
1999 1998
------- -------
(In thousands,
except per
share data)
Net loss
As reported............................................ $(7,575) $(7,704)
Pro forma.............................................. (9,401) (8,274)
Basic and diluted loss per share
As reported............................................ $ (8.29) $ (4.03)
Pro forma.............................................. (9.25) (4.33)
The fair value of each stock option grant has been estimated pursuant to
SFAS 123 on the date of grant using the Black-Scholes option-pricing model
with the following weighted average assumptions:
1993 and 1997
Stock Option
Plans
-----------------
1999 1998
-------- --------
Risk free interest rates................................. 6% 6%
Expected dividend yield.................................. none none
Expected lives........................................... 4.5 yrs. 4.3 yrs.
Expected volatility...................................... 96% 60%
The weighted average grant date fair values of options granted under the
1993 and 1997 Stock Option Plans during 1999 and 1998 were $3.14 and $6.26,
respectively.
Note 12 -- Licenses
Climate Control Seat System. In 1992, the Company obtained the worldwide
license to manufacture and sell technology for a CCS system to individual
automotive OEMs. Under the terms of the license agreement, royalties are
payable based on cumulative net sales and do not require minimum payments. The
Company has recorded royalty expense under this license agreement of $43,000,
$43,000 and $18,000 in 1999, 1998 and 1997, respectively. These royalties are
recorded as research and development expense.
F-17
Note 12 -- Licenses (Continued)
Radar System. In January 1994, the Company entered into a license agreement
for exclusive rights in certain automotive applications to certain radar
technology. Royalties are required to be paid based on cumulative net sales
and are subject to minimum annual royalties beginning in 1995. The minimum
royalty payments for 1997 were $150,000 and were expensed as research and
development costs. This licensing agreement was converted to a non-exclusive
agreement in 1998.
Note 13 -- Commitments
The Company leases its current facility in Irwindale, California from a
partnership controlled by Dr. Bell, a significant shareholder of the Company.
The Company believes that the terms of the lease are at least as favorable as
those that could be obtained from other lessors. The agreement expires on
December 31, 2002, and requires the Company to pay $20,000 per month. The
Company also leases certain equipment under operating leases, which expire
through 2002. Rent expense under all of the Company's operating leases was
$268,000, $266,000 and $415,000 for 1999, 1998 and 1997, respectively. Future
minimum lease payments under all operating leases are $266,000, $258,000,
$247,000, in 2000, 2001 and 2002 respectively, and nil thereafter.
The Company has entered into certain office and computer equipment leases
under long-term lease arrangements, which are reported as capital leases. The
terms of the leases range from three to five years with interest rates ranging
from 11.8% to 19.7%. Future minimum lease payments under these capital leases
are $19,000, $6,000 and $6,000, respectively, for years ending December 31,
2000, 2001 and 2002 of which $4,000 represents total interest to be paid and
$16,000 was included in liabilities at December 31, 1999.
Note 14 -- Related Party Transactions
Dr. Bell, Vice Chairman of the Board and founder of the Company, co-founded
CALSTART in 1992, served as its interim President, and for five years had
served on CALSTART's Board of Directors and is a member of its Executive
Committee. Included in accounts receivable at December 31, 1998 and 1999, was
a receivable owed to the Company from CALSTART of $41,000 and nil,
respectively, relating primarily to amounts withheld from payments made by
CALSTART under several development programs.
On March 23, 1999, the Company's Board of Directors agreed to form a
subsidiary to hold the Company's EV operations. Pursuant to discussions held
among the Company's Board of Directors and Dr. Bell, Vice Chairman of the
Board and a significant shareholder of the Company, the Company agreed to sell
to Dr. Bell a 15% interest in the EV subsidiary for $88,000. On March 29,
1999, the 15% was sold to Dr. Bell and was reflected as paid-in capital. On
May 26, 1999, the shareholders voted to sell the remaining interest, 85%, of
the EV subsidiary to Dr. Bell in exchange for all of his Class B Common Stock
(Note 9). The Company recorded a loss of $36,000 on the transfer of related
assets to Dr. Bell.
Note 15 -- Joint Venture Agreement
On July 24, 1997, the Company entered into a joint venture agreement with
Yazaki Corporation ("Yazaki") to develop and market the Company's Interactive
Voice System (IVS(TM)), a voice-activated navigation system. Under the terms
of the agreement, the Company received $1,800,000 in cash and a note
receivable for $1,000,000 in consideration for the net assets related to the
Company's voice interactive technology totaling $89,000. In addition, the
Company incurred costs of $348,000 associated with the sale. In 1998, the
Company received $971,000 in payment of the remaining $1,000,000 noted above.
The $971,000 is net of approximately $29,000 of prior year navigation system
related expenses owed by the Company to IVS.
Note 16 -- Segment Reporting
In 1998, the Company adopted SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information" which requires the Company to disclose
certain segment information used by management for making operating decisions
and assessing the performance of the Company. Essentially, management
evaluates the performance of its segments based primarily on operating results
before depreciation and selling, general and administrative costs. Such
accounting policies used are the same as those described in Note 3.
F-18
Note 16 -- Segment Reporting (Continued)
The Company's reportable segments are as follows:
. Climate Control Seats (CCS) -- variable temperature climate control seat
system designed to improve the temperature comfort of automobile
occupants.
. Radar -- radar-based sensing system that detects objects by reflecting
radar signals near the automobile and provides an audible or visual
signal as the driver approaches the object.
. Electric Vehicle Systems (EV) -- design and development of electric
vehicles and related components. As discussed in Notes 1 and 14, all EV
related assets were sold to Dr. Bell, a significant shareholder of the
Company. Also, as discussed in Note 1, the Company's Board of Directors
decided to suspend funding of the EV program in August 1998.
. Interactive Voice Navigation System (IVS) -- voice recognition technology
incorporating proprietary features and computer systems which allows the
driver to receive directions to their destination while driving their
vehicle. In 1997, the Company entered into a joint venture agreement
whereby all related assets were sold (Note 15).
The table below presents information about the reported revenues and
operating loss of Amerigon for the years ended December 31, 1999, 1998 and
1997 (in thousands). Asset information by reportable segment is not reported,
since management does not produce such information.
Reconciling As
CCS Radar EV IVS Items Reported
------- ----- ------- ----- ----------- --------
1999
Revenue............. $ 784 $ -- $ -- $ -- $ -- $ 784
Operating loss...... (3,316) (847) -- -- (3,481)(1) (7,644)
1998
Revenue............. 396 329 45 -- -- 770
Operating loss...... (2,844) (455) (545) -- (4,098)(1) (7,942)
1997
Revenue............. 451 135 611 111 -- 1,308
Operating loss...... (978) (702) (1,194) (501) (4,471)(1) (7,846)
- ---------------------
(1) Represents selling, general and administrative costs of $3,255,000,
$3,752,000 and $4,309,000, respectively, and depreciation expense of
$226,000, $346,000 and $162,000, respectively, for years ended December
31, 1999, 1998 and 1997.
Revenue information by geographic area (in thousands):
1999 1998 1997
---- ---- ------
United States--Commercial................................ $491 $ 58 $ 211
United States--Government................................ -- 103 416
Asia..................................................... 247 461 556
Europe................................................... 46 148 125
---- ---- ------
Total Revenues........................................... $784 $770 $1,308
==== ==== ======
In 1999, two customers (CCS), one foreign and one commercial, represented
30% and 53%, respectively, of the Company's sales. In 1998 three customers,
two foreign (CCS) and one government (Radar) represented 12%, 30% and 13%,
respectively, of the Company's sales. In 1997, three customers, one foreign
and one government (EV) and one foreign (CCS/Radar) represented 11%, 30% and
19%, respectively, of the Company's sales.
F-19
Note 17 -- Subsequent Events
Bridge Facility
In March 2000, the Company obtained a loan from Big Star for an initial
advance of $1.5 million and, at the Company's request and subject to Big
Star's sole discretion, additional advances of up to an additional
$2.5 million. The advances accrue interest at 10% per annum, payable at
maturity or on the date of any prepayment. The principal and accrued interest
of the initial loan are convertible at any time into Class A Common Stock at
a conversion price (the "Conversion Price") equal to the average closing bid
price of the Common Stock during the ten days preceding the date of the bridge
loan (the "Market Price"). The Conversion price will be adjusted in the event
the Company issues in excess of $5 million of equity securities in an offering
at an issuance price that is less than the Market Price with respect to the
bridge loan. Additional advances will also be convertible based on the average
price of the Company's Class A Common Stock during the ten days preceding such
additional advances. The loans are due on the earlier of August 31, 2000, or
upon the occurrence of a Trigger Event as defined as an event that the Company
(or its Board of Directors) shall have authorized, recommended, proposed or
publicly announced its intention to enter into (or has failed to recommend
rejection of) any tender or exchange offer, merger consolidation, liquidation,
dissolution, business combination, recapitalization, acquisition, or
disposition of a material amount of the assets or securities or any comparable
transaction which has not been consented to in writing by Big Star. The
Company has granted liens on substantially all of its assets as collateral for
this loan. Warrants to purchase Class A Common Stock of the Company were also
issued in connection with the loan for the number of shares equal to 10% of
the principal amount of the advances made divided by the conversion price. The
exercise price for the warrants and provision for future adjustments to their
exercise prices are the same as for the loans.
Ford Agreement
On March 27, 2000, the Company entered into a Value Participation Agreement
("VPA") with the Ford. Pursuant to the VPA, Ford agreed that, through December
31, 2004, the Company has the exclusive right to manufacture and supply CCS
units to Ford's tier 1 suppliers for installation in Ford, Lincoln and Mercury
branded vehicles produced and sold in North America (other than Ford branded
vehicles produced by Auto Alliance, Inc.). Ford is not obligated to purchase
any CCS units under the VPA.
As part of the VPA, the Company will grant to Ford warrants exercisable for
Class A Common Shares. A warrant for the right to purchase 82,197 shares of
Class A Common Stock at an exercise price of $2.75 per share was issued and
fully vested on March 27, 2000. Additional warrants will be granted and vested
based upon purchases by Ford of a specified number of CCS units in a given
year throughout the length of the VPA. The exercise price of these additional
warrants depends on when such warrants vest, with the exercise price
increasing each year. If Ford does not achieve specific goals in any year, the
VPA contains provisions for Ford to make up the shortfall in the next
succeeding year. If Ford achieves all of the incentive levels required under
the VPA, warrants will be granted and vested for an additional 986,364 shares
of Class A Common Stock. The total number of shares subject to warrants which
may become vested will be adjusted in certain circumstances for antidilution
purposes, including an adjustment for equity issuances of up to $15 million on
or before September 30, 2000, so that the percentage interest in the Company
represented by the aggregate number of shares subject to warrants is not
diluted by such issuances.
Modification of the Company's Certificate of Determination
In March 2000, the holders of the Series A Preferred Stock entered into an
agreement whereby, subject to shareholder approval, the holders agreed to
amend the Company's Certificate of Determination to eliminate the provision as
discussed in Note 8, which defined a merger, acquisition or sale of assets
where there is change in control as a liquidation event.
Note 18 -- Unaudited Pro Forma Balance Sheet Information
The unaudited pro forma balance sheet reflects the reclassification of the
Series A Redeemable and Convertible Preferred Stock to equity as if the
agreement to amend the Certificate of Determination, as discussed in Note 17,
had occurred on December 31, 1999.
F-20
AMERIGON INCORPORATED
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1999, 1998 and 1997
(In thousands)
Balance at Charged to Charged to Deductions
Beginning of Costs and Other from Balance at End
Description Period Expenses Accounts Reserves of Period
- ----------- ------------ ---------- ---------- ---------- --------------
Allowance for Doubtful
Accounts
Year Ended December 31,
1997................... $ 80 $ -- $ -- $ -- $ 80
Year Ended December 31,
1998................... 80 27 -- (6) 101
Year Ended December 31,
1999................... 101 16 -- (59) 58
Allowance for Inventory
Year Ended December 31,
1997................... -- -- -- -- --
Year Ended December 31,
1998................... -- 100 -- -- 100
Year Ended December 31,
1999................... 100 121 (101) 120
Allowance for Deferred
Income Tax Assets
Year Ended December 31,
1997................... 7,161 2,885 -- -- 10,046
Year Ended December 31,
1998................... 10,046 3,021 -- -- 13,067
Year Ended December 31,
1999................... 13,067 2,872 -- -- 15,939
F-21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Amerigon Incorporated
/s/ Richard A. Weisbart
By: _________________________________
Richard A. Weisbart
President, Chief Executive
Officer
and Chief Financial Officer
March 30, 2000
-------------------------------
(Date)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
Signature Capacity Date
--------- -------- ----
/s/ Richard A. Weisbart President, Chief Executive March 30, 2000
____________________________________ Officer and Chief Financial
Richard A. Weisbart Officer
/s/ Lon E. Bell, Ph. D Vice Chairman of the Board March 30, 2000
____________________________________ and Chief Technology
Lon E. Bell, Ph. D. Officer
/s/ Roy A. Anderson Director March 30, 2000
____________________________________
Roy A. Anderson
/s/ John W. Clark Director March 30, 2000
____________________________________
John W. Clark
/s/ Oscar B. Marx, III Chairman of the Board March 30, 2000
____________________________________
Oscar B. Marx, III
/s/ Paul Oster Director March 30, 2000
____________________________________
Paul Oster
/s/ James J. Paulsen Director March 30, 2000
____________________________________
James J. Paulsen
/s/ Sandra L. Grouf Controller March 30, 2000
____________________________________ (Principal Accounting
Sandra L. Grouf Officer)