UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 2010
[ ] Transition Report pursuant to Section 13 or 15
(d) of the Securities Exchange Act of 1934
For the transition period from _____ to _____
Commission File Number 1-10869
UQM
TECHNOLOGIES,
INC.
(Exact name of registrant, as specified in its charter)
Colorado
(State or other jurisdiction of
incorporation or organization)
|
84-0579156
(I.R.S. Employer
Identification No.)
|
4120 Specialty
Place, Longmont, Colorado 80504
(Address of principal executive offices) (Zip code)
(303)
682-4900
(Registrant's telephone number, including area code)
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 whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).
Yes
No
Not Applicable
X
.
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of "accelerated filer and large accelerated filer" in Rule
12b-2 of the Exchange Act. (Check one):
[ ] Large accelerated filer
|
[ X ] Accelerated filer
|
[ ] Non-accelerated filer
|
[ ] Smaller reporting company
|
Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act.)Yes
No
X
.
The number of shares outstanding (including shares held by
affiliates) of the registrant's common stock, par value $0.01 per share at
October 26, 2010 was 36,177,348.
TABLE OF CONTENTS
Part I
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Financial Information
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Item 1
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Financial Statements (unaudited)
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Consolidated Balance Sheets as of September 30, 2010 and March 31, 2010
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Consolidated statements of operations for the quarters and six month
periods ended
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September 30, 2010 and 2009
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Consolidated statements of cash flows for the six month periods ended
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September 30, 2010 and 2009
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Notes to Consolidated Financial Statements
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Item 2
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Management's Discussion and Analysis of Financial Condition and Results
of Operations
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Item 3
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Quantitative and Qualitative Disclosures About Market Risk
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Item 4
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Controls and Procedures
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Part II
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Other Information
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Item 1
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Legal Proceedings
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Item 1A
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Risk Factors
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Item 6
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Exhibits and Reports on Form 8-K
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PART I - FINANCIAL
INFORMATION
ITEM 1: FINANCIAL STATEMENTS
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (unaudited)
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September 30, 2010
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March 31, 2010
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Assets
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Current assets:
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Cash and cash equivalents
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$ 14,350,153
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17,739,600
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Short-term investments
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12,052,198
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12,409,183
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Accounts receivable
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3,261,291
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1,695,638
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Costs and estimated earnings in excess of billings on
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uncompleted contracts
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500,150
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680,746
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Inventories
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1,481,939
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1,291,326
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Prepaid expenses and other current assets
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311,330
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140,285
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Total current assets
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31,957,061
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33,956,778
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Property and equipment, at cost:
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Land
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1,858,489
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1,825,968
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Building
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6,170,472
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5,402,176
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Machinery and equipment
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6,201,378
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4,524,188
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14,230,339
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11,752,332
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Less accumulated depreciation
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(4,445,370
)
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(4,090,962
)
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Net property and equipment
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9,784,969
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7,661,370
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Patent costs, net of accumulated amortization of
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$764,035 and $738,556
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278,381
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297,623
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Trademark costs, net of accumulated amortization of
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$53,012 and $50,769
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120,575
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122,818
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Other assets
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183,119
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643,984
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Total assets
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$
42,324,105
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42,682,573
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(Continued)
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See accompanying notes to consolidated financial statements.
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UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (unaudited), Continued
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September 30, 2010
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March 31, 2010
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Liabilities and Stockholders' Equity
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Current liabilities:
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Accounts payable
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$ 1,153,477
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1,421,779
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Other current liabilities
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986,595
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1,049,243
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Short-term deferred compensation under executive employment
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agreements
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739,200
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432,554
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Billings in excess of costs and estimated earnings on
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uncompleted contracts
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24,291
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51,552
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Total current liabilities
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2,903,563
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2,955,128
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Long-term deferred compensation under executive employment
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agreements
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521,885
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722,862
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Total liabilities
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3,425,448
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3,677,990
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Commitments and contingencies
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Stockholders' equity:
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Common stock, $.01 par value, 50,000,000
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shares authorized; 36,050,886 and 35,946,738 shares
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issued and outstanding
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360,509
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359,467
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Additional paid-in capital
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112,968,922
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112,211,227
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Accumulated deficit
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(74,430,774
)
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(73,566,111
)
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Total stockholders' equity
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38,898,657
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39,004,583
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Total liabilities and stockholders' equity
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$
42,324,105
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42,682,573
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See accompanying notes to consolidated financial statements.
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UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited)
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Quarter Ended September 30,
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Six Months Ended September 30,
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2010
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2009
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2010
|
2009
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Revenue:
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Contract services
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$ 43,262
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431,512
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345,490
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844,394
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Product sales
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1,984,296
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1,839,030
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4,237,392
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3,555,467
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2,027,558
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2,270,542
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4,582,882
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4,399,861
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Operating costs and expenses:
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Costs of contract services
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161,434
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285,215
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350,750
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581,720
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Costs of product sales
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1,639,515
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1,167,511
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3,041,451
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2,396,164
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Research and development
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152,628
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127,689
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271,947
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313,835
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Production engineering
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856,682
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587,881
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1,660,316
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1,014,316
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Reimbursement of costs under DOE grant
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(2,551,944)
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-
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(2,551,944)
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-
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Selling, general and administrative
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2,177,981
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603,069
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3,000,822
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1,242,847
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Gain on sale of long-lived asset
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-
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-
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(1,004)
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-
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2,436,296
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2,771,365
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5,772,338
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5,548,882
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Loss before other income (expense)
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(408,738)
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(500,823)
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(1,189,456)
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(1,149,021)
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Other income (expense):
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Interest income
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30,945
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|
11,487
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|
59,653
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|
26,772
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Interest expense
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|
-
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|
(6,701)
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-
|
|
(13,904)
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Other
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-
|
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-
|
|
265,140
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|
11,000
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|
|
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|
30,945
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|
4,786
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|
324,793
|
|
23,868
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|
|
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|
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|
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|
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Net loss
|
|
$
(377,793
)
|
|
(496,037
)
|
|
(864,663
)
|
|
(1,125,153
)
|
|
|
|
|
|
|
|
|
|
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Net loss per common share - basic and
|
|
|
|
|
|
|
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|
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diluted
|
|
$ (0.01
)
|
|
(
0.02
)
|
|
(
0.02
)
|
|
(
0.04
)
|
|
|
|
|
|
|
|
|
|
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|
Weighted average number of shares of
|
|
|
|
|
|
|
|
|
|
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common stock outstanding - basic and
|
|
|
|
|
|
|
|
|
|
|
diluted
|
|
36,005,413
|
|
26,947,997
|
|
35,976,580
|
|
26,851,069
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
|
|
|
|
|
|
|
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (unaudited)
|
|
Six Months Ended September 30,
|
|
|
2010
|
2009
|
|
Cash flows from operating activities:
|
|
|
|
|
Net loss
|
$ (864,663)
|
|
(1,125,153)
|
|
|
Adjustments to reconcile net loss to net cash used in
|
|
|
|
|
|
|
operating activities:
|
|
|
|
|
|
|
|
Depreciation and amortization
|
388,605
|
|
286,636
|
|
|
|
|
Non-cash equity based compensation
|
856,169
|
|
153,888
|
|
|
|
|
Impairment of inventory
|
-
|
|
3,620
|
|
|
|
|
Gain on sale of equipment
|
(1,004)
|
|
-
|
|
|
|
|
Change in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable and costs and estimated earnings in
|
|
|
|
|
|
|
|
|
|
excess of billings on uncompleted contracts
|
(1,129,807)
|
|
(445,109)
|
|
|
|
|
|
Inventories
|
(190,613)
|
|
293,667
|
|
|
|
|
|
Prepaid expenses and other current assets
|
(171,045)
|
|
(183,065)
|
|
|
|
|
|
Accounts payable and other current liabilities
|
(393,823)
|
|
(220,590)
|
|
|
|
|
|
Billings in excess of costs and estimated earnings on
|
|
|
|
|
|
|
|
|
|
uncompleted contracts
|
(27,261)
|
|
35,360
|
|
|
|
|
|
Deferred compensation under executive
|
|
|
|
|
|
|
|
|
|
employment agreements
|
105,669
|
|
18,813
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
(1,427,773
)
|
|
(
1,181,933
)
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
Purchases of short-term investments
|
(11,264,319)
|
|
(9,177)
|
|
|
Maturities of short-term investments
|
11,621,304
|
|
1,554,372
|
|
|
Decrease (increase) in other long-term assets
|
534
|
|
(803)
|
|
|
Acquisition of property and equipment
|
(4,441,304)
|
|
(156,236)
|
|
|
Property and equipment reimbursements received from DOE under
|
|
|
|
|
|
|
grant
|
2,224,776
|
|
-
|
|
|
Increase in patent and trademark costs
|
(6,237)
|
|
(7,856)
|
|
|
Cash proceeds from the sale of equipment
|
1,004
|
|
-
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
(1,864,242
)
|
|
1,380,300
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
Repayment of debt
|
-
|
|
(55,780)
|
|
|
Issuance of common stock under employee stock purchase plan
|
1,006
|
|
59,721
|
|
|
Issuance of common stock upon exercise of employee stock options
|
3,570
|
|
753,137
|
|
|
Issuance of common stock upon exercise of warrants
|
-
|
|
167,751
|
|
|
Purchase of treasury stock
|
(102,008
)
|
|
(69,495
)
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
(97,432
)
|
|
855,334
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
(3,389,447)
|
|
1,053,701
|
|
Cash and cash equivalents at beginning of period
|
17,739,600
|
|
2,501,999
|
|
Cash and cash equivalents at end of period
|
$
14,350,153
|
|
3,555,700
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
Interest paid in cash during the period
|
$
-
|
|
14,088
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
|
|
|
|
Notes to Consolidated Financial Statements
( 1)
|
The accompanying consolidated financial statements are
unaudited; however, in the opinion of management, all adjustments, which
were solely of a normal recurring nature, necessary to a fair presentation
of the results for the interim periods, have been made. Certain prior year
amounts have been reclassified to conform to the current period
presentation. The results for the interim periods are not necessarily
indicative of the results to be expected for the fiscal year. The Notes
contained herein should be read in conjunction with the Notes to our
Consolidated Financial Statements filed on Form 10-K for the year ended
March 31, 2010.
|
( 2)
|
New Accounting Pronouncements
|
|
In October 2009, the FASB issued new standards for
revenue recognition with multiple deliverables. These new standards impact
the determination of when the individual deliverables included in a
multiple-element arrangement may be treated as separate units of
accounting. Additionally, these new standards modify the manner in which
the transaction consideration is allocated across the separately
identified deliverables by no longer permitting the residual method of
allocating arrangement consideration. These new standards are required to
be adopted in the first quarter of FY 2012; however, early adoption is
permitted. We do not expect these new standards to significantly impact
our consolidated financial statements.
In October 2009, the FASB issued new standards for the
accounting for certain revenue arrangements that include software
elements. These new standards amend the scope of pre-existing software
revenue guidance by removing from the guidance non-software components of
tangible products and certain software components of tangible products.
These new standards are required to be adopted in the first quarter of FY
2012; however, early adoption is permitted. We do not expect these new
standards to significantly impact our consolidated financial statements.
In January 2010, the FASB issued amended standards that
require additional fair value disclosures. These amended standards require
disclosures about inputs and valuation techniques used to measure fair
value as well as disclosures about significant transfers, beginning in the
first quarter of 2010. Additionally, these amended standards require
presentation of disaggregated activity within the reconciliation for fair
value measurements using significant unobservable inputs (Level 3),
beginning in the first quarter of FY 2012. We do not expect these new
standards to significantly impact our consolidated financial statements.
In April 2010, the FASB issued a new standard on the
milestone method of revenue recognition. This new standard provides
guidance on the criteria that is necessary to apply the milestone method
of revenue recognition. This new standard is required to be adopted in the
first quarter of FY2012. We do not expect this new standard to
significantly impact our consolidated financial statements.
|
( 3)
|
Stock-Based Compensation
|
|
Stock Option Plans
As of September 30, 2010, we had 1,128,702 shares of
common stock available for future grant to employees, consultants and key
suppliers under our 2002 Equity Incentive Plan ("Plan"). Under
the Plan, the exercise price of each option is set at the fair value of
the common stock on the date of grant and the maximum term of the option
is 10 years from the date of grant. Options granted to employees generally
vest ratably over a three-year period. The maximum number of options that
may be granted to an employee under the Plan in any calendar year is
500,000 options. Forfeitures under the Plan are available for re-issuance
at any time prior to expiration of the Plan in 2013. Options granted under
the Plan to employees require the option holder to abide by certain
Company policies, which restrict their ability to sell the underlying
common stock. Prior to the adoption of the Plan, we issued stock options
under our 1992 Incentive and Non-Qualified Option Plan, which expired by
its terms in 2002. Forfeitures under the 1992 Incentive and Non-Qualified
Option Plan may not be re-issued.
|
|
Non-Employee Director Stock Option Plan
In February 1994 our Board of Directors ratified a
Stock Option Plan for Non-Employee Directors ("Directors Plan")
pursuant to which Directors may elect to receive stock options in lieu of
cash compensation for their services as directors. As of September 30,
2010, we had 75,648 shares of common stock available for future grant
under the Directors Plan. Option terms range from 3 to 10 years from the
date of grant. Option exercise prices are equal to the fair value of the
common shares on the date of grant. Options granted under the plan
generally vest immediately. Forfeitures under the Directors Plan are
available for re-issuance at a future date.
Stock Purchase Plan
We have established a Stock Purchase Plan under which
eligible employees may contribute up to 10 percent of their compensation
to purchase shares of our common stock at 85 percent of the fair market
value at specified dates. At September 30, 2010 we had 506,330 shares of
common stock available for issuance under the Stock Purchase Plan. During
the quarters and six month periods ended September 30, 2010 and 2009, we
issued 277 and 16,730 shares, and 277 and 45,968 shares of common stock,
respectively, under the Stock Purchase Plan. Cash received by us upon the
purchase of shares under the Stock Purchase Plan for the quarters and six
month periods ended September 30, 2010 and 2009 was $1,006 and $24,928,
and $1,006 and $59,721, respectively.
Stock Bonus Plan
We have a Stock Bonus Plan ("Stock Plan")
administered by the Board of Directors. At September 30, 2010 there were
1,006,794 shares of common stock available for future grant under the
Stock Plan. Under the Stock Plan, shares of common stock may be granted to
employees, key consultants, and directors who are not employees as
additional compensation for services rendered. Vesting requirements for
grants under the Stock Plan, if any, are determined by the Board of
Directors at the time of grant. There were 235,173 and zero shares and
235,173 and zero shares granted under the Stock Plan during the quarters
and six month periods ended September 30, 2010 and 2009, respectively.
We use the straight-line attribution method to
recognize share-based compensation costs over the requisite service period
of the award. Options granted by us generally expire ten years from the
grant date. Options granted to existing and newly hired employees
generally vest over a three-year period from the date of the grant. The
exercise price of options is equal to the market price of our common stock
(defined as the closing price reported by the NYSE Amex) on the date of
grant.
We use the Black-Scholes-Merton option pricing model
for estimating the fair value of stock option awards. The table below
shows total share-based compensation expense for the quarters and six
month periods ended September 30, 2010 and 2009 and the classification of
these expenses:
|
|
|
Quarter Ended September 30,
|
Six Months Ended September 30,
|
|
|
2010
|
2009
|
2010
|
2009
|
|
Costs of contract services
|
$ 11,350
|
20,726
|
41,470
|
40,301
|
|
Costs of product sales
|
37,371
|
16,022
|
50,463
|
36,388
|
|
Research and development
|
7,780
|
6,440
|
13,596
|
17,426
|
|
Production engineering
|
27,426
|
22,828
|
51,208
|
50,891
|
|
Selling, general and administrative
|
693,896
|
3,962
|
699,432
|
8,882
|
|
|
$
777,823
|
69,978
|
856,169
|
153,888
|
|
|
|
|
|
|
|
Share based compensation capitalized in inventories
were insignificant in the quarters and six month periods ended September
30, 2010 and September 30, 2009.
We adjust share-based compensation on a quarterly basis
for changes to the estimate of expected equity award forfeitures based on
actual forfeiture experience. The effect of adjusting the forfeiture rate
for all expense amortization is recognized in the period the forfeiture
estimate is changed. The effect of forfeiture adjustments in the quarters
and six month periods ended September 30, 2010 and September 30, 2009 were
insignificant.
All shares granted under the Director's Plan are
vested.
A summary of the status of non-vested shares under the
Equity Incentive Plan as of September 30, 2010 and 2009 and changes during
the quarters and six month periods ended September 30, 2010 and 2009 is
presented below:
|
|
Six Months Ended September 30, 2010
|
Six Months Ended September 30, 2009
|
|
|
Weighted-Average
|
|
Weighted-Average
|
|
Shares
|
Grant Date
|
Shares
|
Grant Date
|
|
Under Option
|
Fair
Value
|
Under Option
|
Fair
Value
|
Non-vested at April 1
|
338,747
|
$ 1.93
|
283,454
|
$ 1.40
|
Granted
|
-
|
$ -
|
-
|
$ -
|
Vested
|
-
|
$ -
|
-
|
$ -
|
Forfeited
|
(1,832
)
|
$ 1.61
|
-
|
$ -
|
Non-vested at June 30
|
336,915
|
$ 1.94
|
283,454
|
$ 1.40
|
Granted
|
510,132
|
$ 1.37
|
-
|
$ -
|
Vested
|
(297,594)
|
$ 1.21
|
(128,471)
|
$ 1.47
|
Forfeited
|
-
|
$ -
|
(5,873
)
|
$ 1.58
|
Non-vested at September 30
|
549,453
|
$ 1.80
|
149,110
|
$ 1.35
|
|
|
|
|
|
|
As of September 30, 2010, there was $622,185 of total
unrecognized compensation costs related to stock options granted under the
Equity Incentive Plan. The unrecognized compensation cost is expected to
be recognized over a weighted average period of 25 months. The total fair
value of stock options that vested during the quarters and six month
periods ended September 30, 2010 and 2009 was $359,062 and $188,401, and
$359,062 and $188,401, respectively.
There were 510,132 and zero and 510,132 and zero
employee stock option grants under the Equity Incentive Plan during the
quarters and six month periods ended September 30, 2010, and 2009,
respectively.
A summary of the non-vested shares under the Stock
Bonus Plan as of September 30, 2010 and 2009 and changes during the
quarters and six month periods ended September 30, 2010 and 2009 are
presented below:
|
|
Six Months Ended September 30, 2010
|
Six Months Ended September 30, 2009
|
|
|
Weighted-Average
|
|
Weighted-Average
|
|
Shares
|
Grant Date
|
Shares
|
Grant Date
|
|
Under Contract
|
Fair
Value
|
Under Contract
|
Fair
Value
|
Non-vested at April 1
|
98,929
|
$ 2.97
|
225,870
|
$ 3.08
|
Granted
|
-
|
$ -
|
-
|
$ -
|
Vested
|
-
|
$ -
|
-
|
$ -
|
Forfeited
|
-
|
$ -
|
-
|
$ -
|
Non-vested at June 30
|
98,929
|
$ 2.97
|
225,870
|
$ 3.08
|
Granted
|
235,173
|
$ 2.51
|
-
|
$ -
|
Vested
|
(139,767)
|
$ 2.57
|
(45,342)
|
$ 3.20
|
Forfeited
|
-
|
$ -
|
-
|
$ -
|
Non-vested at September 30
|
194,335
|
$ 2.70
|
180,528
|
$ 3.05
|
|
|
|
|
|
|
As of September 30, 2010, there was $277,928 of total
unrecognized compensation costs related to common stock granted under our
Stock Bonus Plan. The unrecognized compensation cost at September 30, 2010
is expected to be recognized over a weighted average period of 26 months.
The total fair value of common stock granted under the Stock Bonus Plan
that vested during the quarters and six month periods ended September 30,
2010 and 2009, was $589,998 and $145,094, and $589,998 and $145,094,
respectively.
|
|
Expected volatility is based on historical volatility.
The expected life of options granted are based on historical experience.
|
|
Additional information with respect to stock option
activity during the quarter and six month periods ended September 30, 2010
under our Equity Incentive Plan is as follows:
|
|
|
|
|
Weighted
|
|
|
|
|
Weighted
|
Average
|
|
|
|
Shares
|
Average
|
Remaining
|
Aggregate
|
|
|
Under
|
Exercise
|
Contractual
|
Intrinsic
|
|
|
Option
|
Price
|
Life
|
Value
|
|
Outstanding at April 1, 2010
|
2,377,075
|
$ 3.45
|
3.9 years
|
$ 2,509,155
|
|
Granted
|
-
|
$ -
|
|
|
|
Exercised
|
(1,000)
|
$ 3.57
|
|
$ 600
|
|
Forfeited
|
(3,166
)
|
$ 3.57
|
|
|
|
Outstanding at June 30, 2010
|
2,372,909
|
$ 3.45
|
3.7 years
|
$ 1,264,435
|
|
Granted
|
510,132
|
$ 2.52
|
|
|
|
Exercised
|
-
|
$ -
|
|
$ -
|
|
Forfeited
|
(6,334
)
|
$ 3.59
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2010
|
2,876,707
|
$ 3.28
|
4.0 years
|
$
328,687
|
|
|
|
|
|
|
|
Exercisable at September 30, 2010
|
2,327,254
|
$ 3.30
|
3.4 years
|
$
260,704
|
|
|
|
|
|
|
|
Vested and expected to vest at September 30, 2010
|
2,850,029
|
$ 3.29
|
3.9 years
|
$
325,114
|
|
|
|
|
|
|
|
Additional information with respect to stock option
activity during the quarter and six month periods ended September 30, 2009
under our Equity Incentive Plan is as follows:
|
|
|
|
|
Weighted
|
|
|
|
|
Weighted
|
Average
|
|
|
|
Shares
|
Average
|
Remaining
|
Aggregate
|
|
|
Under
|
Exercise
|
Contractual
|
Intrinsic
|
|
|
Option
|
Price
|
Life
|
Value
|
|
Outstanding at April 1, 2009
|
2,740,815
|
$ 3.66
|
4.7 years
|
$ -
|
|
Granted
|
-
|
$ -
|
|
|
|
Exercised
|
-
|
$ -
|
|
$ -
|
|
Forfeited
|
-
|
$ -
|
|
|
|
Outstanding at June 30, 2009
|
2,740,815
|
$ 3.66
|
4.4 years
|
$ 341,705
|
|
Granted
|
-
|
$ -
|
|
|
|
Exercised
|
(254,094)
|
$ 2.71
|
|
$ 535,449
|
|
Forfeited
|
(5,873
)
|
$ 2.66
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2009
|
2,480,848
|
$ 3.76
|
4.0 years
|
$
5,803,280
|
|
|
|
|
|
|
|
Exercisable at September 30, 2009
|
2,331,738
|
$ 3.84
|
3.9 years
|
$
5,316,673
|
|
|
|
|
|
|
|
Vested and expected to vest at September 30, 2009
|
2,471,918
|
$ 3.77
|
4.0 years
|
$
5,773,138
|
|
|
|
|
|
|
|
Additional information with respect to stock option
activity during the quarter and six month periods ended September 30, 2010
under our Director's Plan is as follows:
|
|
|
|
|
Weighted
|
|
|
|
|
Weighted
|
Average
|
|
|
|
Shares
|
Average
|
Remaining
|
Aggregate
|
|
|
Under
|
Exercise
|
Contractual
|
Intrinsic
|
|
|
Option
|
Price
|
Life
|
Value
|
|
Outstanding at April 1, 2010
|
256,653
|
$ 3.15
|
2.6 years
|
$ 303,651
|
|
Granted
|
-
|
$ -
|
|
|
|
Exercised
|
-
|
$ -
|
|
$ -
|
|
Forfeited
|
(977
)
|
$ 7.63
|
|
|
|
Outstanding at June 30, 2010
|
255,676
|
$ 3.13
|
2.4 years
|
$ 143,003
|
|
Granted
|
100,136
|
$ 2.63
|
|
|
|
Exercised
|
-
|
$ -
|
|
$ -
|
|
Forfeited
|
(24,039
)
|
$ 3.57
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2010
|
331,773
|
$ 2.96
|
3.3 years
|
$
45,771
|
|
|
|
|
|
|
|
Exercisable at September 30, 2010
|
331,773
|
$ 2.96
|
3.3 years
|
$
45,771
|
|
|
|
|
|
|
|
Vested and expected to vest at September 30, 2010
|
331,773
|
$ 2.96
|
3.3 years
|
$
45,771
|
|
|
|
|
|
|
|
Additional information with respect to stock option
activity during the quarter and six month periods ended September 30, 2009
under our Director's Plan is as follows:
|
|
|
|
|
Weighted
|
|
|
|
|
Weighted
|
Average
|
|
|
|
Shares
|
Average
|
Remaining
|
Aggregate
|
|
|
Under
|
Exercise
|
Contractual
|
Intrinsic
|
|
|
Option
|
Price
|
Life
|
Value
|
|
Outstanding at April 1, 2009
|
222,919
|
$ 2.77
|
2.7 years
|
$ -
|
|
Granted
|
-
|
$ -
|
|
|
|
Exercised
|
-
|
$ -
|
|
$ -
|
|
Forfeited
|
-
|
$ -
|
|
|
|
Outstanding at June 30, 2009
|
222,919
|
$ 2.77
|
2.5 years
|
$ 48,096
|
|
Granted
|
-
|
$ -
|
|
|
|
Exercised
|
(19,802)
|
$ 3.20
|
|
$ 13,861
|
|
Forfeited
|
-
|
$ -
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2009
|
203,117
|
$ 2.73
|
2.5 years
|
$
614,947
|
|
|
|
|
|
|
|
Exercisable at September 30, 2009
|
203,117
|
$ 2.73
|
2.5 years
|
$
614,947
|
|
|
|
|
|
|
|
Vested and expected to vest at September 30, 2009
|
203,117
|
$ 2.73
|
2.5 years
|
$
614,947
|
|
|
|
|
|
|
|
Cash received by us upon the exercise of stock options
for the quarters and six month periods ended September 30, 2010 and 2009
was zero and $753,137, and $3,570 and $753,137, respectively. The source
of shares of common stock issuable upon the exercise of stock options is
from authorized and previously unissued common shares.
|
( 4)
|
We have an investment policy approved by the Board of
Directors that governs the quality, acceptability and dollar concentration
of our investments. Investments are comprised of marketable securities and
consist primarily of commercial paper, asset-backed and mortgage-backed
notes and bank certificates of deposits with original maturities beyond
three months. All marketable securities and corporate bonds are held in
our name at three major financial institutions who hold custody of the
investments. All of our investments are held-to-maturity investments as we
have the positive intent and ability to hold until maturity. These
securities are recorded at amortized cost.
The amortized cost and unrealized gain or loss of our
investments at September 30, 2010 and March 31, 2010 were:
|
|
September 30,
2010
|
March
31, 2010
|
|
Amortized Cost
|
Gain (Loss)
|
Amortized Cost
|
Gain (Loss)
|
Short-term investments:
|
|
|
|
|
U.S. government and government agency
|
|
|
|
|
|
securities
|
$ 3,014,372
|
(8,342)
|
4,994,624
|
576
|
Commercial paper, corporate and foreign bonds
|
5,773,574
|
(54,698)
|
1,656,875
|
(2,389)
|
Certificates of deposit
|
3,264,252
|
-
|
5,757,684
|
-
|
|
12,052,198
|
(63,040
)
|
12,409,183
|
(1,813
)
|
Long-term investment:
|
|
|
|
|
Certificates of deposit
(included in other assets)
|
59,579
|
-
|
58,701
|
-
|
|
$
12,111,777
|
(63,040
)
|
12,467,884
|
(1,813
)
|
|
The time to maturity of held-to-maturity securities were:
|
|
|
|
September 30, 2010
|
March 31, 2010
|
|
|
|
|
|
|
|
|
Three to six months
|
$ 10,499,783
|
|
1,349,290
|
|
|
Six months to one year
|
1,552,415
|
|
11,059,893
|
|
|
Over one year
|
59,579
|
|
58,701
|
|
|
|
$
12,111,777
|
|
12,467,884
|
( 5)
|
At September 30, 2010 and March 31, 2010, the estimated
period to complete contracts in process ranged from one to nine months and
one to fourteen months, respectively. We expect to collect all related
accounts receivable arising therefrom within sixty days of billing. The
following summarizes contracts in process:
|
|
|
|
|
September 30, 2010
|
|
March 31, 2010
|
|
|
|
|
|
|
|
|
|
Costs incurred on uncompleted contracts
|
|
$ 4,041,533
|
|
4,063,128
|
|
|
Estimated earnings
|
|
479,603
|
|
544,417
|
|
|
|
|
4,521,136
|
|
4,607,545
|
|
|
Less billings to date
|
|
(4,045,277
)
|
|
(3,978,351
)
|
|
|
|
|
$
475,859
|
|
629,194
|
|
|
|
|
|
|
|
|
|
Included in the accompanying balance sheets as follows:
|
|
|
|
|
|
|
|
Costs and estimated earnings in excess of billings on
|
|
|
|
|
|
|
|
|
uncompleted contracts
|
|
$ 500,150
|
|
680,746
|
|
|
|
Billings in excess of costs and estimated earnings on
|
|
|
|
|
|
|
|
|
uncompleted contracts
|
|
(24,291
)
|
|
(51,552
)
|
|
|
|
|
$
475,859
|
|
629,194
|
|
|
|
|
|
|
|
( 6)
|
Inventories at September 30, 2010 and March 31, 2010 consist of:
|
|
|
|
September 30, 2010
|
|
March 31, 2010
|
|
|
|
|
|
|
|
|
Raw materials
|
$ 956,524
|
|
512,572
|
|
|
Work-in-process
|
474,172
|
|
744,525
|
|
|
Finished products
|
51,243
|
|
34,229
|
|
|
|
$
1,481,939
|
|
1,291,326
|
|
Our raw material inventory is subject to obsolescence
and potential impairment due to bulk purchases in excess of customers'
requirements. We periodically assess our inventory for recovery of its
carrying value based on available information, expectations and estimates,
and adjust inventory-carrying values to the lower of cost or market for
estimated declines in the realizable value. During the six month periods
ended September 30, 2010 and 2009, we impaired obsolete inventory with a
carrying value of zero and $3,620, respectively.
|
|
We have a $45,145,534 grant with the U.S. Department of
Energy ("DOE") under the Stimulus Act. The Grant provides funds
to facilitate the manufacture and deployment of electric drive vehicles,
batteries and electric drive vehicle components in the United States.
Pursuant to the terms of the Agreement, the DOE will reimburse us for 50
percent of qualifying costs incurred on or after August 5, 2009 for the
purchase of facilities, tooling and manufacturing equipment, and for
engineering costs related to product qualification and testing of our
electric propulsion systems and other products. The period of the Grant is
through January 12, 2013.
We recognize government grants when it is probable that
the Company will comply with the conditions attached to the grant
arrangement and the grant will be received.
Funding for qualifying project costs incurred is
limited to $32.0 million until we provide DOE with an additional updated
total estimated cost of the project along with evidence of firm
commitments for our 50 percent share of the total
estimated cost of the project by July 13, 2011. If all such funds have not
been secured, we must submit, by such date, a funding plan to obtain the
remainder of such funds, which is acceptable to the DOE.
The Grant is also subject to our compliance with
certain reporting requirements. The Stimulus Act imposes minimum
construction wage and labor standards for projects funded by the Grant.
If we dispose of assets acquired using Grant funding,
we may be required to reimburse the DOE upon such sale date if the fair
value of the asset on the date of disposition exceeds $5,000. The amount
of any such reimbursement shall be equal to 50 percent of the fair value
of the asset on the date of disposition.
While UQM has exclusive patent ownership rights for any
technology developed with Grant funds, we are required to grant the DOE a
non-exclusive, non-transferable, paid-up license to use such technology.
On September 7, 2010 the Grant was amended to remove
certain conditions related to the qualification of our accounting systems
and the mutual agreement on updated total costs eligible for reimbursement
under the Grant. As a result of this amendment certain engineering costs
incurred subsequent to August 5, 2009 became eligible for reimbursement
and have been recognized during the quarter and six month period ended
September 30, 2010. Future reimbursements of qualified engineering costs
will be recognized in the period the associated costs are incurred.
At September 30, 2010 we had received reimbursements
from the DOE under the Stimulus Grant totaling $7.9 million and had grant
funds receivable of $1.2 million.
|
|
The application of grant funds to eligible capital
asset purchases under the DOE Grant as of September 30, 2010 is as
follows:
|
|
Purchase Cost
|
Grant Funding
|
Recorded Value
|
Land
|
$ 896,388
|
448,194
|
448,194
|
Building
|
8,308,905
|
4,154,452
|
4,154,453
|
Machinery and Equipment
|
3,952,410
|
1,976,205
|
1,976,205
|
|
$
13,157,703
|
6,578,851
|
6,578,852
|
(8)
|
Other current liabilities at September 30, 2010 and
March 31, 2010 consist of:
|
|
|
|
September 30, 2010
|
|
March 31, 2010
|
|
|
|
|
|
|
|
|
Accrued payroll and employee benefits
|
$ 232,749
|
|
175,579
|
|
|
Accrued personal property and real estate taxes
|
215,368
|
|
354,807
|
|
|
Accrued warranty costs
|
94,629
|
|
75,903
|
|
|
Unearned revenue
|
203,600
|
|
356,596
|
|
|
Accrued royalties
|
52,106
|
|
34,515
|
|
|
Other
|
188,143
|
|
51,843
|
|
|
|
$
986,595
|
|
1,049,243
|
( 9)
|
Stockholders' Equity
|
Changes in the components of stockholders' equity during the
quarter and six month period ended September 30, 2010 were as follows:
|
Number of
|
|
|
|
|
|
common
|
|
Additional
|
|
Total
|
|
shares
|
Common
|
paid-in
|
Accumulated
|
stockholders'
|
|
issued
|
stock
|
capital
|
deficit
|
equity
|
Balances at April 1, 2010
|
35,946,738
|
$ 359,467
|
112,211,227
|
(73,566,111)
|
39,004,583
|
|
|
|
|
|
|
Issuance of common stock upon exercise
|
|
|
|
|
|
|
of employee stock options
|
1,000
|
10
|
3,560
|
-
|
3,570
|
Compensation expense from
|
|
|
|
|
|
|
employee and director stock
|
|
|
|
|
|
|
option and common stock grants
|
-
|
-
|
78,346
|
-
|
78,346
|
Net loss
|
-
|
-
|
-
|
(486,870
)
|
(486,870
)
|
Balances at June 30, 2010
|
35,947,738
|
$ 359,477
|
112,293,133
|
(74,052,981)
|
38,599,629
|
|
|
|
|
|
|
Issuance of common stock under
|
|
|
|
|
|
|
stock bonus plan
|
139,767
|
1,398
|
320,601
|
-
|
321,999
|
Issuance of common stock under
|
|
|
|
|
|
|
employee stock purchase plan
|
277
|
3
|
1,003
|
-
|
1,006
|
Purchase of treasury stock
|
(36,896)
|
(369)
|
(101,639)
|
-
|
(102,008)
|
Compensation expense from
|
|
|
|
|
|
|
employee and director stock
|
|
|
|
|
|
|
option and common stock grants
|
-
|
-
|
455,824
|
-
|
455,824
|
Net loss
|
-
|
-
|
-
|
(377,793
)
|
(377,793
)
|
Balances at September 30, 2010
|
36,050,886
|
$
360,509
|
112,968,922
|
(
74,430,774
)
|
38,898,657
|
(10)
|
Significant Customers
|
We have historically derived significant revenue from a few
key customers. Revenue from CODA Automotive totaled $358,800 and $33,000, and
$427,800 and $147,250, for the quarters and six month periods ended September
30, 2010 and 2009, respectively, which was 18 percent and 1 percent, and 9
percent and 3 percent, of total revenue, respectively. Revenue from Electric
Vehicles International totaled $206,940 and zero, and $269,022 and zero, for
the quarters and six month periods ended September 30, 2010 and 2009,
respectively, which was 10 percent and nil, and 6 percent and nil, of total
revenue, respectively.
Trade accounts receivable from CODA Automotive were 11
percent and 3 percent of total accounts receivable as of September 30, 2010
and March 31, 2010, respectively. Inventories consisting of raw materials,
work-in-progress and finished goods for this customer totaled $292,139 and
$350,425 as of September 30, 2010 and March 31, 2010, respectively. Trade
accounts receivable from Electric Vehicles International were 2 percent and
nil of total accounts receivable as of September 30, 2010 and March 31, 2010,
respectively. Inventories consisting of raw materials, work-in-progress and
finished goods for this customer totaled zero and $8,285 as of September 30,
2010 and March 31, 2010, respectively.
Revenue derived from contracts with agencies of the U.S.
Government and from subcontracts with U.S. Government prime contractors
totaled $317,053 and $915,596 and $844,334 and $1,176,258 for the quarters and
six month periods ended September 30, 2010 and 2009, respectively, which was
16 percent and 40 percent, and 18 percent and 27 percent of our consolidated
total revenue for the quarters and six month
periods ended September 30, 2010 and 2009, respectively.
Accounts receivable from government-funded contracts represented 59 percent
and 8 percent of total accounts receivable as of September 30, 2010 and March
31, 2010, respectively. Of these amounts, revenue derived from subcontracts
with AM General LLC totaled $328,689 and $694,315 and $715,611 and $1,209,863
for the quarters and six months ended September 30, 2010 and 2009,
respectively, which represented 16 and 31 percent, and 16 and 27 percent, of
our consolidated total revenue for the quarters and six month periods ended
September 30, 2010 and 2009, respectively. This customer also represented 16
percent and 8 percent of total accounts receivable at September 30, 2010 and
March 31, 2010, respectively, and nil and 13 percent of inventories at
September 30, 2010 and March 31, 2010, respectively.
The Company currently has a full valuation allowance, as it
is management's judgment that it is more-likely-than-not that net deferred tax
assets will not be realized to reduce future taxable income.
We recognize interest and penalties related to uncertain
tax positions in "Other Income (expense)," net. As of September 30,
2010 and 2009, we had no provisions for interest or penalties related to
uncertain tax positions.
The tax years 2005 through 2009 remain open to examination
by both the Internal Revenue Service of the United States and by the various
state taxing authorities where we file.
(12)
|
Loss Per Common Share
|
Basic earnings per share is computed by dividing income or
loss available to common stockholders by the weighted average number of common
shares outstanding during the periods presented. Diluted earnings per share is
computed by dividing income or loss available to common stockholders by all
outstanding and potentially dilutive shares during the periods presented,
unless the effect is antidilutive. At September 30, 2010 and 2009,
respectively, common shares issued under the Stock Bonus Plan but not yet
earned totaling 194,335 and 180,528 were being held by the Company. For the
quarters and six month periods ended September 30, 2010 and 2009 respectively,
8,686 and 45,776 shares, and 13,682 and 14,649 shares, were potentially
includable in the calculation of diluted loss per share under the treasury
stock method. The shares for the
quarter and six month period ended September 30, 2009 were not included,
because to do so would be antidilutive. At September 30, 2010 and 2009,
options to purchase 3,216,601 and 2,694,537 shares of common stock,
respectively, and warrants to purchase zero, and 26,674 shares of common
stock, respectively, were outstanding. For the quarter and six month periods
ended September 30, 2010 and 2009, respectively, options and warrants for
1,268,268 and 649,269, and 1,189,700 and 1,308,061 shares were not included in
the computation of diluted loss per share because the option exercise price
was greater than the average market price of the common stock. In-the-money
options and warrants determined under the treasury stock method to acquire
297,312 shares and 659,386, and 465,862 and 319,076, shares of common stock
for the quarters and six month period ended September 30, 2010 and 2009,
respectively, were potentially includable in the calculation of diluted loss
per share but we were not, because to do so would be antidilutive.
(13)
|
Fair Value of Financial Instruments
|
The following methods and assumptions were used to estimate
the fair value of each class of financial instruments.
Cash and cash equivalents, accounts receivable, and
accounts payable:
The carrying amounts approximate fair value because of the
short maturity of these instruments.
Investments:
The carrying value of these instruments is the amortized
cost of the investments which approximates fair value. See Note 4.
(14)
|
Fair Value Measurements
|
Liabilities measured at fair value on a recurring basis as
of September 30, 2010 are summarized below:
|
Fair Value Measurements at Reporting Date Using
|
|
|
Quoted Prices
|
|
|
|
|
In Active
|
Significant
|
|
|
|
Markets
|
Other
|
Significant
|
|
|
For Identical
|
Observable
|
Unobservable
|
|
|
Liabilities
|
Inputs
|
Inputs
|
|
Total
|
(Level
1)
|
(Level 2)
|
(Level 3)
|
Deferred compensation under
|
|
|
|
|
|
executive employment agreements
(1)
|
$ 1,261,085
|
-
|
-
|
1,261,085
|
|
|
|
|
|
|
Note (1) $739,200 included in current
liabilities and $521,885 included in long term liabilities on our
consolidated balance sheet as of September 30, 2010.
|
|
|
|
|
|
|
Liabilities measured at fair value on a recurring basis as
of March 31, 2010 are summarized below:
|
Fair Value Measurements at Reporting Date Using
|
|
|
Quoted Prices
|
|
|
|
|
In Active
|
Significant
|
|
|
|
Markets
|
Other
|
Significant
|
|
|
For Identical
|
Observable
|
Unobservable
|
|
|
Liabilities
|
Inputs
|
Inputs
|
|
Total
|
(Level
1)
|
(Level 2)
|
(Level 3)
|
Deferred compensation under
|
|
|
|
|
|
executive employment agreements
(1)
|
$ 1,155,416
|
-
|
-
|
1,155,416
|
|
|
|
|
|
|
Note (1) $432,554 included in current
liabilities and $722,862 included in long term liabilities on our
consolidated balance sheet as of September 30, 2010.
|
Deferred compensation under executive employment agreements
represents the future compensation potentially payable under the retirement
and voluntary termination provisions of executive employment agreements. The
value of the Level 3 liability in the foregoing table was determined under the
income approach, using inputs that are both unobservable and significant to
the value of the obligation including changes in the Company's credit
worthiness and changes in interest rates.
A summary of the liability measured at fair value on a
recurring basis using significant unobservable inputs (Level 3) follows:
|
Fair Value Measurements Using Significant
|
|
Unobservable
Inputs (Level 3)
|
|
Deferred Compensation On Executive Employment
Agreements
|
|
Quarter Ended September 30,
|
Six Months Ended September 30,
|
|
2010
|
2009
|
2010
|
2009
|
Balance at beginning of the period
|
$ 1,166,480
|
1,082,955
|
1,155,416
|
1,073,549
|
|
Total gains or losses (realized and
|
|
|
|
|
|
unrealized):
|
|
|
|
|
|
|
Included in earnings
|
94,605
|
9,407
|
105,669
|
18,813
|
|
|
Included in other comprehensive
|
|
|
|
|
|
|
income
|
-
|
-
|
-
|
-
|
|
Purchases, sales, issuances, and
|
|
|
|
|
|
settlements, net
|
-
|
-
|
-
|
-
|
|
Transfers in (out) of Level 3
|
-
|
-
|
-
|
-
|
Balance at the end of the period
|
$
1,261,085
|
1,092,362
|
1,261,085
|
1,092,362
|
|
|
|
|
|
|
Loss for the period included in earnings
|
|
|
|
|
attributable to the Level 3
liability still held
|
|
|
|
|
at the end of the period
|
$
94,605
|
9,407
|
105,669
|
18,813
|
At September 30, 2010, we have two reportable segments:
technology and power products. Our reportable segments are strategic business
units that offer different products and services. They are managed separately
because each business requires different business strategies. The technology
segment encompasses our technology-based operations including core research to
advance our technology, application and production engineering and product
development and job shop production of prototype components. The power
products segment encompasses the manufacture and sale of motors and electronic
controllers. Salaries of the executive officers and corporate general and
administrative expense are allocated to our segments annually based on factors
established at the beginning of each fiscal year. The percentages allocated to
the technology segment and power products segment were 69 percent and 31
percent for the quarter and six month periods ended September 30, 2010, and
were 82 percent and 18 percent for the quarter and six month periods ended
September 30, 2009, respectively.
Intersegment sales or transfers, which were eliminated upon
consolidation, were $524,754 and $42,849, and $641,330 and $47,316, for the
quarters and six month periods ended September 30, 2010 and 2009,
respectively.
The technology and power products segments lease office,
production and laboratory space in a building owned by a wholly-owned
subsidiary of the Company whose operations are included as part of the Power
Products Segment based on a negotiated rate for the square footage occupied.
Intercompany lease payments, were $212,004 and $45,900, and $257,904 and
$91,800, for the quarters and six month periods ended September 30, 2010 and
2009, respectively, and were eliminated upon consolidation.
The following table summarizes significant financial
statement information, after deducting intersegment eliminations of each of
the reportable segments as of and for the quarter ended September 30, 2010:
|
|
|
|
Power
|
|
|
|
|
Technology
|
Products
|
Total
|
|
Revenue
|
|
$
|
1,174,999
|
852,559
|
2,027,558
|
|
Interest income
|
|
$
|
30,468
|
477
|
30,945
|
|
Interest expense
|
|
$
|
-
|
-
|
-
|
|
Depreciation and amortization
|
|
$
|
(117,564)
|
(110,273)
|
(227,837)
|
|
Segment earnings (loss)
|
|
$
|
311,384
|
(689,177)
|
(377,793)
|
|
Total assets
|
|
$
|
32,014,383
|
10,309,722
|
42,324,105
|
|
Expenditures for long-lived segment assets
|
|
$
|
(531,108)
|
(1,495,446)
|
(2,026,554)
|
The following table summarizes significant financial
statement information, after deducting intersegment eliminations of each of
the reportable segments as of and for the quarter ended September 30, 2009:
|
|
|
|
Power
|
|
|
|
|
Technology
|
Products
|
Total
|
|
Revenue
|
|
$
|
1,760,826
|
509,716
|
2,270,542
|
|
Interest income
|
|
$
|
10,613
|
874
|
11,487
|
|
Interest expense
|
|
$
|
-
|
(6,701)
|
(6,701)
|
|
Depreciation and amortization
|
|
$
|
(92,724)
|
(52,873)
|
(145,597)
|
|
Segment loss
|
|
$
|
(480,112)
|
(15,925)
|
(496,037)
|
|
Total assets
|
|
$
|
8,725,308
|
3,415,176
|
12,140,484
|
|
Expenditures for long-lived segment assets
|
|
$
|
(105,600)
|
(22,507)
|
(128,107)
|
|
The following table summarizes significant financial statement
information, after deducting intersegment eliminations of each of the
reportable segments as of and for the six month period ended September 30,
2010:
|
|
|
|
|
Power
|
|
|
|
|
Technology
|
Products
|
Total
|
|
Revenue
|
|
$
|
3,046,029
|
1,536,853
|
4,582,882
|
|
Interest income
|
|
$
|
58,651
|
1,002
|
59,653
|
|
Interest expense
|
|
$
|
-
|
-
|
-
|
|
Depreciation and amortization
|
|
$
|
(228,858)
|
(159,747)
|
(388,605)
|
|
Impairment of inventories
|
|
$
|
-
|
-
|
-
|
|
Segment loss
|
|
$
|
(45,136)
|
(819,527)
|
(864,663)
|
|
Total assets
|
|
$
|
32,014,383
|
10,309,722
|
42,324,105
|
|
Expenditures for long-lived segment assets
|
|
$
|
(671,102)
|
(3,776,439)
|
(4,447,541)
|
|
The following table summarizes significant financial statement
information, after deducting intersegment eliminations of each of the
reportable segments as of and for the six month period ended September 30,
2009:
|
|
|
|
|
Power
|
|
|
|
|
Technology
|
Products
|
Total
|
|
Revenue
|
|
$
|
3,369,213
|
1,030,648
|
4,399,861
|
|
Interest income
|
|
$
|
25,184
|
1,588
|
26,772
|
|
Interest expense
|
|
$
|
-
|
(13,904)
|
(13,904)
|
|
Depreciation and amortization
|
|
$
|
(180,890)
|
(105,746)
|
(286,636)
|
|
Impairment of inventories
|
|
$
|
(3,620)
|
-
|
(3,620)
|
|
Segment loss
|
|
$
|
(1,031,810)
|
(93,343)
|
(1,125,153)
|
|
Total assets
|
|
$
|
8,725,308
|
3,415,176
|
12,140,484
|
|
Expenditures for long-lived segment assets
|
|
$
|
141,585
|
22,507
|
164,092
|
(16)
|
Commitments and Contingencies
|
Employment Agreements
We have entered into employment agreements with four of our
officers which expire on August 22, 2012. We have also entered into an
employment agreement with our chief operating officer which expires on August
31, 2015. The aggregate future base salary payable to these five executive
officers under the employment agreements, over their remaining terms is
$3,238,925. In addition, we have recorded a liability of $1,261,085 and
$1,155,416 at September 30, 2010 and March 31, 2010, respectively,
representing the potential future compensation payable under the retirement
and voluntary termination provisions of the employment agreements.
Lease Commitments
At September 30, 2010 there were no operating leases with
initial non-cancelable terms in excess of one year.
Litigation
We are involved in various claims and legal actions arising
in the ordinary course of business. In the opinion of management, and based on
current available information, the ultimate disposition of these matters is
not expected to have a material adverse effect on our financial position,
results of operations or cash flow, although adverse developments in these
matters could have a material impact on a future reporting period.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Report contains statements that constitute
"forward-looking statements" within the meaning of Section 27A of the
Securities Act and Section 21E of the Securities Exchange Act. These statements
appear in a number of places in this Report and include statements regarding our
plans, beliefs or current expectations; including those plans, beliefs and
expectations of our officers and directors with respect to, among other things,
orders to be received under our supply agreement with CODA Automotive, our
ability to successfully expand our manufacturing facilities and the continued
growth of the electric-powered vehicle industry. Important Risk Factors that
could cause actual results to differ from those contained in the forward-looking
statements are listed below in Part II, Item 1A. Risk Factors.
Introduction
We generate revenue from two principal activities: 1)
research, development and application engineering services that are paid for by
our customers; and 2) the sale of motors, generators and electronic controls.
The sources of engineering revenue typically vary from year to year and
individual projects may vary substantially in their periods of performance and
aggregate dollar value. Our product sales consist of both prototype low volume
sales, which are generally sold to a broad range of customers, and annually
recurring higher volume production.
We have entered into a ten year Supply Agreement with CODA
Automotive to supply UQM® PowerPhase®
electric propulsion systems to CODA Automotive's production partner, HaFei.
Initial shipments of production systems under the agreement are expected to
begin later this calendar year and ramp up as the CODA all-electric four-door
sedan is introduced in the California market and in Hawaii in mid 2011. While
the Supply Agreement provides a framework for our supply of CODA's propulsion
systems needs, a binding purchase obligation only occurs upon the issuance of a
purchase order with certain scheduled deliveries being noncancellable as
provided for in the Supply Agreement. CODA hopes to sell 14,000 vehicles in
calendar year 2011 reaching an annual run rate of 20,000 vehicles, which, if
achieved, would result in annual revenue to us well in excess of $50 million. As
of the date of this report, we have begun deliveries of pre-production units and
we have received a production purchase order from CODA for initial deliveries,
although the firm delivery schedule necessary to make the purchase order
noncancellable has not yet been received.
The CODA all-electric sedan is propelled by a 100 kW UQM®
PowerPhase® electric propulsion system. During the quarter ended
September 30, 2010, CODA announced that they would begin accepting refundable
purchase deposits of $499 and that the CODA passenger sedan would be priced at
$44,900 before application of federal and California tax credits of up to $7,500
and $5,000, respectively, which could potentially reduce the net purchase cost
of the vehicle to as low as $32,400.
In July, we announced that an international automobile
company had placed an initial order for over fifty PowerPhase® electric
propulsion systems as part of their fleet build and vehicle development
activities. Deliveries under the order have begun with the remainder scheduled
to occur through the first calendar quarter of 2011. Automobile companies
typically build test fleets to evaluate new vehicles that are under development
prior to their market launch. Introduction of the vehicle is targeted for 2012.
We have also been awarded a $45.1 million Grant from the DOE
under the American Recovery and Reinvestment Act to accelerate the manufacturing
and deployment of electric vehicles, batteries and components in the United
States. The Grant provides for a 50 percent cost-share by the Company raising
the total value of the project to $90.2 million. Capital expenditures for
facilities, tooling and manufacturing equipment and the qualification and
testing of products associated with the launch of volume production for CODA
Automotive and other customers are qualified for reimbursement under the DOE
program.
During the quarter the Grant was amended to remove certain
conditions related to the qualification of our accounting system and the mutual
agreement on updated total costs eligible for reimbursement under the grant. As
a result of this amendment, certain engineering costs incurred since August 5,
2009 in the amount of $2.6 million became eligible for reimbursement and have
been recognized during the quarter and six month period ended September 30,
2010. Future reimbursements of qualified engineering costs will be recognized in
the period the associated costs are incurred. Reimbursements received from the
DOE through September 30, 2010 for capital assets acquired totaled $5.8 million,
which were recorded as a reduction in the cost basis of these assets.
During the quarter we relocated our headquarters and
manufacturing operations to a 129,304 square foot facility on a 30 acre site in
Longmont, Colorado. Approximately 15 acres of the site are available for future
facility expansion. We have completed the installation of our productionized
motor and motor controller assembly lines. The lines are expected to be
qualified to launch volume production activities shortly. We expect our working
capital requirements to increase coincident with and following the launch of
deliveries under the CODA Supply Agreement. As a result, we expect to devote
substantial financial resources to meet this working capital requirement which
could be in excess of $10 million depending on the timing and volume of
deliveries.
We are continuing to experience solid demand for our electric
propulsion systems and related products from a wide-range of customers
worldwide. We believe that the increased demand is due, in part, to an expansion
in the number of all-electric and hybrid electric vehicle platforms being
developed for potential introduction in the passenger automobile market and the
amount of government grants and loans available to encourage the development and
introduction of clean vehicles.
Near the end of the quarter we introduced a recently
developed 5kW DC-to-AC inverter for use onboard electric and hybrid-electric
vehicles. This electronic box enables the availability of 110 volt AC power
onboard vehicles to power a wide range of tools and electronic instruments. We
expect to see further growth in deliveries to these markets as the global
economy continues to improve. In addition, we expect that demand for our
electric propulsion system and generator products will remain strong for the
foreseeable future as vehicle makers continue to focus on the development and
introduction of electric and hybrid electric vehicles as part of the
restructuring of the global automotive industry to provide a broader selection
of highly fuel efficient vehicles to consumers.
Contract services revenue for the fiscal quarter and six
month period ended September 30, 2010 was $43,262 and $345,490, respectively,
versus $431,512 and $844,394 for the comparable periods last fiscal year.
Revenue for the quarter and six month period was impacted by adjustments to
indirect costs on a cost-plus government contract, the application of
engineering resources to production engineering activities and reduced levels of
funded development programs. Primarily due the factors above, cost of contract
services exceeded contract services revenue for the quarter and gross profit
margins decreased for the six month period to negative 2 percent versus 31
percent for the comparable six month period last fiscal year.
Product sales revenue for the second quarter and six month
period ended September 30, 2010 rose 7.9 percent and 19.2 percent to $1,984,296
and $4,237,392, respectively, versus $1,839,030 and $3,555,467 for the
comparable periods last fiscal year. The increases are due to continued strong
demand for electric propulsion systems and generators and the delivery of
pre-production units under the CODA Supply Agreement.
Gross profit margins on product sales for the quarter and six
month period ended September 30, 2010 were 17.4 percent and 28.2 percent versus
36.5 percent and 32.6 percent for the comparable quarter and six month period
last fiscal year. The decrease in gross profit margins for the quarter and six
month period are due to deliveries of pre-production units which typically have
lower gross profit margins than other low volume product sales.
Production engineering expenditures, before reimbursements
from the DOE Grant increased to $856,682 and $1,660,316 for the quarter and six
month period ended September 30, 2010 versus $587,881 and $1,014,316,
respectively, for the comparable periods last fiscal year. The increase is
attributable to increased staffing levels in the production engineering group
and the transfer of engineering resources from the contract services group in
support of our production launch activities for CODA and our other customers'
production engineering requirements. Accrued cost reimbursements under the DOE
Grant were $2,551,944 for the quarter ended September 30, 2010 representing
reimbursable product qualification and testing costs incurred from August 5,
2009 through September 30, 2010. As described above, the DOE reimbursement was
recognized during the current quarter due to the resolution of certain
contingencies provided for in the Grant.
Other income was $265,140 for the six month period ended
September 30, 2010, reflecting a cash recovery upon completion of a former
customer's bankruptcy proceedings.
Net loss for the second fiscal quarter decreased to $377,793,
or $0.01 per common share, on total revenue of $2,027,558 versus a net loss of
$496,037 or $0.02 per common share on total revenue of $2,270,542 for the
comparable quarter last fiscal year. The reduction in net loss is primarily
attributable to reimbursements of product qualification and testing costs under
the DOE Grant. Net loss for the six month period ended September 30, 2010
declined to $864,663, or $0.02 per common share on total revenue of $4,582,882,
versus a net loss of $1,125,153, or $0.04 per common share on total revenue of
$4,399,861, for the comparable period last year. The reduction in net loss is
primarily attributable to reimbursements of product qualification and testing
costs under the DOE Grant.
Our liquidity for the quarter and six month period ended
September 30, 2010 was sufficient to meet our operating requirements. At
September 30, 2010 we had cash and short-term investments totaling $26,402,351.
Net cash used in operating activities and capital expenditures, net of
reimbursements for the six month period ended September 30, 2009 were $1,427,773
and $2,216,528 versus $1,181,933 and $156,236 for the same period last fiscal
year, respectively.
As the markets for electrified vehicles continue to emerge
and expand into additional vehicle platforms over the next several years, we
expect to experience potentially rapid growth in our revenue coincident with the
introduction of electric products for our customers. Should these expectations
be realized, our existing cash and short-term investments may not be adequate to
fund our anticipated growth and, as a result, we may need to raise additional
capital to fund the higher than currently anticipated growth in our business.
Financial Condition
Cash and cash equivalents and short-term investments at
September 30, 2010 were $26,402,351 and working capital (the excess of current
assets over current liabilities) was $29,053,498 compared with $30,148,783 and
$31,001,650, respectively, at March 31, 2010. The decrease in cash and
short-term investments and working capital is primarily attributable to
operating losses, higher levels of accounts receivable and inventories, and
lower levels of accounts payable and other accrued liabilities.
Accounts receivable increased $1,565,653 to $3,261,291 at
September 30, 2010 from $1,695,638 at March 31, 2010. The increase is primarily
due to higher levels of billings under our DOE Grant and increased average days
outstanding on commercial accounts. Substantially all of our customers are large
well-established companies of high credit quality. Our sales are conducted
through acceptance of customer purchase orders or in some cases through supply
agreements. For credit qualified customers our standard terms are net 30 days.
For international customers and customers without an adequate credit rating our
typical terms are irrevocable letter of credit or cash payment in advance of
delivery. No allowance for bad debts was deemed necessary at September 30, 2010
or March 31, 2010; however, in light of current economic conditions we may need
to establish an allowance for bad debts in the future.
Costs and estimated earnings on uncompleted contracts
decreased $180,596 to $500,150 at September 30, 2010 versus $680,746 at March
31, 2010. The decrease is due to more favorable billing terms on certain
contracts in process at September 30, 2010 versus March 31, 2010. Estimated
earnings on contracts in process decreased to $479,603 or 10.6 percent of
contracts in process of $4,521,136 at September 30, 2010 compared to estimated
earnings on contracts in process of $544,417 or 11.8 percent of contracts in
process of $4,607,545 at March 31, 2010. The decrease is attributable to lower
expected margin on certain contracts in process at September 30, 2010.
Inventories increased $190,613 to $1,481,939 at September 30,
2010 principally due to higher levels of raw material inventories which
increased $443,952, reflecting higher levels of inventory on hand for the CODA
production program at September 30, 2010.
Prepaid expenses and other current assets increased to
$311,330 at September 30, 2010 from $140,285 at March 31, 2010 primarily due to
the prepayment of insurance premium costs on our commercial insurance coverage.
We invested $201,551 and $2,216,528 for the acquisition of
property and equipment, net of reimbursements from the DOE Grant, during the
quarter and six months ended September 30, 2010 compared to $121,443 and
$156,236 during the comparable quarter and six months last fiscal year. The
increase in capital expenditures is primarily due to renovation costs on our new
facility and purchases of manufacturing equipment.
Patent costs decreased to $278,381 at September 30, 2010
versus $297,623 at March 31, 2010 primarily due to the systematic amortization
of patent issuance costs. Similarly, trademark costs decreased to $120,575 at
September 30, 2010 versus $122,818 at March 31, 2010 primarily due to the
systematic amortization of trademark costs.
Accounts payable decreased $268,302 to $1,153,477 at
September 30, 2010 from $1,421,779 at March 31, 2010, primarily due to a
reduction in the level trade account payables arising from the renovation of our
new facility occupied during the second quarter.
Other current liabilities decreased to $986,595 at September
30, 2010 from $1,049,243 at March 31, 2010. The decrease is primarily
attributable to lower levels of customer deposits at September 30, 2010.
Billings in excess of costs and estimated earnings on
uncompleted contracts decreased to $24,291 at September 30, 2010 from $51,552 at
March 31, 2010 reflecting decreased billings on certain engineering contracts in
process at September 30, 2010 in advance of the performance of the associated
work versus March 31, 2010.
Short-term deferred compensation under executive employment
agreements increased $306,646 to $739,200 at September 30, 2010 from $432,554 at
March 31, 2010 reflecting retirement payments to the companies CEO who is
retiring next quarter.
Common stock and additional paid-in capital were $360,509 and
$112,968,922, respectively, at September 30, 2010 compared to $359,467 and
$112,211,227 at March 31, 2010. The increases in common stock and additional
paid-in capital were primarily attributable to annual non-cash share based
payments granted during the second quarter of fiscal 2011.
Results of Operations
Quarter Ended September 30, 2010
Operations for the second quarter ended September 30, 2010,
resulted in a net loss of $377,793, or $0.01 per common share, compared to a net
loss of $496,037, or $0.02 per common share for the comparable period last year.
The reduction in net loss is primarily attributable to reimbursements of product
qualification and testing costs under the DOE Grant.
Revenue from contract services decreased to $43,262 at
September 30, 2010 versus $431,512 for the comparable quarter last year. Revenue
for the quarter was impacted by adjustments to indirect costs on a cost-plus
government contract, the application of engineering resources to production
engineering activities and reduced levels of funded development programs.
Product sales revenue for the second quarter rose 7.9 percent
to $1,984,296 versus $1,839,030 for the comparable period last fiscal year. The
increase is due to continued strong demand for electric propulsion systems and
generators and the delivery of pre-production units under the CODA Supply
Agreement. Power products segment revenue for the quarter ended September 30,
2010 increased to $852,559 from $509,716 for the comparable quarter last fiscal
year due to increased levels of higher volume propulsion system shipments.
Technology segment product revenue for the quarter ended September 30, 2010
decreased to $1,131,737, compared to $1,329,314 for the quarter ended September
30, 2009 due to decreased shipments of prototype propulsion motors and
controllers.
Gross profit margins for the quarter ended September 30, 2010
decreased to 11.2 percent compared to 36.0 percent for the quarter ended
September 30, 2009. Gross profit margin on contract services was negative for
the second quarter this fiscal year compared to 33.9 percent for the quarter
ended September 30, 2009, primarily due to the reduction in contract services
revenue discussed above. Gross profit margin on product sales for the second
quarter this year decreased to 17.4 percent compared to 36.5 percent for the
second quarter last year. The decrease is primarily due to the delivery of
pre-production units to CODA which generally have a lower gross profit margin
than sales of other low volume products.
Research and development expenditures for the quarter ended
September 30, 2010 increased to $152,628 compared to $127,689 for the quarter
ended September 30, 2009 reflecting cost-sharing on government research programs
and higher levels of on-going software research activities.
Production engineering costs were $856,682 for the second
quarter versus $587,881 for the second quarter last fiscal year. The increase is
attributable to higher sample costs, and expansion of the group and its
activities in preparation for the launch of higher volume manufacturing
operations.
Reimbursement of costs under the DOE Grant were $2,551,944
for the quarter ended September 30, 2010 representing reimbursable product
qualification and testing costs incurred from August 5, 2009 through September
30, 2010. As described above, the DOE reimbursement was recognized during the
current quarter due to the resolution of certain contingencies provided for in
the Grant.
Selling, general and administrative expense for the quarter
ended September 30, 2010 was $2,177,981 compared to $603,069 for the same
quarter last year. The increase is attributable to higher levels of compensation
expense arising from a change in the period of grant versus that for the last
fiscal year, costs arising from the appointment of Mr. Ridenour as president of
the company, and moving expenses incurred during the quarter associated with our
relocation to a new facility.
Interest income increased to $30,945 for the quarter ended
September 30, 2010 versus $11,487 for the same period last fiscal year. The
increase is attributable to higher levels of invested cash balances.
Six Months Ended September 30, 2010
Operations for the six month period ended September 30, 2010,
resulted in a net loss of $864,663, or $0.02 per common share, compared to a net
loss of $1,125,153, or $0.04 per common share for the comparable period last
year. The reduction in net loss is primarily attributable to reimbursements of
product qualification and testing costs under the DOE Grant.
Revenue from contract services decreased to $345,490 for the
six month period ended September 30, 2010 versus $844,394 for the comparable
period last year. Revenue for the six month period was impacted by adjustments
to indirect costs on a cost-plus government contract, the application of
engineering resources to production engineering activities and reduced levels of
funded development programs.
Product sales for the six month period ended September 30,
2010 increased to $4,237,392, compared to $3,555,467 for the comparable period
last year. Power products segment revenue for the six month period ended
September 30, 2010 increased to $1,536,853 from $1,030,648 for the comparable
period last fiscal year due to increased shipments of pre-production CODA
systems and shipments under our supply agreement with Electric Vehicles
International. Technology segment product revenue for the six month period ended
September 30, 2010 increased to $2,700,539, compared to $2,524,819 for the
comparable period last year due to increased shipments of prototype propulsion
motors and controllers.
Gross profit margins for the six month period ended September
30, 2010 decreased to 26.0 percent compared to 32.3 percent for the comparable
six month period last fiscal year. The decrease is due to negative margins
during the second quarter on contract services and deliveries of pre-production
units which typically have lower gross profit margins than other low volume
product sales. Gross profit margin on contract services decreased for the six
month period to negative 2 percent versus 31.1 percent for the comparable six
month period last fiscal year primarily due to the reduction in contract
services revenue during the second quarter discussed above. Gross profit margin
on product sales for the six month period ended September 30, 2010 decreased to
28.2 percent compared to a 32.6 percent for the comparable period last year. The
decrease is due to deliveries of pre-production units during the period which
typically have lower gross profit margins than other low volume product sales .
Research and development expenditures for the six month
period ended September 30, 2010 decreased to $271,947 compared to $313,835 for
the same period last year. The decrease is primarily due to reduced levels of
internally funded programs.
Production engineering costs were $1,660,316 for the six
month period ended September 30, 2010 versus $1,014,316 for the comparable six
month period last year. The increase is attributable to higher sample costs and
the addition of engineering resources to our production engineering group.
Reimbursements of costs under DOE Grant was $2,551,944 for
the six months ended September 30, 2010 versus zero for the comparable period
last year representing reimbursable product qualification and testing costs
incurred from August 5, 2009 through September 30, 2010. As described above, the
DOE reimbursement was recognized during the second quarter due to the resolution
of certain contingencies provided for in the Grant.
Selling, general and administrative expense for the six month
period ended September 30, 2010 was $3,000,822 compared to $1,242,847 for the
same period last year. The increase is attributable to higher levels of
compensation expense arising from a change in the period of grant versus that
for the last fiscal year, costs arising from the appointment of Mr. Ridenour as
President of the Company, and moving expenses incurred during the quarter
associated with our relocation to a new facility.
Interest income decreased to $59,653 for the six month period
ended September 30, 2010 versus $26,772 for the comparable period last year. The
decrease is attributable to lower yields and lower levels of invested cash
balances.
Other income was $265,140 for the six month period ended
September 30, 2010, reflecting a cash recovery upon completion of a former
customer's bankruptcy proceedings.
Liquidity and Capital Resources
Our cash balances and liquidity throughout the quarter and
six month period ended September 30, 2010 were adequate to meet operating needs.
At September 30, 2010, we had working capital (the excess of current assets over
current liabilities) of $29,053,498 compared to $31,001,650 at March 31, 2010.
For the six month period ended September 30, 2010, net cash
used in operating activities was $1,427,773 compared to net cash used in
operating activities of $1,181,933 for the comparable six month period last
fiscal year. The increase in cash used for the six month period is primarily
attributable to increased levels of accounts receivable and inventory, which
were partially offset by noncash share based payments. Our sales are conducted
through acceptance of customer purchase orders or in some cases through supply
agreements. In cases where credit is granted to customers, our standard terms
are net 30 days. Significant increases in revenue or a change in our credit
policies to offer extended payment terms could potentially result in material
increases in our working capital requirements. In addition, judgments regarding
customers credit quality and their ability to meet their financial obligations
to us could be incorrect, resulting in bad debts which could have a material
adverse effect on our financial results and liquidity.
Net cash used in investing activities for the second quarter
was $1,864,242 compared to cash provided by investing activities of $1,380,300
for the comparable six month period last fiscal year. The increase in cash used
was primarily due to increased levels of short-term investments and higher
levels of capital expenditures associated with the establishment of high volume
manufacturing capability and capacity for the CODA vehicle launch later this
calendar year, partially offset by increased levels of short-term investment
maturities.
We expect to fund our operations over the next year from
existing cash and short-term investment balances and from available bank
financing, if any. We may need to invest substantially greater financial
resources during fiscal 2011 on the commercialization of our products in
emerging markets, including a significant increase in human resources, and
increased expenditures for equipment, tooling and facilities. These capital
requirements may be substantially reduced by the funding of 50 percent of
qualified capital expenditures from the Company's Grant from the DOE. Working
capital requirements related to our supply agreement with CODA could exceed $10
million if CODA achieves their calendar 2011 production targets of 14,000
vehicles. Although we expect to manage our operations and working capital
requirements to minimize the future level of operating losses and working
capital usage consistent with the execution of our business plan, our planned
working capital requirements may consume a substantial portion of our cash
reserves at September 30, 2010. If customer demand accelerates substantially,
our losses over the short-term may increase together with our working capital
requirements. In addition, our $45.1 million DOE Grant requires us to provide
matching funds of 50 percent on all qualifying expenditures under the Grant. As
of September 30, 2010 we have received credit from the DOE for matching funds of
$32 million, and we have an obligation under our DOE Grant to demonstrate our
ability to provide additional matching funds of $13 million on or before July
13, 2011. We do not currently have sufficient funds to meet this potential
future funding requirement.
If our existing financial resources are not sufficient to
execute our business plan, including meeting future funding requirements under
the DOE Grant, we may issue equity or debt securities in the future, although we
cannot assure that we will be able to secure additional capital should it be
required to implement our current business plan. In the event financing or
equity capital to fund future growth is not available on terms acceptable to us,
or at all, we will modify our strategy to align our operation with then
available financial resources.
Contractual Obligations
The following table presents information about our
contractual obligations and commitments as of September 30, 2010:
|
|
Payments
due by
Period
|
|
Total
|
Less Than
1 Year
|
2 - 3 Years
|
4 - 5 Years
|
More than
5 Years
|
Purchase obligations
|
$ 2,818,616
|
2,818,616
|
-
|
-
|
-
|
Executive employment agreements
(1)
|
1,261,085
|
739,200
|
461,577
|
-
|
60,308
|
Total
|
$
4,079,701
|
3,557,816
|
461,577
|
-
|
60,308
|
|
|
|
|
|
|
(1)
|
Includes severance pay obligations under executive
employment agreements, but not annual cash compensation under the
agreements.
|
Off-Balance Sheet Arrangements
None.
Critical Accounting Policies
The preparation of financial statements and related
disclosures in conformity with accounting principles generally accepted in the
United States of America requires management to make judgments, assumptions and
estimates that affect the dollar values reported in the consolidated financial
statements and accompanying notes. Note 1 to the consolidated financial
statements contained in our annual report on Form 10-K for the fiscal year ended
March 31, 2010 describes the significant accounting policies and methods used in
the preparation of the consolidated financial statements. Estimates are used
for, but not limited to, allowance for doubtful accounts receivables, costs to
complete contracts, the recoverability of inventories, the fair value of
financial and long-lived assets and in the establishment of provisional billing
rates on certain government contracts. Actual results could differ materially
from these estimates. The following critical accounting policies are impacted
significantly by judgments, assumptions and estimates used in preparation of the
consolidated financial statements.
Accounts Receivable
Our trade accounts receivable are subject to credit risks
associated with the financial condition of our customers and their liquidity. We
evaluate all customers periodically to assess their financial condition and
liquidity and set appropriate credit limits based on this analysis. As a result,
the collectibility of accounts receivable may change due to changing general
economic conditions and factors associated with each customer's particular
business. Because substantially all of our customers are large well-established
companies with excellent credit worthiness, we have not established a reserve at
September 30, 2010 and March 31, 2010 for potentially uncollectible trade
accounts receivable. In light of current economic conditions we may need to
establish an allowance for bad debts in the future. It is also reasonably
possible, that future events or changes in circumstances could cause the
realizable value of our trade accounts receivable to decline materially,
resulting in material losses.
Inventories
We maintain raw material inventories of electronic
components, motor parts and other materials to meet our expected manufacturing
needs for proprietary products and for products manufactured to the design
specifications of our customers. Some of these components may become obsolete or
impaired due to bulk purchases in excess of customer requirements. Accordingly,
we periodically assesses our raw material inventory for potential impairment of
value based on then available information, expectations and estimates and
establish impairment reserves for estimated declines in the realizable value of
our inventories. The actual realizable value of our inventories may differ
materially from these estimates based on future occurrences. It is reasonably
possible that future events or changes in circumstances could cause the
realizable value of our inventories to decline materially, resulting in
additional material impairment losses.
Percentage of Completion Revenue Recognition on Long-term
Contracts: Costs and Estimated Earnings in Excess of Billings on
Uncompleted
Contracts
We recognize revenue on development projects funded by our
customers using the percentage-of-completion method. Under this method, contract
services revenue is based on the percentage that costs incurred to date bear to
management's best estimate of the total costs to be incurred to complete the
project. Many of these contracts involve the application of our technology to
customers' products and other applications with demanding specifications.
Management's best estimates have sometimes been adversely impacted by unexpected
technical challenges requiring additional analysis and redesign, failure of
electronic components to operate in accordance with manufacturers published
performance specifications, unexpected prototype failures requiring the purchase
of additional parts and a variety of other factors that may cause unforeseen
delays and additional costs. It is reasonably possible that total costs to be
incurred on any of the projects in process at September 30, 2010 could be
materially different from management's estimates, and any modification of
management's estimate of total project costs to be incurred could result in
material changes in the profitability of affected projects or result in material
losses on any affected projects.
Fair Value Measurements and Asset Impairment
Some of our assets and liabilities may be subject to analysis
as to whether the asset or liability should be marked to fair value and some
assets may be evaluated for potential impairment in value. Fair value estimates
and judgments may be required by management for those assets that do not have
quoted prices in active markets. These estimates and judgments may include fair
value determinations based upon the extrapolation of quoted prices for similar
assets and liabilities in active or inactive markets, for observable items other
than the asset or liability itself, for observable items by correlation or other
statistical analysis, or from our assumptions about the assumptions market
participants would use in valuing an asset or liability when no observable
market data is available. Similarly, management evaluates both tangible and
intangible assets for potential impairments in value. In conducting this
evaluation, management may rely on a number of factors to value anticipated
future cash flows including operating results, business plans and present value
techniques. Rates used to value and discount cash flows may include assumptions
about interest rates and the cost of capital at a point in time. There are
inherent uncertainties related to these factors and management's judgment in
applying them to the analysis of asset impairment. Changes in any of the
foregoing estimates and assumptions or a change in market conditions could
result in a material change in the value of an asset or liability resulting in a
material adverse change in our operating results.
Cost-Sharing and Cost-Plus Type Contracts
Some of our business with the U.S. Government and prime
contractors is performed under cost-sharing of cost-plus fixed-fee type
contracts. These contracts provide for the reimbursement of costs, to the extent
allocable and allowable under applicable government regulations. Typically,
billings under these contracts are based on provisional rates, which are
estimates of the actual costs expected to be incurred during the relevant period
of performance. The final amounts qualified for reimbursement are determined in
arrears, typically annually, based on the actual costs incurred during the
relevant period of performance. The final costs eligible for reimbursement under
these contracts may differ materially from the provisional rates. If actual
costs incurred are less than the amounts estimated through provisional rates, we
will be obligated to return any excess of provisional payments over final
qualified costs, which could have a material adverse impact on our operating
results and liquidity.
New Accounting Pronouncements
In October 2009, the FASB issued new standards for revenue
recognition with multiple deliverables. These new standards impact the
determination of when the individual deliverables included in a multiple-element
arrangement may be treated as separate units of accounting. Additionally, these
new standards modify the manner in which the transaction consideration is
allocated across the separately identified deliverables by no longer permitting
the residual method of allocating arrangement consideration. These new standards
are required to be adopted in the first quarter of FY 2012; however, early
adoption is permitted. We do not expect these new standards to significantly
impact our consolidated financial statements.
In October 2009, the FASB issued new standards for the
accounting for certain revenue arrangements that include software elements.
These new standards amend the scope of pre-existing software revenue guidance by
removing from the guidance non-software components of tangible products and
certain software components of tangible products. These new standards are
required to be adopted in the first quarter of FY 2012; however, early adoption
is permitted. We do not expect these new standards to significantly impact our
consolidated financial statements.
In January 2010, the FASB issued amended standards that
require additional fair value disclosures. These amended standards require
disclosures about inputs and valuation techniques used to measure fair value as
well as disclosures about significant transfers, beginning in the first quarter
of 2010. Additionally, these amended standards require presentation of
disaggregated activity within the reconciliation for fair value measurements
using significant unobservable inputs (Level 3), beginning in the first quarter
of FY 2012. We do not expect these new standards to significantly impact our
consolidated financial statements.
In April 2010, the FASB issued a new standard on the
milestone method of revenue recognition. This new standard provides guidance on
the criteria that is necessary to apply the milestone method of revenue
recognition. This new standard is required to be adopted in the first quarter of
FY2012. We do not expect this new standard to significantly impact our
consolidated financial statements.
ITEM 3. QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the potential loss arising from adverse
changes in market rates and prices, such as foreign currency exchange and
interest rates. We do not use financial instruments to any degree to manage
these risks and do not hold or issue financial instruments for trading purposes.
All of our product sales, and related receivables are payable in U.S. dollars.
We are not subject to interest rate risk on our debt obligations.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are
designed to ensure that information required to be disclosed in our reports
filed with the Securities and Exchange Commission ("SEC") is recorded,
processed, summarized and reported within the time periods specified in the SEC's
rules and forms, and that such information is accumulated and communicated to
our management, including our Chief Executive Officer ("CEO") and
Chief Financial Officer ("CFO"), as appropriate, to allow timely
decisions regarding required disclosure.
As of September 30, 2010, we performed an evaluation under
the supervision and with the participation of our management, including CEO and
CFO, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures (as defined in Rule 13a-15(e) under the U.S.
Securities and Exchange Act of 1934). Based on that evaluation, our management,
including the CEO and CFO, concluded that our disclosure controls and procedures
were effective as of September 30, 2010.
PART II-OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Litigation
We are involved in various claims and legal actions arising
in the ordinary course of business. In the opinion of management, and based on
current available information, the ultimate disposition of these matters is not
expected to have a material adverse effect on our financial position, results of
operations or cash flow, although adverse developments in these matters could
have a material impact on a future reporting period.
ITEM 1A. RISK FACTORS
Risk Factors
You should carefully consider the risks described below
before making an investment decision. The risks and uncertainties
described below are not the only ones we face. Additional risks and
uncertainties not presently known to us or that we currently deem immaterial may
also impair our business operations.
Our business, financial condition or results of operations
could be materially adversely affected by any of these risks. The trading price
of our common stock could decline due to any of these risks, and you may lose
all or part of your investment.
This report also contains forward-looking statements that
involve risks and uncertainties. Our actual results could differ
materially from those anticipated in the forward-looking statements as a result
of a number of factors, including the risks described below.
We have incurred significant losses and may continue to do
so.
We have incurred significant net losses as shown in the following tables:
|
|
|
Fiscal
Year Ended March
31,
|
|
2010
|
2009
|
2008
|
|
|
|
|
Net loss
|
$ 4,140,872
|
$ 4,402,019
|
$ 4,586,105
|
We have had accumulated deficits as follows:
September 30, 2010
|
$ 74,430,774
|
|
|
March 31, 2010
|
$ 73,566,111
|
|
|
March 31, 2009
|
$ 69,425,239
|
In the future, we plan to make additional investments in
product development, facilities and equipment and other costs related to the
commercialization of our products. As a result, we expect to continue to incur
net losses at least through March 31, 2011 and potentially beyond.
Our operating losses, anticipated capital expenditures and
working capital requirements in the longer term may exceed our current cash
balances.
Our net loss for the quarter and six month period ended
September 30, 2010 was $377,793 and $864,663 versus a net loss for the
comparable quarter and six months last fiscal year of $
496,037
and $1,125,153
. At September 30, 2010, our cash and
short-term investments totaled $26,402,351. We expect our losses to continue
through at least March 31, 2011 and potentially beyond. Our existing cash
resources, together with funding expected from our ARRA grant should be
sufficient to complete our business plan for at least the next eighteen months.
Should those resources be insufficient, we may need to secure additional debt or
equity funding, which may not be available on terms acceptable to us, if at all.
If we do not satisfy the terms of our U.S. Department of
Energy grant, we may not receive all or any portion of the $45.1 million
grant we were awarded and may be required to return amounts already paid to us
under the grant.
On January 13, 2010, we finalized a $45.1 million award
under the American Recovery and Reinvestment Act's Electric Drive Vehicle
Battery and Component Manufacturing Initiative with the U.S. Department of
Energy. This Award is subject to terms and conditions specified in the agreement
between us and the DOE. We are required to make a cash investment on a
dollar-for-dollar matching basis to receive funds under this Award. If we are
unable to match the total amount of the $45.1 million award with funding
from non-Federal sources, we will be unable to take advantage of the entire
Award, and could become ineligible for continued participation in the program.
The payment of the incurred costs under the award has been limited to $32
million until we provide DOE with firm commitments for an additional $12 million
representing our remaining 50 percent share of the total estimated cost of the
project. If all such funds have not been secured by July 13, 2011, we must
submit by such a date, a funding plan to obtain the remainder of such funds that
is acceptable to the DOE. In the event we do not satisfy the foregoing
contingency, the award may be terminated. In addition, the award may be
terminated at any time at the convenience of the government. Although we expect
to satisfy the contingencies contained in the award, we can not assure that the
contingencies will be satisfied and the contract will not be terminated prior to
receiving all of the proceeds.
CODA's manufacturing partner may not purchase from us all or
any portion of the 20,000 systems provided for under its supply agreement.
We have executed a supply agreement with CODA that provides a
framework for CODA's manufacturing partner to purchase from us 20,000 electric
propulsion systems for use in automobiles to be manufactured by CODA during the
initial two-year term of the agreement. Under the terms of this agreement,
CODA's manufacturing partner, HaFei, will issue blanket purchase orders covering
their annual purchase requirements and specifying the timing of delivery for
such units, with the nearest 60-day delivery schedule considered to be
"firm" and noncancellable. HaFei has not yet issued any purchase
orders under the CODA supply agreement. If HaFei does not purchase at least
15,000 units under the CODA supply agreement, CODA may be required to make
specific payments to us. For example, if CODA is unsuccessful in the development
of its electric automobile, HaFei would not be obligated to purchase electric
propulsion systems from us, but CODA would then be obligated to make the
payments specified in the contract to us. While these specific payments would
cover much of our costs in preparing to supply electric propulsion systems to
CODA, the payments are substantially less than the amount we would receive for
sales of systems under the supply agreement. In addition, CODA may not have
adequate funds to make any such payments to us or may otherwise contest its
obligation to pay, and as a result it is possible that we may never receive any
such funds. CODA may also terminate the supply agreement for any number of
reasons.
We may experience challenges in launching production of
electric propulsion systems on the scale envisioned under the CODA supply
agreement.
We have not to date produced electric propulsion systems on
the scale we intend to manufacture to fulfill our obligations under the CODA
supply agreement, although we have several years of experience manufacturing
motors and electronics that are smaller and operate at lower power levels. We
will also need to hire additional personnel, as well as acquire new equipment
and tooling to launch production for CODA, which will require significant time
and expense. We may not sell a sufficient number of systems to CODA or other
customers to cover these expenses.
Our revenue is highly concentrated among a small number of
customers.
A large percentage of our revenue is typically derived from a
small number of customers, and we expect this trend to continue and intensify as
we begin production under the CODA supply agreement. CODA may become the source
of a substantial portion of our revenue in at least the near-term. The magnitude
of this revenue is dependent on CODA's ability to introduce and sell its
passenger vehicle in commercial volumes.
Our customer arrangements generally are non-exclusive, have
no long-term volume commitments and are often done on a purchase order basis. We
cannot be certain that customers that have accounted for significant revenue in
past periods will continue to purchase our products. Accordingly, our revenue
and results of operations may vary substantially from period to period. We are
also subject to credit risk associated with the concentration of our accounts
receivable from our customers. If one or more of our significant customers were
to cease doing business with us, significantly reduce or delay its purchases
from us or fail to pay us on a timely basis, our business, financial condition
and results of operations could be materially adversely affected.
Our business relies on third parties, whose success we cannot
predict.
As a manufacturer of motors, generators, and other component
parts, our business model depends on the ability of third parties in our
industry to develop, produce and market products that include or are compatible
with our technology and then to sell these products into the marketplace. Our
ability to generate revenue depends significantly on the commercial success of
our customers and partners. Failure of these third parties to achieve
significant sales of products incorporating our products and fluctuations in the
timing and volume of such sales could have a material adverse effect on our
business, financial condition and results of operations.
Our electric propulsion systems use rare earth minerals and
unavailability or limited supply of these minerals could prevent us from
manufacturing our products in production quantities or increase our costs.
Neodymium, a rare earth mineral, is a key element used in the
production of magnets that are a component of our electric propulsion systems.
Neodymium is currently sourced primarily from China, and China recently
indicated its intent to retain more of this mineral for the use of Chinese
companies, rather than exporting it. To the extent that we buy magnets as a
finished product from a Chinese supplier, these potential limitations on
neodymium ore may not impact us. Although neodymium iron boron magnets are
available from other sources, these alternative sources are currently more
costly. Reduced availability of neodymium from China could adversely affect our
ability to obtain magnets in sufficient quantities, or in a timely manner, to
meet our production plans. In the event that China's actions cause us to seek
alternate sources of supply for magnets, it could cause an increase in our
production costs thereby reducing our profit margin on electric propulsion
systems if we are unable to pass the increase in our production costs on to our
customers.
A prolonged downturn in global economic conditions may materially adversely
affect our business.
Our business and results of operations are affected by
international, national and regional economic conditions. Financial markets in
the United States, Europe and Asia have experienced extreme disruption over the
last two years, including, among other things, extreme volatility in security
prices, severely diminished liquidity and credit availability, ratings
downgrades of certain investments and declining values of others. We are unable
to predict the likely duration and severity of the current disruptions in
financial markets, credit availability, and adverse economic conditions
throughout the world. These economic developments affect businesses such as ours
and those of our customers and suppliers in a number of ways that could result
in unfavorable consequences to us. Current economic conditions or declining
economic conditions in the United States and elsewhere, including in the
automobile industry, may cause our current or potential customers to delay or
reduce purchases which could, in turn, result in reductions in sales of our
products, materially and adversely affecting our results of operations and cash
flows. Volatility and disruption of global financial markets could limit our
customers' ability to obtain adequate financing to maintain operations and
proceed with planned or new capital spending initiatives, leading to a reduction
in sales volume that could materially and adversely affect our results of
operations and cash flow. In addition, a decline in our customers' ability to
pay as a result of the economic downturn may lead to increased difficulties in
the collection of our accounts receivable, higher levels of reserves for
doubtful accounts and write-offs of accounts receivable, and higher operating
costs as a percentage of revenues.
Some of our contracts can be cancelled with little or no
notice and could restrict our ability to commercialize our technology.
Some of our technology has been developed under government
funding by United States government agencies. In some cases, government agencies
in the United States can require us to obtain or produce components for our
systems from sources located in the United States rather than foreign countries.
Our contracts with government agencies are also subject to the risk of
termination at the convenience of the contracting agency and in some cases grant
"march-in" rights to the government. March-in rights are the right of
the United States government or the applicable government agency, under limited
circumstances, to exercise a non-exclusive, royalty-free, irrevocable worldwide
license to any technology developed under contracts funded by the government to
facilitate commercialization of technology developed with government funding.
March-in rights can be exercised if we fail to commercialize the developed
technology. The implementation of restrictions on our sourcing of components or
the exercise of march-in rights by the government or an agency of the government
could restrict our ability to commercialize our technology.
Some of our orders for the future delivery of products are
placed under blanket purchase orders which may be cancelled by our customers at
any time. The amount payable to the Company, if any, upon cancellation by the
customer varies by customer. Accordingly, we may not recognize as revenue all or
any portion of the amount of outstanding order backlog we have reported.
We face intense competition in our motor development and may
be unable to compete successfully.
In developing electric motors for use in vehicles and other
applications, we face competition from very large domestic and international
companies, including the world's largest automobile manufacturers. Many of our
competitors have far greater resources to apply to research and development
efforts than we have, and they may independently develop motors that are
technologically more advanced than ours. These competitors also have much
greater experience in and resources for marketing their products. For these
reasons, potential customers may choose to purchase electric motors from our
competitors rather than from us. In addition, the U.S. government has
awarded substantial financial grants under the stimulus bill to several large
companies who compete with us. To the extent that some of these competitors
received awards under the stimulus bill in amounts greater than we have, could
adversely impact our ability to compete.
Our business depends, in part, on the expansion of the market
for hybrid electric vehicles and the future introduction and growth of a market
for all-electric vehicles.
Although our electric propulsion systems may be used in a
wide variety of products, the market for electric and hybrid vehicles is fairly
new. At the present time, batteries used to power electric motors have limited
life and require several hours to charge, and charging stations for electric
motors are not widely available. Electric and hybrid vehicles also tend to be
priced higher than comparable gasoline-powered vehicles. As a result, consumers
may experience concerns about driving range limitations, battery charging time
and higher purchase costs of electric or hybrid automobiles. If consumer
preferences shift to vehicles powered by other alternative methods, or if
concerns about the availability of charging stations cannot be overcome, the
market for all-electric cars, and therefore our electric propulsion systems, may
be limited. In addition, our electric propulsion systems are incorporated in
buses used for mass transit in several U.S. cities. If passenger traffic in
these mass transit systems declines, demand for our products may also decrease.
The popularity of alternative fuel based vehicles and
"green energy" initiatives are highly dependent on macro-economic
conditions, including oil prices and the overall health of the economy. When oil
prices fall, interest in and resources allocated to the development of advanced
technology vehicles and propulsion systems may diminish. The recent downturn in
the world economy also has severely impacted the automotive industry, slowing
the demand for vehicles generally and reducing consumers' willingness to pay
more for environmentally friendly technology.
If our products do not achieve market acceptance, our
business may not grow.
Although we believe our proprietary systems are suited for a
wide-range of vehicle electrification applications, our business and financial
plan relies heavily on the introduction of new products that have limited
testing in the marketplace. We are currently making substantial investments in
human resources, manufacturing facilities and equipment, production and
application engineering, among other things, to ramp up our production capacity
in order to capitalize on the anticipated expansion in demand for electric
propulsion systems and generators in the automobile and light truck markets. Our
sales of electric propulsion systems and generators in the automobile and light
truck markets to date have consisted of limited quantities of evaluation and
field test units. We are not certain that our existing products will achieve
broad market acceptance, or that we will be able to develop new products or
product enhancements that will achieve broad market acceptance.
Changes in environmental policies could hurt the market for
our products.
The market for electric and other alternative fuel vehicles
and equipment and the demand for our products are influenced, to a degree, by
federal, state and local regulations relating to air quality, greenhouse gases
and pollutants. These laws and regulations may change, which could result in
transportation or equipment manufacturers abandoning or delaying their interest
in electric or hybrid electric vehicles or equipment. In addition, a failure by
authorities to enforce current laws and regulations or to adopt additional
environmental laws or regulations could limit the demand for our products.
Although many governments have identified as a significant
priority the development of alternative energy sources, governments may change
their priorities, and any change they make could materially affect our revenue
or the development of our products.
If we are unable to protect our patents and other proprietary
technology, we will be unable to prevent third parties from using our
technology, which would impair our competitiveness and ability to commercialize
our products. In addition, the cost of enforcing our proprietary rights may be
expensive and result in increased losses.
Our ability to compete effectively against other companies in
our industry will depend, in part, on our ability to protect our proprietary
technology. Although we have attempted to safeguard and maintain our proprietary
rights, we do not know whether we have been or will be successful in doing so.
We have historically pursued patent protection in a limited number of foreign
countries where we believe significant markets for our products exist or where
potentially significant competitors have operations. It is possible that a
substantial market could develop in a country where we have not received patent
protection and under such circumstances our proprietary products would not be
afforded legal protection in these markets. Further, our competitors may
independently develop or patent technologies that are substantially equivalent
or superior to ours. We cannot assure that additional patents will be issued to
us or, if they are issued, as to the scope of their protection. Patents granted
may not provide meaningful protection from competitors. Even if a competitor's
products were to infringe patents owned by us, it would be costly for us to
pursue our rights in an enforcement action, it would divert funds and resources
which otherwise could be used in our operations and we cannot assure that we
would be successful in enforcing our intellectual property rights. In addition,
effective patent, trademark, service mark, copyright and trade secret protection
may not be available in every country where we may operate or sell our products
in the future. If third parties assert technology infringement claims against
us, the defense of the claims could involve significant legal costs and require
our management to divert time and attention from our business operations. If we
are unsuccessful in defending any claims of infringement, we may be forced to
obtain licenses or to pay royalties to continue to use our technology. We may
not be able to obtain any necessary licenses on commercially reasonable terms or
at all. If we fail to obtain necessary licenses or other rights, or if these
licenses are costly, our results of operations may suffer either from reductions
in revenues through our inability to serve customers or from increases in costs
to license third-party technologies.
Use of our motors in vehicles could subject us to product
liability claims or product recalls, and product liability insurance claims
could cause an increase in our insurance rates or could exceed our insurance
limits, which could impair our financial condition, results of operations and
liquidity.
The automotive industry experiences significant product
liability claims. As a supplier of electric propulsion systems or other products
to vehicle OEMs, we face an inherent business risk of exposure to product
liability claims in the event that our products, or the equipment into which our
products are incorporated, malfunction and result in personal injury or death.
We may be named in product liability claims even if there is no evidence that
our systems or components caused an accident. Product liability claims could
result in significant losses as a result of expenses incurred in defending
claims or the award of damages. The sale of systems and components for the
transportation industry entails a high risk of these claims, which may increase
as our production and sales increase. In addition, we may be required to
participate in recalls involving these systems if any of our systems prove to be
defective, or we may voluntarily initiate a recall or make payments related to
such claims as a result of various industry or business practices or the need to
maintain good customer relationships.
We carry product liability insurance of $10 million
covering most of our products. If we were to experience a large insured loss, it
might exceed our coverage limits, or our insurance carriers could decline to
further cover us or raise our insurance rates to unacceptable levels, any of
which could impair our financial position and results of operations. Any product
liability claim brought against us also could have a material adverse effect on
our reputation.
We may be subject to warranty claims, and our provision for
warranty costs may not be sufficient.
We may be subject to warranty claims for defects or alleged
defects in our products, and the risk of such claims arising will increase as
our production and sales increase. In addition, in response to consumer demand,
vehicle manufacturers have been providing, and may continue to provide,
increasingly longer warranty periods for their products. As a consequence, these
manufacturers may require their suppliers, such as us, to provide
correspondingly longer product warranties. As a result, we could incur
substantially greater warranty claims in the future.
The unpredictability and fluctuation of our quarterly results
may adversely affect the trading price of our common stock.
Our revenues and results
of
operations have varied in the past, and may vary in the future, from quarter to
quarter due to a number of factors, many of which are outside of our control and
any of which may cause our stock price to
fluctuate. The
primary factors that may affect us include the following:
-
the timing and size of sales of our products and services;
-
loss of customers or the ability to attract new customers;
-
changes in our pricing policies or the pricing policies of our
competitors;
-
increases in sales and marketing, product development or administration
expenses;
-
costs related to acquisitions of technology or businesses;
-
our ability to attain and maintain quality levels for our products; and
-
general economic factors.
Future or anticipated sales of our stock may impact our market price.
Sales of substantial numbers of shares of our common stock in
the public market, or the perception that significant sales are likely, could
adversely affect the market price of our common stock. The number of shares of
common stock available for future sale through our shelf registration statement
is equal to approximately 18% of the currently outstanding shares of our common
stock. We cannot predict the effect that market sales of such a large number of
shares would have on the market price of our common stock. Moreover, actual or
anticipated downward pressure on the market price of our common stock due to
actual or anticipated sales of our common stock could cause some institutions or
individuals to engage in short sales of our common stock, which may itself cause
the market price of our common stock to decline.
We are subject to financial and reputational
risks due to product recalls resulting from product quality and liability
issues.
The risk of product recalls, and associated adverse
publicity, is inherent in the development, manufacturing, marketing, and sale of
powertrain systems. Our products and the products of third parties in which our
products are a component are becoming increasingly sophisticated and complicated
as rapid advancements in technologies occur in the market for clean vehicles. At
the same time, product quality and liability issues present significant risks.
Product quality and liability issues may affect not only our own products but
also the third-party products in which our motors, generators and electronic
products are a component. Our efforts to maintain product quality may not be
successful, and if they are not, we may incur expenses in connection with, for
example, product recalls and lawsuits, and our brand image and reputation as a
producer of high-quality products may suffer. Any product recall or lawsuit
seeking significant monetary damages could have a material adverse effect on our
business and financial condition. A product recall could generate substantial
negative publicity about our products and business, interfere with our
manufacturing plans and product delivery obligations as we seek to replace or
repair affected products, and inhibit or prevent commercialization of other
future product candidates. Although we do have product liability insurance, we
do not have insurance to cover the costs associated with a product recall and
the expenses we would incur in connection with a product recall could have a
material adverse affect on our operating results.
If our products fail to perform as expected, we could lose existing and
future business, and our ability to develop, market and sell our products could
be harmed.
Our products are complex and could have unknown defects or
errors, which may give rise to claims against us, diminish our brand or divert
our resources from other purposes. Despite testing, our products have contained
defects and errors in the past and may in the future contain manufacturing or
design defects, errors or performance problems when first introduced, when new
versions or enhancements are released, or even after these products have been
used by our customers for a period of time. These problems could result in
expensive and time-consuming design modifications or warranty charges, delays in
the introduction of new products or enhancements, significant increases in our
service and maintenance costs, exposure to liability for damages, damaged
customer relationships and harm to our reputation, any of which may adversely
affect our business and our operating results.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
31.1 Certification of Chief Executive Officer
31.2 Certification of Chief Financial Officer
32.1 Certification pursuant to 18 U.S.C. section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1 CODA Supply Agreement (Portions omitted pursuant to request for
confidential treatment filed separately with the Commission.)
Reports on Form 8-K
Report regarding voting results on matters submitted to a
vote at the annual meeting of the company's shareholders filed August 6, 2010.
Report regarding amendments to the employment agreements of
certain named officers filed August 18, 2010.
Report regarding appointment of, and employment agreement,
with Eric Ridenour filed August 24, 2010.
Report regarding modification number three to the Assistance
Agreement with the DOE filed August 26, 2010.
Report regarding modification number four to the Assistance
Agreement with the DOE filed September 9, 2010.
Report regarding completion of an at-market sales agreement
with Stifel Nicolaus & Company, Incorporated filed September 16, 2010.
|
SIGNATURES
|
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Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
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UQM Technologies, Inc.
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Registrant
|
Date: October 28, 2010
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/s/
D
ONALD
A
.
F
RENCH
|
|
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Donald A. French
|
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Treasurer
|
|
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(Principal Financial and
|
|
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Accounting Officer)
|
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