|
·
|
|
We participate in trade show events globally to demonstrate our products and engage with users of electric motor technology.
|
|
·
|
|
We actively involve all functional groups within the Company to support the needs of our customers.
|
We believe that the successful execution of these activities will lead us to secure volume production commitments from customers, so that our operations will become cash flow positive and ultimately profitable.
Recent Events
In
January 2018, we announced the first significant purchase order from KESHI, a major Chinese manufacturer of commercial mining vehicles. The purchase order is for explosion-proof E-drive systems and was valued at $1.2 million. Shipments began during 2018. While we signed a cooperation agreement with KESHI in 2015, KESHI’s production launch was delayed due to the market conditions, but now has made a major commitment to this new energy market application. KESHI plans to move forward with their strategy to do final assembly and test in China under our
current cooperation agreement for explosion-proof electric propulsion systems in China.
On March 7, 2018 we announced that we received the first purchase order from Ashok Leyland, a major commercial vehicle manufacturer in India. The purchase order was for fifty-one UQM PowerPhase® eDT systems to be shipped during 2018 for a demonstration program for electric transit buses in India. The purchase order signified the first step in the development program to gain market leadership and drive the overall 2030 India electrification initiative.
On July 31, 2018, we announced that we had signed a lease agreement in Shanghai, China to open a customer service center for both our fuel cell compressor systems and propulsions systems. The facility should allow us to provide quick turnaround for service and spare parts to our customers in China, and eventually assemble the fuel cell compressor systems in that region.
On August 9, 2018, we announced that we had received new fuel cell compressor system purchase orders from several new and existing Chinese customers, including our major Chinese OEM customer. The new purchase orders were valued at approximately $3.0 million. All these orders represent incremental new business with shipments expected to be delivered through 2018 and into 2019.
On August 30, 2018, we announced that we had received an order from Lightning Systems for our eDT 220 electric propulsion systems for use in several new projects, including Class 6 vehicles for Zeem Solutions, located in New York, and a city bus program for Via Mobility, located in Boulder, Colorado. Shipments are currently expected to commence in 2018 and continue into 2019. We supply various powertrain components to Lightning Systems, including the UQM E-Drive paired with different gearbox solutions, making us the Tier 1 provider for the full assembly.
On September 11, 2018, we announced that we had unveiled our newest product launch at the Electric & Hybrid Vehicle Technology Expo held in Novi, Michigan. We introduced a full lineup of PowerPhase ® HD2 electric motor inverters, which complements our signature motors and software controls, to further serve our customers in the electric vehicle market.
On January 21, 2019, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Danfoss Power Solutions (US) Company, a Delaware corporation (“Danfoss”), and Danfoss-2019 Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Danfoss (the “Merger Sub”). Under the terms of the Merger Agreement, Merger Sub will be merged (the “Merger”) with and into the Company, as a result of which the Company will continue as the surviving corporation and a wholly-owned subsidiary of Danfoss.
Under the terms of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each issued and outstanding share of the Company’s common stock (each a “Company Share”), other than shares owned by Danfoss, Merger Sub, or any wholly-owned subsidiary of the Company, or held in the Company’s treasury, will be cancelled and converted into the right to receive $1.71 per share in cash (the “Merger Consideration”). Each option to purchase Company Shares that is outstanding as of the Effective Time (whether vested or unvested) will be cancelled in exchange for the right to receive the excess of the Merger Consideration over the exercise price of such option, less applicable taxes required to be withheld. Restricted stock that is not vested immediately prior to the Effective Time will be automatically fully vested and free of any restrictions immediately prior to the Effective Time, and will be treated as Company Shares for all purposes of the Merger Agreement, including the right to receive the Merger Consideration, subject to applicable withholdings. Outstanding warrants
that are outstanding at the Effective Time will be cancelled and the holders issued a replacement warrant that will be exercisable for an amount in cash equal to the aggregate number of Common Shares underlying the warrant multiplied by the excess, if any of the Merger Consideration over the per share exercise price of the warrant.
The board of directors of the Company (the “Company Board”) unanimously approved and declared advisable the Merger, the Merger Agreement, and the other transactions contemplated thereby.
Completion of the transaction is subject to the satisfaction or waiver of specified closing conditions, including (i) the approval of the Merger Agreement by the holders of a two-thirds of the issued and outstanding Company Shares (the “Company Stockholder Approval”), (ii) receipt of required regulatory approvals, including from the Committee on Foreign Investment in the United States, and (iii) other customary closing conditions, including the accuracy of each party’s representations and warranties (except where the failure of such representations and warranties to be true and correct would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect (as defined in Merger Agreement)), each party’s performance in all material respects of its obligations under the Merger Agreement, and the absence of a Company Material Adverse Effect since the date of the Merger Agreement. Assuming the satisfaction of conditions, the Company expects the transaction to close in the second quarter of 2019. Holders of outstanding Common Shares that do not vote in favor of the Merger are entitled to exercise dissenter’s rights in accordance with the terms, conditions and procedures of the Colorado Business Corporation Act and to receive the payment of the fair value of such shares.
If the transactions contemplated by the Merger Agreement are consummated, the Company Shares will be delisted from the NYSE American stock exchange and deregistered under the Securities Exchange Act of 1934, as amended.
Financial Condition
Cash and cash equivalents at December 31, 2018 were $1,918,570 and we had a working capital deficit of $836,263 compared with $6,309,269 and positive working capital of $7,762,363, at December 31, 2017. The decrease in cash and cash equivalents was the result of operating losses. Working capital decreased in year ending December 31, 2018 due to our line of credit coming due within one year, an increase in current liabilities as we purchased more inventory to support customer demand and higher unearned revenue from customer deposits.
Restricted cash (current and long-term) at December 31, 2018 was $296,314 compared to $500,056 at December 31, 2017. The decrease in restricted cash is related to the payment of the interest on the line of credit secured with a bank in March 2017. The cash is reserved for payment of the interest on the line of credit.
Accounts receivable increased $857,496 to $1,681,289 at December 31, 2018 from $823,793 at December 31, 2017. The increase is primarily due to the mix of prepaid versus credit term customers for our 2018 sales. 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 or history, our typical terms are irrevocable letter of credit or cash payment in advance of delivery. At both December 31, 2018 and 2017, we had no allowance for doubtful accounts receivable.
Total inventories increased $2,442,527 to $4,783,887 at December 31, 2018 compared to $2,341,360 at December 31, 2017, reflecting an increase in raw materials and work-in-process for confirmed sales orders to be sold to customers in 2019. In the year ended December 31, 2018, we increased our reserve for obsolete or slow moving inventory by $169,954 for parts that are unlikely to be sold.
Prepaid expenses and other current assets increased to $377,762 at December 31, 2018 from $233,566 at December 31, 2017, primarily due to increases in vendor prepayments.
We invested $373,347 for the acquisition of property and equipment during the year ended December 31, 2018 versus $83,838 during the year ended December 31, 2017. The increase in capital expenditures is primarily attributable to the purchase of production tooling and equipment during the year ended December 31, 2018.
Patent costs increased to $260,021 at December 31, 2018 compared to $222,461 at December 31, 2017, primarily due to new patent applications being submitted for approval which was partially offset by the amortization of capitalized patent costs.
Trademark costs decreased to $85,964 at December 31, 2018 compared to $90,460 at December 31, 2017 due to the amortization of capitalized trademark costs.
Accounts payable increased $2,046,757 to $2,995,632 at December 31, 2018 from $948,875 at December 31, 2017, primarily due to the timing of vendor payments and reflecting an increase in inventory purchases to support higher customer orders.
Current debt was $4,656,757 at December 31, 2018 versus $0 at December 31, 2017 due to our line of credit becoming due within one year.
Other current liabilities increased $574,311 to $1,394,150 at December 31, 2018 from $819,839 at December 31, 2017. The increase is primarily attributable to the an increase in accrued payroll and employee benefits, warranty costs, and unearned revenue at December 31, 2018.
Billings in excess of costs and estimated earnings on engineering services contracts was $110,727 at December 31, 2018 versus $199,160 at December 31, 2017. The decrease is due to timing of costs incurred versus billings on certain contracts that were in process in the respective fiscal year ends.
Long-term debt was $0 at December 31, 2018 versus $3,119,450 at December 31, 2017 due to our line of credit being classified as current debt since it is due within one year.
Other long-term liabilities decreased $15,508 to $106,159 at December 31, 2018 from $121,667 at December 31, 2017 due to the amortization of a license fee received from a customer under a ten-year cooperation agreement.
Common stock and additional paid-in capital increased to $542,674 and $134,645,911, respectively, at December 31, 2018 compared to $541,085 and $133,901,406, respectively, at December 31, 2017. The increases in common stock and additional paid-in capital were primarily attributable to the compensation expense from employee and director stock option and common stock grants.
Results of Operations – Year Ended December 31, 2018 Compared to Year Ended December 31, 2017
Revenue
Product sales for 2018 increased 73 percent to $12,367,115 compared to $7,162,456 for 2017, reflecting an increase in orders from our customers, both domestically and internationally, especially from orders for fuel cell compressor systems from customers in China.
Revenue from contract services increased $1,191,376, or 193 percent, to $1,807,669 for 2018 versus $616,293 for 2017. This was driven by renewed development of products for our customers.
Gross Profit Margin
Gross profit margins on product sales for 2018 decreased to 21 percent compared to 39% percent for 2017. The decrease is primarily due to pricing pressure as volumes have increased and higher production operating costs incurred to support higher customer orders.
Gross profit margins on contract services decreased to 44 percent for 2018 compared to 54% percent for 2017, reflecting a change in the mix of contracts in process.
Costs and Expenses
Research and development expenditures for 2018 were $2,497,127 compared to $2,042,732 for 2017. In 2018, resources were allocated to internally funded development projects in 2018.
Selling, general and administrative expenses for 2018 were $7,299,860 compared to $6,367,331 for 2017. The increase for 2018 is attributable to increases in employee and contract labor costs, professional fees, shareholder costs and insurance costs.
Other
Interest income increased to $6,251 for 2018 from $5,127 for 2017. The increase is attributable to more favorable interest rates on invested cash balances.
Interest expense was $208,076 in 2018 versus $108,146 in 2017. The increase is attributable to higher outstanding balances and increased interest rates on the borrowings from the line of credit we secured in March 2017.
Amortization of deferred financing costs was $37,308 in 2018 versus $29,535 in 2017. The financing costs are amortized over the life of the loan.
Gain on sale of long-lived assets was $0 in 2018 versus $606,006 in 2017. The gain was recognized on the sale of vacant land in July, 2017.
Other income for 2018 was 131,798 versus $32,734 for 2017. The increase between the years is attributable to royalties from a resource ownership interest.
Net Loss
As a result, net loss for 2018 was $6,503,562, or $0.12
per common share, compared to a net loss of $4,778,316, or $0.10
per common share, for 2017.
Liquidity and Capital Resources
Our cash balances and liquidity throughout 2018 were adequate to meet operating needs. At December 31, 2018, we had cash and cash equivalents of $1,918,570 and a working capital deficit of $836,263 compared to $6,309,269 and positive working capital of $7,762,363 at December 31, 2017. Cash and working capital decreased as of December 31, 2018 compared to the prior year because in 2017 we reported a sale of vacant land (net proceeds of $1.4 million) and the closing of the first stage investment of the SPA with CNHTC of $5.1 million.
For 2018, net cash used in operating activities was $5,735,405 compared to net cash used in operating activities of $4,870,626 for 2017. The increase in cash used in operating activities for 2018 versus 2017 is primarily attributable to increased net operating losses, increased purchases of inventory, and increased accounts payable.
Net cash used by investing activities for 2018 was $428,268 compared to cash provided of $1,279,050 for 2017. The change for 2018 is primarily due to acquisition of property and equipment.
Net cash provided by financing activities was $1,569,232 for 2018 versus cash provided in financing activities of $8,300,812 for 2017. In 2018 we borrowed $1.5 million against our line of credit. In 2017 we received cash of $5.1 million from the closing of the first stage investment related to the Agreement with CNHTC and borrowed $3.1 million against our line of credit.
On March 15, 2017, the Company entered into a non-revolving line of credit with a bank for $5.6 million. The interest rate is variable based upon the one month LIBOR rate plus 4.0% per annum on the outstanding balance. The non-revolving line of credit will expire on September 15, 2019 and the amounts repaid during the term of the loan may not be reborrowed. At the expiry date, all outstanding principal and interest are due.
As of December 31, 2018, $4,664,529 was drawn on the line of credit. For additional information, see Note 8 of the Consolidated Financial Statements.
We expect to fund our operations over the next year from existing cash and cash equivalent balances and, to the extent all closing conditions are satisfied (including obtaining CFIUS approval), our merger with Danfoss Power Solutions. In the event the merger is not completed, we will need to pursue other sources of capital that have not been identified.
Although we expect to manage our operations and working capital requirements to minimize the future level of operating losses and working capital usage, our working capital requirements may increase in the future. If customer demand accelerates substantially, our working capital requirements may also increase substantially.
If our existing financial resources are not sufficient to execute our business plan, we may need to raise additional capital in the future, although we cannot assure that we will be able to secure additional capital should it be required to implement our current
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
UQM Technologies, Inc.
Opinion on the Financial Statements
We have audited the accompanying
consolidated
balance sheet
s
of UQM Technologies, Inc.
and subsidiaries
(the “Company”) as of
December 31, 2018 and 2017
, the related consolidated statements of operations, stockholders’ equity and cash flows for the yea
rs
then ended, and the related notes (collectively referred to as the consolidated financial statements”). In our opinion, the
consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2018 and 2017, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern Uncertainty
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has sustained recurring losses from operations and had a working capital deficit that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These
consolidated
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
consolidated
financial statements based on our audits.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit
s
in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
consolidated
financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.
As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated
financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated
financial statements. We believe that our audit
s
provide a reasonable basis for our opinion.
/s/ Moss Adams LLC
Denver, Colorado
March 27, 2019
We have served as the Company’s auditor since 2017.
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
2018
|
|
2017
|
Assets
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,918,570
|
|
$
|
6,309,269
|
Restricted cash
|
|
|
296,314
|
|
|
176,193
|
Accounts receivable
|
|
|
1,681,289
|
|
|
823,793
|
Inventories, net
|
|
|
4,783,887
|
|
|
2,341,360
|
Prepaid expenses and other current assets
|
|
|
377,762
|
|
|
233,566
|
Total current assets
|
|
|
9,057,822
|
|
|
9,884,181
|
|
|
|
|
|
|
|
Property and equipment, at cost:
|
|
|
|
|
|
|
Land
|
|
|
896,388
|
|
|
896,388
|
Building
|
|
|
4,516,301
|
|
|
4,516,301
|
Machinery and equipment
|
|
|
7,479,790
|
|
|
7,136,578
|
|
|
|
12,892,479
|
|
|
12,549,267
|
Less accumulated depreciation
|
|
|
(8,282,269)
|
|
|
(7,936,056)
|
Net property and equipment
|
|
|
4,610,210
|
|
|
4,613,211
|
|
|
|
|
|
|
|
Patent costs, net of accumulated amortization of $972,553 and $953,491, respectively
|
|
|
260,021
|
|
|
222,461
|
Trademark costs, net of accumulated amortization of $89,877 and $85,381, respectively
|
|
|
85,964
|
|
|
90,460
|
Restricted cash
|
|
|
-
|
|
|
323,863
|
Total assets
|
|
$
|
14,014,017
|
|
$
|
15,134,176
|
See accompanying notes to consolidated financial statements.
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
|
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
2018
|
|
2017
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
2,995,632
|
|
$
|
948,875
|
Unearned revenue
|
|
|
736,819
|
|
|
153,944
|
Other current liabilities
|
|
|
1,394,150
|
|
|
819,839
|
Deferred contract liability
|
|
|
110,727
|
|
|
199,160
|
Current debt, net of deferred financing costs of
$7,772 and $0, respectively
|
|
|
4,656,757
|
|
|
-
|
Total current liabilities
|
|
|
9,894,085
|
|
|
2,121,818
|
|
|
|
|
|
|
|
Long-term debt, net of deferred financing costs of $0 and $45,079
|
|
|
-
|
|
|
3,119,450
|
Other long-term liabilities
|
|
|
106,159
|
|
|
121,667
|
Total long-term liabilities
|
|
|
106,159
|
|
|
3,241,117
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
10,000,244
|
|
|
5,362,935
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
Common stock, $0.01 par value, 175,000,000 shares authorized; 54,267,440 and 54,108,510 shares issued and outstanding, respectively
|
|
|
542,674
|
|
|
541,085
|
Additional paid-in capital
|
|
|
134,645,911
|
|
|
133,901,406
|
Accumulated deficit
|
|
|
(131,174,812)
|
|
|
(124,671,250)
|
Total stockholders’ equity
|
|
|
4,013,773
|
|
|
9,771,241
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
14,014,017
|
|
$
|
15,134,176
|
See accompanying notes to consolidated financial statements.
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
Product sales
|
|
$
|
12,367,115
|
|
$
|
7,162,456
|
|
Contract services
|
|
|
1,807,669
|
|
|
616,293
|
|
|
|
|
14,174,784
|
|
|
7,778,749
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
Costs of product sales
|
|
|
9,798,384
|
|
|
4,368,093
|
|
Costs of contract services
|
|
|
1,008,715
|
|
|
285,095
|
|
Research and development
|
|
|
2,497,127
|
|
|
2,042,732
|
|
Selling, general and administrative
|
|
|
7,299,860
|
|
|
6,367,331
|
|
|
|
|
20,604,086
|
|
|
13,063,251
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(6,429,302)
|
|
|
(5,284,502)
|
|
Other income (expense), net
|
|
|
(74,260)
|
|
|
506,186
|
|
Net loss
|
|
$
|
(6,503,562)
|
|
$
|
(4,778,316)
|
|
|
|
|
|
|
|
|
|
Net loss per common share - basic and diluted
|
|
$
|
(0.12)
|
|
$
|
(0.10)
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares of common stock outstanding - basic and diluted
|
|
|
54,183,772
|
|
|
50,038,799
|
|
See accompanying notes to consolidated financial statements.
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common
|
|
|
|
|
Additional
|
|
|
|
|
Total
|
|
|
shares
|
|
Common
|
|
paid-in
|
|
Accumulated
|
|
stockholders’
|
|
|
issued
|
|
stock
|
|
capital
|
|
deficit
|
|
equity
|
Balances at December 31, 2016
|
|
|
48,519,313
|
|
$
|
485,193
|
|
$
|
128,409,933
|
|
$
|
(119,892,934)
|
|
$
|
9,002,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock upon exercise of employee and director options
|
|
|
72,347
|
|
|
723
|
|
|
58,810
|
|
|
-
|
|
|
59,533
|
Issuance of common stock under employee stock purchase plan
|
|
|
116,023
|
|
|
1,160
|
|
|
52,601
|
|
|
-
|
|
|
53,761
|
Issuance of common stock under stock bonus plan
|
|
|
68,023
|
|
|
680
|
|
|
(680)
|
|
|
-
|
|
|
-
|
Issuance of common stock under definitive stock purchase agreement
|
|
|
5,347,300
|
|
|
53,473
|
|
|
5,046,425
|
|
|
-
|
|
|
5,099,898
|
Common stock used for tax withholdings
|
|
|
(14,496)
|
|
|
(144)
|
|
|
(12,236)
|
|
|
-
|
|
|
(12,380)
|
Compensation expense from employee and director stock option and common stock grants
|
|
|
|
|
|
|
|
|
346,553
|
|
|
-
|
|
|
346,553
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
(4,778,316)
|
|
|
(4,778,316)
|
Balances at December 31, 2017
|
|
|
54,108,510
|
|
$
|
541,085
|
|
$
|
133,901,406
|
|
$
|
(124,671,250)
|
|
$
|
9,771,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock upon exercise of employee and director options
|
|
|
37,672
|
|
|
376
|
|
|
26,119
|
|
|
-
|
|
|
26,495
|
Issuance of common stock under employee stock purchase plan
|
|
|
55,964
|
|
|
560
|
|
|
52,639
|
|
|
-
|
|
|
53,199
|
Issuance of common stock under stock bonus plan
|
|
|
76,079
|
|
|
761
|
|
|
(761)
|
|
|
-
|
|
|
-
|
Issuance of common stock under definitive stock purchase agreement
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
Common stock used for tax withholdings
|
|
|
(10,785)
|
|
|
(108)
|
|
|
(10,354)
|
|
|
-
|
|
|
(10,462)
|
Compensation expense from employee and director stock option and common stock grants
|
|
|
|
|
|
|
|
|
676,862
|
|
|
-
|
|
|
676,862
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
(6,503,562)
|
|
|
(6,503,562)
|
Balances at December 31, 2018
|
|
|
54,267,440
|
|
$
|
542,674
|
|
$
|
134,645,911
|
|
$
|
(131,174,812)
|
|
$
|
4,013,773
|
See accompanying notes to consolidated financial statements.
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2018
|
|
2017
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
Net loss
|
$
|
(6,503,562)
|
|
$
|
(4,778,316)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
435,512
|
|
|
400,370
|
Non-cash equity based compensation
|
|
676,862
|
|
|
346,553
|
Gain on sale of long-lived assets
|
|
-
|
|
|
(606,006)
|
Change in operating assets and liabilities:
|
|
|
|
|
|
Accounts receivable
|
|
(857,496)
|
|
|
339,523
|
Deferred contract asset
|
|
-
|
|
|
29,917
|
Inventories
|
|
(2,442,527)
|
|
|
(591,625)
|
Prepaid expenses and other current assets
|
|
(144,196)
|
|
|
16,031
|
Accounts payable and other current liabilities
|
|
2,621,068
|
|
|
(206,233)
|
Unearned revenue
|
|
582,875
|
|
|
-
|
Deferred contract liabilities
|
|
(88,433)
|
|
|
199,160
|
Other long-term liabilities
|
|
(15,508)
|
|
|
(20,000)
|
Net cash used in operating activities
|
|
(5,735,405)
|
|
|
(4,870,626)
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
Acquisition of property and equipment, net
|
|
(373,347)
|
|
|
(83,838)
|
Cash paid for patent and trademark fees
|
|
(54,921)
|
|
|
(30,060)
|
Cash proceeds from the sale of long-lived assets
|
|
-
|
|
|
1,392,948
|
Net cash (used in) / provided by investing activities
|
|
(428,268)
|
|
|
1,279,050
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
Cash received for shares exercised under employee stock purchase plan
|
|
53,199
|
|
|
53,761
|
Proceeds from line of credit
|
|
1,500,000
|
|
|
3,100,000
|
Payment of employee tax withholdings in exchange for return
of common stock
|
|
(10,462)
|
|
|
(12,380)
|
Issuance of common stock upon definitive stock
purchase agreement
|
|
-
|
|
|
5,099,898
|
Issuance of common stock upon exercise of employee and
directors options
|
|
26,495
|
|
|
59,533
|
Net cash provided by financing activities
|
|
1,569,232
|
|
|
8,300,812
|
|
|
|
|
|
|
(Decrease) / increase in cash, cash equivalents, and restricted cash
|
|
(4,594,441)
|
|
|
4,709,236
|
Cash, cash equivalents, and restricted cash at beginning of period
|
|
6,809,325
|
|
|
2,100,089
|
Cash, cash equivalents, and restricted cash at end of period
|
$
|
2,214,884
|
|
$
|
6,809,325
|
See accompanying notes to consolidated financial statements.
(1)
Summary of Significant Accounting Policie
s
(a) Description of Business
UQM Technologies, Inc. and our wholly-owned subsidiaries develop, manufacture and sell power dense, high efficiency electric motors, generators, power electronic controllers and fuel cell compressors for the commercial truck, bus, automotive, marine, and industrial markets. Our headquarters and production facility is located in Longmont, Colorado, and we opened a service center in Shanghai, China to support our installed base of products there. Our revenue is derived primarily from product sales to customers in the commercial truck, bus, automotive, marine, and industrial markets, and from contract research and development services. We are impacted by other factors such as the continued receipt of contracts from industrial and governmental parties, our ability to protect and maintain the proprietary nature of our technology, continued product and technological advances and our ability, together with our partners, to commercialize our products and technology.
(b) Principles of Consolidation
The consolidated financial statements include the accounts of UQM Technologies, Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
(c) Cash, Cash Equivalents and Restricted Cash
We consider cash on hand and investments with original maturities of three months or less to be cash and cash equivalents.
We limit our cash and cash equivalents to high quality financial institutions in order to minimize our credit risk. We maintain cash and cash equivalent balances with financial institutions that exceed federally insured limits. We have not experienced any losses related to these balances and management believes our credit risk to be minimal.
(d) Accounts Receivable
We extend unsecured credit to many of our customers following a review of the customers’ financial condition and credit history. 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 without an adequate credit rating, our typical terms are irrevocable letter of credit or cash payment in advance of delivery. We establish an allowance for uncollectable accounts based upon a number of factors including the length of time trade receivables are past due, the customer’s ability to pay its obligation to us, the condition of the general economy, estimates of credit risk, historical trends and other information. We write off accounts receivable when they become uncollectible against our allowance for doubtful accounts receivable. At December 31, 2018 and 2017, we had no allowance for doubtful accounts receivable.
(e) Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is determined by the first-in, first-out method. We analyze obsolete or slow-moving inventory on a periodic basis and we charge directly to expense obsolete or slow moving inventory items during the period we assess the value of such inventory to be impaired. For the years ended December 31, 2018 and 2017, we recognized a reserve for obsolete or slow moving inventory of $169,954 and $0, respectively. See Note 5.
(f) Property and Equipment
Property and equipment are stated at cost, unless the asset was acquired, in part, with U.S. Department of Energy (“DOE”) grant funds, in which case it is stated at cost net of DOE reimbursements. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range from three to five years, except for buildings, which are depreciated over 27.5 years. Maintenance and repairs are charged to expense as incurred. Depreciation expense for the years ended December 31, 2018 and 2017 was $376,346 and $345,415, respectively, and was reported in operating costs and expenses on the Consolidated Statements of Operations.
(g) Patent and Trademark Costs
Patent and trademark costs consist primarily of legal expenses, and represent those costs incurred by us for the filing of patent and trademark applications. Amortization of patent and trademark costs is computed using the straight-line method over the estimated useful life of the asset, typically 8 years for patents, and 40 years for trademarks. Amortization expense for the years ended December 31, 2018 and 2017, was $23,558 and $25,423, respectively.
(h) Impairment of Long-Lived Assets
We periodically evaluate whether circumstances or events have affected the recoverability of long-lived assets including intangible assets with finite useful lives. The assessment of possible impairment is based on our ability to recover the carrying value of the asset or groups of assets from expected future cash flows (undiscounted and without interest charges) estimated by management. If expected future cash flows are less than the carrying value, an impairment loss is recognized to adjust the asset to fair value as determined by expected discounted future cash flows. As of December 31, 2018 and 2017 there was no impairment of long-lived assets.
(i) Product Warranties
Our warranty policy generally provides three months to four years of coverage depending on the product. We record a liability for estimated warranty obligations at the date products are sold. The estimated cost of warranty coverage is based on our actual historical experience with our current products or similar products. For new products, the required reserve is based on historical experience of similar products until sufficient historical data has been collected on the new product. Adjustments are made as new information becomes available. The following is a summary of warranty activity for the years ended December 31, 2018 and 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
|
|
|
|
|
|
Balance at
|
|
Charged to
|
|
|
|
|
|
|
|
|
Beginning
|
|
Costs and
|
|
|
|
Balance at
|
|
|
|
of Year
|
|
Expenses
|
|
Deductions
(1)
|
|
End of Year
|
|
Year ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
Accrued warranty cost
|
|
$
|
333,431
|
|
312,132
|
|
(47,148)
|
|
$
|
598,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
Accrued warranty cost
|
|
$
|
289,710
|
|
173,014
|
|
(129,293)
|
|
$
|
333,431
|
|
Note (1) Represents actual warranty payments for units covered under warranty
(j) Segment Reporting
The Company has performed its quarterly assessment to determine if additional disclosures are required for segment reporting. Management has determined that the Company has one operating segment because the chief operating decision maker (CODM) and management make business decisions based on product and contract services revenues taken as a whole. Therefore, no further disclosure is required at this time. Management will perform an assessment quarterly to determine if additional disclosures around this standard are needed in the future.
(k) Revenue and Cost Recognition
Accounting Policies
Product Sales
- Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied. The majority of the Company’s contracts have a single performance obligation to transfer products. Accordingly, the Company recognizes revenue when control has been transferred to the customer, generally at the time of shipment of products. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products and is generally based upon a negotiated fixed price. The Company sells its products directly to customers under agreements with payment terms of prepayment or generally net 30 days for credit qualified customers.
Contract Services
- The majority of the Company’s contracts have a single performance obligation to transfer products or an agreed-upon task(s) over time. Accordingly, revenue is recognized using cost input methods, which
recognize revenue and gross profit as work is performed based on the relationship between actual costs incurred compared to the total estimated costs of the contract, as the performance obligations are satisfied. Costs incurred towards contract completion may include costs associated with direct materials, labor, subcontractors, and other indirect costs.
Shipping and Handling Costs-
We account for shipping and handling activities related to contracts with customers as costs to fulfill our promise to transfer the associated products. Accordingly, we record customer payment of shipping and handling costs as a component of net sales, and classify such costs as a component of cost of sales.
Product Warranties
- Our standard product warranty is for one year and provides assurance to the customer that the purchased product will function as intended and complies with agreed-upon specifications. A customer can negotiate an extended warranty period from four months up to four years. The cost of the warranty can be included in the price of the unit or separately stated as a line item in the contract. A majority of our customers have the warranty included in the sales price of the product which is then accounted for as a guarantee. Warranties that are stated as a separate line item in the contract are considered a single performance obligation which is recognized by the time elapsed input method.
Unearned Revenue
- When we receive consideration, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a sales contract, we record unearned revenue, which represents a contract liability. We recognize unearned revenue as net sales after we have transferred control of the goods or services to the customer and all revenue recognition criteria are met.
License Agreements
- We account for our license agreements as multi-element arrangements. Each element in the arrangement is considered a single performance obligation and is treated accordingly. Revenue recognition for the licensing element in the agreement is recognized by the time elapsed input method. Revenue recognition for the product sales element follows the revenue recognition rules as noted above for product sales.
The effect of the adoption of new revenue recognition standard (ASC 606) on our Consolidated Statement of Operations and Balance Sheet as of December 31, 2018 and 2017 did not have a material impact on the timing of the Company’s revenue recognition.
Disaggregation of Revenue
In the following table, revenue is disaggregated by geographic region (using the location of the client as the basis of attributing revenues to the individual regions):
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2018
|
|
2017
|
United States & Canada
|
|
$
|
7,399,406
|
|
$
|
4,009,941
|
Asia Pacific
|
|
|
6,554,721
|
|
|
3,388,370
|
Europe
|
|
|
220,657
|
|
|
380,438
|
Total Revenues
|
|
$
|
14,174,784
|
|
$
|
7,778,749
|
(l) Government Grants
When the Company has been awarded government grants, revenue and cost reimbursements from government grants are recognized when it is probable that the Company will comply with the conditions attached to the grant arrangement and the grant proceeds will be received. Government grants are recognized in the Consolidated Statements of Operations on a systematic basis over the periods in which the Company recognizes the related costs for which the government grant is intended to compensate. Specifically, when government grants are related to reimbursements for cost of revenues or operating expenses, the government grants are recognized as a reduction of the related expense in the Consolidated Statements of Operations. For government grants related to reimbursements of capital expenditures, the government grants are recognized as a reduction of the basis of the asset and recognized in the Consolidated Statements of Operations over the estimated useful life of the depreciable asset as reduced depreciation expense. 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.
During the fiscal years ended December 31, 2018 and 2017, the Company did not recognize any revenue or cost reimbursements from government grants.
(m) Income Taxes
The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The valuation of deferred tax assets may be reduced if future realization is not assured. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income tax expense or benefit in the period that includes the enactment date. The Company has unexpired net operating losses and research and development credits carrying forward into current years that date from the tax year 1999 and 2001, respectively. As such, all federal tax returns from 2000 to the present are subject to audit.
(n) Research and Development
Costs of researching and developing new technology, or significantly altering existing technology, are expensed as incurred.
(o) Loss Per Common Share
The following table sets forth the computation of basic and diluted net loss per share for the years ended December 31, 2018 and 2017:
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
$
|
(6,503,562)
|
|
$
|
(4,778,316)
|
|
Denominator for basic and diluted net loss per common share:
|
|
|
|
|
|
|
|
|
Weighted average number of shares of common stock outstanding - basic and diluted
|
|
|
|
54,183,772
|
|
|
50,038,799
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share - basic and diluted
|
|
|
$
|
(0.12)
|
|
$
|
(0.10)
|
|
The following table sets forth the potential shares of common stock that are not included in the calculation of diluted net loss per share because to do so would be anti-dilutive as of the end of each period presented:
|
|
|
|
|
|
|
|
December 31,
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
Non-vested stock bonus plan shares
|
|
|
169,872
|
|
57,760
|
Stock options outstanding
|
|
|
4,190,470
|
|
3,315,819
|
Warrants to purchase common stock
|
|
|
4,000,000
|
|
5,489,733
|
(p) Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets, obsolescence reserves, and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
(q) New Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued a new standard to achieve a consistent application of revenue recognition within the U.S., resulting in a single revenue model to be applied by reporting companies under U.S. generally accepted accounting principles. Under the new model, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that reporting companies disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new standard was effective for us for the first fiscal year beginning after December 15, 2017. This standard is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application and providing additional disclosures. The Company adopted this standard in the quarter ending March 31, 2018 using the full retrospective method with the cumulative effect and additional disclosures at the period of adoption. The adoption of the standard did not have a material impact on the timing of the Company’s revenue recognition.
In November 2016, the FASB issued guidance on the Statement of Cash Flows and the presentation of restricted cash in the statement. The new standard will require the Statement of Cash Flows to explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash. As a result, the amounts generally described as restricted cash should be included in the cash and cash equivalents when reconciling the beginning of the period and end of the period total amounts shown on the Statement of Cash Flows. This is effective for annual periods beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The amendments should be applied using the retrospective transition method in each period presented. The Company elected to early adopt this standard in the quarter ended June 30, 2017.
In February 2016, the FASB issued a new standard, ASU 2016-02, in which the lessee should recognize an asset and liability that arise from leases no matter the type of lease the company enters into. A lessee should recognize in the statement of financial position a liability allocated on a straight-line basis over the lease term to make lease payments and a right-of-use asset measured at the present value of the lease payments representing its right to use the underlying asset for the lease term. All cash payments should be classified in the operating activities section of the statement of cash flows. Another requirement under the new standard is that a company must separate the lease components from the nonlease components in a contract. Only the lease components are subject to ASU 2016-02 recognition and measurement. Lessees may make an accounting policy election to not separate lease components from nonlease components. Both qualitative and quantitative disclosures are required. Recognition and measurement is required at the beginning of the earliest period presented using a modified retrospective or cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company entered into a new operating lease in the quarter ended September 30, 2018 and is currently evaluating the effect on its financial statements.
(2) Going Concern Assessment
These Consolidated Financial Statements are presented on the basis that the Company will continue as a going concern. The going concern concept contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
As of December 31, 2018, the Company has sustained recurring losses from continuing operations, had a working capital deficit of $836,263 and accumulated deficit of $131,174,812. The Company’s cash and cash equivalents balance at December 31, 2018 was $1,918,570.
On March 15, 2017, the Company entered into a non-revolving line of credit for $5.6 million. The interest rate is variable based upon the one month LIBOR rate plus 4.0% per annum on the outstanding balance. The non-revolving line of credit will expire on September 15, 2019 and the amounts repaid during the term of the loan may not be reborrowed. At the expiry date, all outstanding principal and interest are due.
As of December 31, 2018, $4,664,529 was drawn on the line of credit. For additional information, see Note 8 of the Consolidated Financial Statements.
On January 21, 2019 the Company announced it had entered into an Agreement and Plan of Merger with Danfoss Power Solutions (“the Merger”)
. Under the terms of the Agreement the Company will continue as the surviving corporation and a wholly-owned subsidiary of Danfoss Power Solutions. The board of directors of the Company unanimously approved and declared advisable the Merger. If the transactions contemplated by the Merger Agreement are consummated, the Company shares will be delisted from the NYSE American stock exchange and deregistered under the Securities Exchange Act of 1934, as amended.
Our existing cash resources and cash generated from our revenues, are not expected to be sufficient to complete our business plan for the next twelve months. Should those resources be insufficient, we may need to renegotiate existing debt, secure additional debt or equity funding, which may not be available on terms acceptable to us, if at all. Therefore, management believes there is substantial doubt about the entity’s ability to continue as a going concern.
Management believes completion of the Plan of Merger with Danfoss Power Solutions described above mitigates the substantial doubt raised by our historical operating result and fulfilling our estimated liquidity needs twelve months from the issuance of the financial statements. The Plan of Merger with Danfoss Power Solutions is subject to approval by our shareholders and approval of the Committee on Foreign Investment in the United States (“CFIUS”) prior to completion, so therefore we are unable to predict with certainty the completion of the Merger.
|
(3)
|
|
Cash, cash equivalents, and restricted cash
|
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported on the Consolidated Balance Sheets to the cash on the Consolidated Statements of Cash Flows for the periods ending December 31, 2018 and December 31, 2017.
|
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
2018
|
|
2017
|
Cash and cash equivalents
|
|
$
|
1,918,570
|
|
$
|
6,309,269
|
Restricted cash, current
|
|
|
296,314
|
|
|
176,193
|
Restricted cash, long-term
|
|
|
-
|
|
|
323,863
|
Total cash, cash equivalents, and restricted cash shown in the Consolidated Statements of Cash Flows
|
|
$
|
2,214,884
|
|
$
|
6,809,325
|
Restricted cash classified as a current asset on the Consolidated Balance Sheets represents the amount required to be set aside pursuant to a contractual agreement with the Company’s lender for the payment of interest on borrowings from the line of credit that is expected to be paid within the next twelve months. In addition, restricted cash included in other long-term assets on the Consolidated Balance Sheets represents interest due on the line of credit more than twelve months from the date of the financial statements as contractually required by the lender. The restrictions will lapse when the related long-term debt is paid off.
(4) Contracts in Process
At December 31, 2018 and 2017, the estimated period to complete contracts in process ranged from one to three months and one to three months, respectively. We expect to collect all accounts receivable arising from these contracts within sixty days of billing. For the years ended December 31, 2018 and 2017, the Company did not incur any contract impairment charges. At December 31, 2018 there were no changes expected to existing contracts.
The following summarizes contracts in process:
|
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
2018
|
|
2017
|
Costs incurred on engineering services contracts
|
|
$
|
1,008,715
|
|
$
|
56,175
|
Estimated earnings
|
|
|
688,227
|
|
|
144,665
|
|
|
|
1,696,942
|
|
|
200,840
|
Less billings to date
|
|
|
(1,807,669)
|
|
|
(400,000)
|
|
|
|
|
|
|
|
Contracts in process
|
|
$
|
(110,727)
|
|
$
|
(199,160)
|
|
|
|
|
|
|
|
Included in the accompanying Consolidated Balance Sheets is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred contract liability
|
|
|
(110,727)
|
|
|
(199,160)
|
Contracts in process
|
|
$
|
(110,727)
|
|
$
|
(199,160)
|
(5) Inventories
Inventories consist of:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
2018
|
|
2017
|
|
Raw materials
|
|
$
|
7,836,381
|
|
$
|
7,679,922
|
|
Work-in-process
|
|
|
351,402
|
|
|
289,848
|
|
Finished products
|
|
|
3,719,404
|
|
|
1,390,200
|
|
Reserve for obsolete or slow moving inventory
|
|
|
(7,123,300)
|
|
|
(7,018,610)
|
|
|
|
$
|
4,783,887
|
|
$
|
2,341,360
|
|
As of December 31, 2018, we recorded an expense of $169,954 to increase the reserve for obsolete or slow moving inventory and zero at December 31, 2017.
(6) Patents and Trademarks
Patents owned by the Company had a gross carrying amount of $1,232,574 and $1,175,952, accumulated amortization of $972,553 and $953,491, and a net carrying amount of $260,021 and $222,461, at December 31, 2018 and December 31, 2017, respectively. Trademarks owned by the Company had a gross carrying amount of $175,841 and $175,841, accumulated amortization of $89,877 and $85,381, and a net carrying value of $85,964 and $90,460 at December 31, 2018 and December 31, 2017, respectively. Patents and trademarks are amortized on a straight-line basis over the estimated useful life of the asset. The weighted-average period of amortization is eight years for patents, and forty years for trademarks.
Estimated future amortization of these intangible assets by fiscal year is as follows:
|
|
|
|
|
|
|
|
|
|
Patents
|
|
Trademarks
|
|
2019
|
|
$
|
12,316
|
|
$
|
4,496
|
|
2020
|
|
|
8,226
|
|
|
4,496
|
|
2021
|
|
|
8,226
|
|
|
4,496
|
|
2022
|
|
|
8,226
|
|
|
4,496
|
|
2022
|
|
|
8,226
|
|
|
4,496
|
|
Thereafter
|
|
|
214,801
|
|
|
63,484
|
|
|
|
$
|
260,021
|
|
$
|
85,964
|
|
(7) Other Current Liabilities
Other current liabilities consist of:
|
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
2018
|
|
2017
|
Accrued payroll and employee benefits
|
|
$
|
159,966
|
|
$
|
94,680
|
Accrued personal property and real estate taxes
|
|
|
235,133
|
|
|
235,133
|
Accrued warranty costs
|
|
|
598,415
|
|
|
333,431
|
Accrued fees to Sinotruk
|
|
|
160,000
|
|
|
-
|
Accrued import duties
|
|
|
87,100
|
|
|
87,100
|
Accrued legal fees
|
|
|
72,731
|
|
|
-
|
Accrued royalties
|
|
|
48,336
|
|
|
48,336
|
Other
|
|
|
32,469
|
|
|
21,159
|
|
|
$
|
1,394,150
|
|
$
|
819,839
|
(8) Debt
On March 15, 2017, the Company entered into a non-revolving line of credit for $5.6 million. The loan is collateralized by the Company’s headquarters facility. The interest rate is variable based upon the one month LIBOR rate plus 4.0% per annum on the outstanding balance which was 6.52% as of December 31, 2018. As a condition of the loan, $600,000 was immediately drawn on the line of credit to be used for monthly interest payments on borrowings over the life of the loan. This is reported as restricted cash on the Consolidated Balance Sheet as of December 31, 2018 and December 31, 2017. For additional information, see Note 3 to the Consolidated Financial Statements. The covenants under the debt agreement require the Company to have liquid assets of a minimum of $1.5 million with the lender. In addition, financial statements are to be presented no later than 45 days after the end of each quarter and 90 days after the end of each fiscal year. These covenants took effect for the quarter ending June 30, 2017. As of December 31, 2018, the Company was in compliance with its covenants. The non-revolving line of credit will expire on September 15, 2019 and the amounts repaid during the term of the loan may not be re-borrowed. At the expiry date, all outstanding principal and interest are due. As of December 31, 2018, $4,664,529 was drawn on the line of credit. The Company incurred deferred financing costs of $73,060 upon securing the line of credit.
(9) Commitments and Contingencies
Employment Agreements
On July 21, 2015, the Company entered into employment agreements with its executive officers that expired on June 30, 2017. The July 2015 employment agreements provided for future retention payments under the conditions and for the amounts specified in the agreements. These future retention payments were recorded over the required service period and as a result, we had recorded a liability of $272,222 at December 31, 2016. These retention bonuses were paid in July 2017.
Effective July 1, 2017, the Company entered into new employment agreements with its four executive officers, which expire December 31, 2019.
The aggregate future base salary payable to the executive officers over their remaining terms is $1,098,004.
Lease Commitments
During the year ended December 31, 2018 the Company entered into a four year lease for its service center in Shanghai, China. The Company recorded rent expense in 2018 of $12,500 related to its service center lease. There were no operating leases and there was no rental expense during the year ended December 31, 2017.
The Merger
Under some circumstances, the Company may be required to pay a termination fee of $3.5 million in connection with the termination of the Merger Agreement.
Litigation
Between February 20, 2019 and March 5, 2019, six shareholder complaints were filed in Colorado court related to the proposed Merger,
and then on March 11, 2019 another shareholder compliant related to the proposed Merger was filed in the United States District Court for the Southern District of New York.
.
On February 20, 2019, a putative shareholder class action
complaint captioned Carter v. UQM Technologies, Inc., et. al., (the ‘‘Carter Complaint’’) was filed in the United States District Court for the District of Colorado against the Company and the members of its board of directors. The Carter Complaint alleges that the Company directors breached their fiduciary duties and the Company aided and abetted in the breach of fiduciary duties in connection with the negotiation and approval of the merger agreement by failing to maximize shareholder value, and it brings claims under Section 14(a) and Section 20(a) of the Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’), based on alleged failure to disclose material information in the February 22, 2019 preliminary proxy statement on Schedule 14(A) filed with the Securities and Exchange Commission. The Carter Complaint seeks to enjoin the Company and the directors and Company from proceeding with the stockholders meeting to vote on the Merger proposal and to otherwise enjoin the directors from consummating the merger, an accounting by the defendants for alleged damages sustained as a result of the alleged failure to meet their fiduciary duties, and plaintiff’s costs and attorneys’ and experts’ fees.
On February 22, 2019, a putative shareholder class action complaint captioned
Franchi v. UQM Technologies, Inc., et al.
,
(the ‘‘Franchi Complaint’’) was filed in state District court in Weld County, Colorado against the Company and the members of its board of directors. The Franchi Complaint asserts claims for (i) breach of fiduciary duty by the directors; (ii) indemnification by the Company to
the plaintiff class; (iii) an injunction against the proposed merger; (iv) breach of fiduciary duty as a derivative action; and (v) waste of corporate assets against the individual directors on behalf of the Company. The Franchi Complaint seeks, among other things, certification of a plaintiff class, injunctive relief ordering the directors to fulfill their fiduciary duties to the Company and class, an accounting by the defendants for alleged damages sustained as a result of the alleged failure to meet their fiduciary duties, and plaintiff’s costs and attorneys’ and experts’ fees. The Defendants accepted service of the Franchi Complaint on February 26, 2019.
On February 25, 2019, a plaintiff shareholder complaint captioned Lopez v. UQM Technologies, et al. (the ‘‘Lopez Complaint’’) was filed in the United States District Court for the District of Colorado. The Defendants accepted service of the Lopez Complaint on February 26, 2019. On March 1, 2019, a plaintiff shareholder complaint captioned ETS Logistics, Inc. v. UQM Technologies, et al., (the ‘‘ETS Complaint’’) was filed in the United States District Court for the District of Colorado. On March 5, 2019, a putative shareholder class action complaint captioned Poston v. UQM Technologies, et al., (the ‘‘Poston Complaint’’) was filed in the United States District Court for the District of Colorado. Also on March 5, 2019, a putative shareholder class action complaint captioned Arukala v. UQM Technologies, et al., (the ‘‘Arukala Complaint’’) was filed in the United States District Court for the District of Colorado. The Lopez Complaint, the ETS Complaint, the Poston Complaint, and the Arukala Complaint bring claims under Section 14(a) and Section 20(a) of the Exchange Act based on alleged failure to disclose material information in the February 22, 2019 preliminary proxy statement filed with the SEC. The class action complaints seek, among other things, certification of a plaintiff class, and each of the Lopez Complaint, ETS Complaint, Poston Complaint, and Arukala Complaint seeks injunctive relief to prevent the parties from proceeding with, consummating, or closing the Merger Agreement and the subsequent Merger contemplated by the Merger Agreement unless allegedly omitted material information is disclosed in the proxy; an accounting by the defendants for alleged damages sustained by the plaintiffs; and unspecified plaintiff’s costs and attorneys’ and experts’ fees.
On March 11, 2019,
a putative shareholder class action complaint captioned
David Gunderson
v. UQM
Technologies, Inc., et al.
,
(the ‘‘Gunderson Complaint’’) was filed in United States District Court for the Southern District of Southern New York against the Company and the members of its board of directors. The Gunderson Complaint
asserts claims under Section 14(a) and Section 20(a) of the Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’), based on alleged failure to disclose material information in the March 7, 2019 definitive proxy statement on Schedule 14(A) filed with the Securities and Exchange Commission.
The Company believes each of the claims asserted in the above captioned complaints relating to this Merger are without merit and the Company and its directors intend to vigorously contest them. Management does not believe that the outcome of this litigation will have a material impact on the financial condition of the Company.
(10) Fair Value of Financial Instruments
The carrying amounts of cash, cash equivalents, restricted cash, accounts receivable and accounts payable approximate fair value because of the short maturity of these instruments.
The Company measures the fair value of outstanding debt for disclosure purposes on a recurring basis and its long-term debt of $4,656,757 is reported at amortized cost. The Company’s long-term debt is subject to variable rates of interest and accordingly its carrying value is considered to be representative of its fair market value.
(11) Stockholders’ Equity
The Company has warrants outstanding as follows:
|
|
|
|
|
|
Common Stock
|
Warrants
|
|
|
|
Follow-on Offering
|
Under Option
|
Earliest
|
|
Offering Date
|
(Shares)
|
(Shares)
|
Exercise Date
|
Expiration Date
|
October, 2015
|
8,000,000
|
4,000,000
|
April 30, 2016
|
October 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
Weighted-
|
|
Average
|
|
|
Warrants
|
|
Average
|
|
Remaining
|
|
|
Under
|
|
Exercise
|
|
Contractual
|
|
|
Option
|
|
Price
|
|
Life
|
Outstanding at December 31, 2017
|
|
5,489,733
|
|
$
|
1.53
|
|
|
2.3 years
|
Granted
|
|
-
|
|
$
|
-
|
|
|
|
Exercised
|
|
-
|
|
$
|
-
|
|
|
|
Forfeited
|
|
(1,489,733)
|
|
$
|
2.13
|
|
|
|
Outstanding at December 31, 2018
|
|
4,000,000
|
|
$
|
1.31
|
|
|
1.8 years
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2018
|
|
4,000,000
|
|
$
|
1.31
|
|
|
1.8 years
|
(12) Stock-Based Compensation
Stock Option Plans
As of December 31, 2018, we had 7,100,000 shares of common stock authorized and 3,661,320 shares of common stock available for future grant to employees and consultants under our 2012 Equity Incentive Plan (“Plan”). The term of the 2012 Plan is ten years. Under the 2012 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 ten years from the date of grant. Options granted to employees generally have a ten year term and 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. Forfeitures under the Plan are available for re-issuance at any time prior to expiration of the Plan in 2022. 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 2012 Plan, we issued stock options under our 2002 Equity Incentive Plan. Forfeitures under the 2002 Equity Incentive Plan may not be re-issued.
We also have 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 December 31, 2018, we had 1,000,000 shares of common stock authorized and 434,557 shares of common stock available for future grant under the Directors Plan. Option terms range from three to ten 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 vest immediately. Forfeitures under the Directors Plan are available for re-issuance at a future date.
Stock Bonus Plan
We have a Stock Bonus Plan (“Stock Plan”) administered by the Board of Directors. As of December 31, 2018, we had 2,854,994 shares of common stock authorized and there were 538,747 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.
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 December 31, 2018, we had 1,200,000 shares of common stock authorized and 500,354 shares of common stock available for issuance under the Stock Purchase Plan.
Share-Based Compensation Expense
We use the straight-line attribution method to recognize share-based compensation costs over the requisite service period of the award. The exercise price of options is equal to the market price of our common stock (defined as the closing price reported by the NYSE American stock exchange) on the date of grant. 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 during the years ended December 31, 2018 and 2017 was insignificant.
We use the Black-Scholes-Merton option pricing model for estimating the fair value of stock option awards. The expected volatility and the expected life of options granted are based on historical experience, and the risk free interest rate is obtained from the U.S. Department of the Treasury daily yield curve rates. The weighted average estimated values of employee and director stock option grants, as well as the weighted average assumptions that were used in calculating such values during the years ended December 31, 2018 and 2017 were based on estimates at the date of grant as follows:
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
Weighted average estimated fair value of grant
|
|
$
|
1.23
|
per option
|
|
$
|
0.59
|
per option
|
Expected life (in years)
|
|
|
6.9
|
years
|
|
|
6.0
|
years
|
Risk free interest rate
|
|
|
2.91
|
%
|
|
|
2.07
|
%
|
Expected volatility
|
|
|
82.82
|
%
|
|
|
83.52
|
%
|
Expected dividend yield
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Total share-based compensation expense and the classification of these expenses for the years ended December 31, 2018 and 2017 were as follows:
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
Costs of product sales
|
|
$
|
71,737
|
|
$
|
23,033
|
Costs of contract services
|
|
|
21,429
|
|
|
5,447
|
Research and development
|
|
|
52,866
|
|
|
51,596
|
Selling, general and administrative
|
|
|
530,830
|
|
|
266,477
|
|
|
$
|
676,862
|
|
$
|
346,553
|
Stock Option Plans Activity
Additional information with respect to stock option activity during the year ended December 31, 2018 under our stock option plans is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
Weighted-
|
|
Average
|
|
|
|
|
|
Shares
|
|
Average
|
|
Remaining
|
|
Aggregate
|
|
|
Under
|
|
Exercise
|
|
Contractual
|
|
Intrinsic
|
|
|
Option
|
|
Price
|
|
Life
|
|
Value
|
Outstanding at December 31, 2017
|
|
3,295,502
|
|
$
|
1.16
|
|
|
6.3 years
|
|
$
|
1,383,525
|
Granted
|
|
1,098,322
|
|
$
|
1.24
|
|
|
|
|
|
-
|
Exercised
|
|
(37,672)
|
|
$
|
0.70
|
|
|
|
|
|
-
|
Forfeited
|
|
(165,682)
|
|
$
|
1.53
|
|
|
|
|
|
7,178
|
Outstanding at December 31, 2018
|
|
4,190,470
|
|
$
|
1.16
|
|
|
6.5 years
|
|
$
|
170,233
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2018
|
|
2,713,933
|
|
$
|
1.20
|
|
|
5.2 years
|
|
$
|
140,211
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at December 31, 2018
|
|
3,479,842
|
|
$
|
1.25
|
|
|
6.4 years
|
|
$
|
79,492
|
Additional information with respect to stock option activity during the year ended December 31, 2017 under our stock option plans is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
Weighted-
|
|
Average
|
|
|
|
|
|
Shares
|
|
Average
|
|
Remaining
|
|
Aggregate
|
|
|
Under
|
|
Exercise
|
|
Contractual
|
|
Intrinsic
|
|
|
Option
|
|
Price
|
|
Life
|
|
Value
|
Outstanding at December 31, 2016
|
|
3,004,798
|
|
$
|
1.40
|
|
|
6.4 years
|
|
$
|
-
|
Granted
|
|
500,047
|
|
$
|
0.87
|
|
|
|
|
|
-
|
Exercised
|
|
(72,347)
|
|
$
|
0.82
|
|
|
|
|
|
-
|
Forfeited
|
|
(136,996)
|
|
$
|
1.16
|
|
|
|
|
|
1,120
|
Outstanding at December 31, 2017
|
|
3,295,502
|
|
$
|
1.16
|
|
|
6.3 years
|
|
$
|
1,383,525
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2017
|
|
2,364,161
|
|
$
|
1.32
|
|
|
5.3 years
|
|
$
|
807,799
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at December 31, 2017
|
|
2,864,152
|
|
$
|
1.23
|
|
|
6.0 years
|
|
$
|
1,078,322
|
The weighted-average grant date fair value of options granted during the years ended December 31, 2018 and 2017, was $1.23 and $0.59, respectively.
As of December 31, 2018, there was $864,157 of total unrecognized compensation costs related to stock options granted under our various stock option plans. The unrecognized compensation cost is expected to be recognized over a weighted-average period of twenty-three months. The total fair value of stock options that vested during the years ended December 31, 2018 and 2017 was $ 1,075,292 and $236,329 respectively.
Cash received by us upon the exercise of stock options for the years ended December 31, 2018 and 2017, was $26,495 in 2018 and $59,533 in 2017. The source of shares of common stock issuable upon the exercise of stock options is from authorized and previously unissued common shares.
Stock Bonus Plan Activity
Activity with respect to non-vested shares under the Stock Bonus Plan as of December 31, 2018 and December 31, 2017 and the changes during the above noted periods are presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
2018
|
|
2017
|
|
|
|
|
Weighted-Average
|
|
|
|
Weighted-Average
|
|
|
Shares Under
|
|
Grant
Date
|
|
Shares Under
|
|
Grant Date
|
|
|
Contract
|
|
Fair Value
|
|
Contract
|
|
Fair Value
|
Unvested at beginning of period
|
|
57,760
|
|
$
|
0.68
|
|
102,048
|
|
$
|
0.84
|
Granted
|
|
188,191
|
|
$
|
1.25
|
|
23,735
|
|
$
|
0.87
|
Vested
|
|
(76,079)
|
|
$
|
1.03
|
|
(68,023)
|
|
$
|
0.98
|
Forfeited
|
|
-
|
|
$
|
-
|
|
-
|
|
$
|
-
|
Unvested at end of period
|
|
169,872
|
|
$
|
1.15
|
|
57,760
|
|
$
|
0.68
|
As of December 31, 2018, there was $137,225 of total unrecognized compensation costs related to common stock granted under our Stock Bonus Plan. The unrecognized compensation cost at December 31, 2018 is expected to be recognized over a weighted-average period of eighteen months.
Stock Purchase Plan Activity
During the years ended December 31, 2018 and 2017, we issued 55,964 and 116,023 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 years ended December 31, 2018 and 2017 was $53,199 and $53,761, respectively.
(13) Significant Customers
We have historically derived significant revenue from a few key customers. The following table summarizes revenue and percent of total revenue from significant customers for the years ended December 31, 2018 and 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer A
|
|
|
$
|
3,022,096
|
|
21
|
%
|
|
$
|
1,974,000
|
|
12
|
%
|
Customer B
|
|
|
$
|
2,442,761
|
|
17
|
%
|
|
$
|
1,714,876
|
|
10
|
%
|
Customer C
|
|
|
$
|
1,494,210
|
|
11
|
%
|
|
$
|
300,000
|
|
2
|
%
|
The following table summarizes accounts receivable from significant customers as of December 31, 2018 and 2017:
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
Customer A
|
|
-
|
%
|
-
|
%
|
Customer B
|
|
30
|
%
|
67
|
%
|
Customer C
|
|
4
|
%
|
-
|
%
|
(14) Income Taxes
On December 22, 2017 (the "Enactment Date"), the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act makes broad and complex changes to the U.S. tax code and key provisions applicable, or that may be applicable, to us or certain of UQM Technologies Inc.’s existing or potential customers for 2018 include the following: (1) reduction of the U.S. federal corporate tax rate from
35
% to
21
% percent; (2) elimination of the corporate alternative minimum tax (AMT); (3) a new limitation on deductible interest expense; (4) limitations on the deductibility of certain executive compensation; (5) limitations on the use of foreign tax credits to reduce the U.S. income tax liability; (6) limitations on net operating losses (“NOL”) generated after December 31, 2017 to 80 percent of taxable income; and (7) the introduction of the Base Erosion Anti-Abuse Tax (“BEAT”) for tax years beginning after December 31, 2017.
Concurrent with the enactment of the Tax Act, in December 2017, the SEC staff issued Staff Accounting Bulletin 118 ("SAB 118"), which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Enactment Date for companies to complete the accounting under Accounting Standards Codification 740
- Income Taxes
("ASC 740"). In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that an entity's accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.
Our assessment and accounting for the income tax effects of the Tax Act affecting our consolidated financial statements is generally complete, subject to continued evaluation under SAB 118.
The change in federal corporate income tax rate from 35% to 21% was enacted in 2017 and effective January 1, 2018. For 2017, the rate change does not impact the calculation of current income tax liability but does require the future rate to be applied to deferred income tax assets and liabilities that exist at December 31, 2017. An expense of $13.3 million was recorded to deferred income tax expense for this change. An adjustment to the effective tax rate is also required to reflect the different rates (35% and 21%) applied to currently arising temporary differences for current tax and deferred tax. There is no P&L impact of these adjustments as the valuation allowance will have a corresponding adjustment to offset any changes to the deferred tax asset.
Income tax benefit attributable to loss from operations differed from the amounts computed by applying the U.S. federal income tax rate of 21 percent to December 31, 2018 and 34 percent to December 31, 2017 and to the prior years as a result of the following:
|
|
|
|
|
|
|
|
|
Year ended
|
|
Year ended
|
|
|
December 31,
|
|
December 31,
|
|
|
2018
|
|
2017
|
Computed "expected" tax benefit
|
|
$
|
(1,365,746)
|
|
$
|
(1,608,777)
|
Increase (decrease) in taxes resulting from:
|
|
|
|
|
|
|
Foreign Rate Differential
|
|
|
4,255
|
|
|
-
|
Increase (decrease) in valuation allowance for net deferred tax assets
|
|
|
1,482,507
|
|
|
(13,303,260)
|
Change in rate on deferred opening balance
|
|
|
-
|
|
|
13,289,000
|
Other Adjustments
|
|
|
(9,044)
|
|
|
1,662,208
|
Other, net
|
|
|
(111,972)
|
|
|
(39,171)
|
Income tax expense
|
|
$
|
—
|
|
$
|
—
|
The components of the Company’s federal and state deferred tax assets and liabilities at December 31, 2018 and 2017 are shown below. The tax effects of temporary differences that give rise to significant portions of the net deferred tax asset are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
2018
|
|
2017
|
Deferred tax assets:
|
|
|
|
|
|
|
Research and development credit carry-forwards
|
|
$
|
4,073
|
|
$
|
4,073
|
Net operating loss carry-forwards
|
|
|
24,259,168
|
|
|
22,947,741
|
Deferred compensation
|
|
|
14,160
|
|
|
9,443
|
Property and equipment
|
|
|
75,274
|
|
|
75,545
|
Stock Compensation
|
|
|
691,991
|
|
|
659,526
|
Other
|
|
|
2,168,122
|
|
|
2,033,592
|
Total deferred tax assets
|
|
|
27,212,788
|
|
|
25,729,920
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
Intangible assets
|
|
|
35,571
|
|
|
35,211
|
Total deferred tax liabilities
|
|
|
35,571
|
|
|
35,211
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
|
27,177,217
|
|
|
25,694,709
|
|
|
|
|
|
|
|
Less valuation allowance
|
|
|
(27,177,217)
|
|
|
(25,694,709)
|
|
|
|
|
|
|
|
Deferred tax assets, net of valuation allowance
|
|
$
|
—
|
|
$
|
—
|
As of December 31, 2018 and December 31, 2017, respectively, we had NOL carry-forwards of approximately $100.6 million and $95.3 million, respectively for U.S. income tax purposes that expire in varying amounts through 2038. At December 31, 2017, approximately $5.3 million of the net operating loss carry-forwards are attributable to stock options, the benefit of which will be credited to additional paid-in capital if realized. At December 31, 2017, the new accounting pronouncements (ASU 2016-09) changed the accounting for net operating losses allowing recognition in 2017. However, due to the provisions of Section 382 of the Internal Revenue Code, the utilization of a portion of these NOLs may be limited. Future ownership changes under Section 382 could occur that would result in additional Section 382 limitations, which could further restrict the use of NOLs. In addition, any Section 382 limitation could reduce our ability for utilization to zero if we fail to satisfy the continuity of business enterprise requirement for the two-year period following an ownership change.
The valuation allowance for deferred tax assets of $27.2 million and $25.7 million at December 31, 2018 and December 31, 2017, respectively, relates principally to the uncertainty of the utilization of deferred tax assets in various tax jurisdictions. The Company continually assesses both positive and negative evidence to determine whether it is more-likely-than-not that the deferred tax assets can be realized prior to their expiration. Based on the Company’s assessment it has determined the deferred tax assets are not currently realizable.
We have not recorded any potential liability for uncertain tax positions taken on our tax returns.
We may, from time to time, be assessed interest or penalties by major tax jurisdictions, although any such assessments historically have been minimal and immaterial to our financial results. Penalties are recorded in selling, general and administrative expenses and interest paid or received is recorded in interest expense or interest income, respectively, in the consolidated statements of operations.
(15) 401(k) Employee Benefit Plan
We have established a 401(k) Savings Plan (“401K Plan”) under which eligible employees may contribute up to 15 percent of their compensation. Employees over the age of 18 are eligible immediately upon hire to participate in the 401K Plan. At the direction of the participants, contributions are invested in several investment options offered by the 401K Plan. We currently match 33 percent of participants’ contributions, subject to certain limitations. These matching contributions vest ratably over a three-year period. Matching contributions to the 401K Plan were $148,255 and $118,512, for the years ended December 31, 2018 and 2017 respectively.
(16) Interim Financial Data (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters Ended
|
|
|
|
|
|
March 31,
|
|
June 30,
|
|
September 30,
|
|
December 31,
|
Year ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
1,611,574
|
|
$
|
2,701,655
|
|
$
|
4,385,422
|
|
$
|
5,476,133
|
Gross profit
|
|
$
|
306,671
|
|
$
|
720,484
|
|
$
|
1,039,253
|
|
$
|
1,301,277
|
Net loss
|
|
$
|
(1,932,798)
|
|
$
|
(2,469,726)
|
|
$
|
(1,141,573)
|
|
$
|
(959,465)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share basic and diluted:
|
|
$
|
(0.04)
|
|
$
|
(0.05)
|
|
$
|
(0.02)
|
|
$
|
(0.01)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters Ended
|
|
|
March 31,
|
|
June 30,
|
|
September 30,
|
|
December 31,
|
Year ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
1,015,045
|
|
$
|
1,788,955
|
|
$
|
2,752,554
|
|
$
|
2,222,195
|
Gross profit
|
|
$
|
326,132
|
|
$
|
701,764
|
|
$
|
1,281,220
|
|
$
|
816,445
|
Net loss
|
|
$
|
(1,606,026)
|
|
$
|
(1,348,221)
|
|
$
|
(543,401)
|
|
$
|
(1,280,668)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share basic and diluted:
|
|
$
|
(0.03)
|
|
$
|
(0.03)
|
|
$
|
(0.01)
|
|
$
|
(0.03)
|
(17) Subsequent Events
As described in Note 2 and elsewhere in this Annual Report, on January 21, 2019, we entered into the Merger Agreement with Danfoss and Merger Sub, and if the merger transaction thereby is effected, the Company will become a wholly owned subsidiary of Danfoss Power Solutions (US) Company.
Since the announcement of the Merger on January 21, 2019, holders of the Company’s warrants have exercised 1,950,115 warrants. In exchange for issuing the common shares for the warrants, the Company received $2,554,651.
On March 11, 2019, we entered into a Change in Terms Agreement with Bank of the West that served to, among other things, extend the maturity date of the promissory note evidencing our debt obligations to September 15, 2019.
ITEM 9.
CHANGE IN AND DISAGREEMENTS WITH INDEPENDENT ACCOUNTANTS O
N ACCOUNTING AND FINANCIAL DISCLOSURE
Effective November 16, 2017, and as described in a Current Report on Form 8-K dated November 16, 2017, Hein & Associates LLP (“
Hein
”), the independent registered public accounting firm for the Company, merged with Moss Adams LLP (“
Moss Adams
”). As a result of this transaction, on November 16, 2017, Hein resigned as the independent registered public accounting firm for the Company. Concurrent with such resignation of Hein, the Company’s audit committee approved the engagement of Moss Adams as the new independent registered public accounting firm for the Company effective for the year ended December 31, 2017.
ITEM 9A.
CONTROLS AND PROCEDURES
Disclosure Controls And Procedures
We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2018 under the supervision and with the participation of management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”).
Based on their evaluation as of December 31, 2018, our CEO and CFO have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective to ensure that the information required to be disclosed by our management in the reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii)
accumulated and communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosure.
Management Report on Internal Control Over Financial Reporting
Our management is responsible for all aspects of the business, including the preparation of the consolidated financial statements in this annual report. Management prepared the consolidated financial statements using accounting principles generally accepted in the United States. Management has also prepared the other information in this annual report and is responsible for its accuracy and consistency with the consolidated financial statements.
Management is responsible for establishing and maintaining an adequate system of internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act), including safeguarding of assets against unauthorized acquisition, use or disposition. This system is designed to provide reasonable assurance to management and the board of directors regarding preparation of reliable published financial statements and safeguarding of our assets. This system is supported with written policies and procedures and contains self-monitoring mechanisms. Appropriate actions are taken by management to correct deficiencies as they are identified. All internal control systems have inherent limitations, including the possibility of circumvention and overriding of controls, and, therefore, can provide only reasonable assurance as to the reliability of financial statement preparation and such asset safeguarding.
Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2018. In making this assessment, it used the criteria described in the 2013 “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management has concluded that, as of December 31, 2018, our internal control over financial reporting is effective. Management reviewed the results of its assessment with the Audit Committee of our Board of Directors who oversees the financial reporting process.
Attestation Report of the Registered Public Accounting Firm
This Form 10-K does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Form 10-K.
Changes in Internal Control Over Financial Reporting
There were no changes to our internal control over financial reporting that occurred during the quarter ended December 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B
. OTHER INFORMATION
None.
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS
AND CORPORATE GOVERNANCE
Additional information required by Item 10 is incorporated by reference from and contained under the headings “Election of Directors”, “Management” “Section 16(a) Beneficial Ownership Reporting Compliance” and “Code of Ethics” in our Definitive Proxy Statement for the 2019 Annual Meeting of Shareholders or an amendment to be filed to this Form 10-K.
ITEM 11.
EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference from and contained under the headings “Executive Compensation”, “Option Grants during Fiscal Year 2018,” “Aggregate Option Exercises During Fiscal Year 2018,” “Option Values at the End of Fiscal Year 2018,” “Director Compensation,” “Compensation discussion and Analysis,” “Compensation and Benefits Committee Report,” and “Compensation Committee Interlocks” in our definitive Proxy Statement for the 2019 Annual Meeting of Shareholders or an amendment to be filed to this Form 10-K.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMEN
T AND RELATED STOCKHOLDER MATTERS
The information required by Item 12 is incorporated by reference from and contained under the heading “Security Ownership of Certain Owners and Management” and “Equity Compensation Plan Information” in our definitive Proxy Statement for the 2019 Annual Meeting of Shareholders or an amendment to be filed to this Form 10-K.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTION
S
AND DIRECTOR INDEPENDENCE
The information required by Item 13 is incorporated by reference from and contained under the headings “Certain Relationships and Related Transactions” in our definitive Proxy Statement for the 2019 Annual Meeting of Shareholders or an amendment to be filed to this Form 10-K.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The information required by Item 14 is incorporated by reference from and contained under the heading “Ratification of Selection of Independent Auditors” in our definitive Proxy Statement for the 2019 Annual Meeting of Shareholders or an amendment to be filed to this Form 10-K.
PART IV
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)
|
1.
|
Financial Statements
|
|
|
|
|
|
UQM Technologies, Inc. (included in Part II):
|
|
|
|
|
|
Reports of Independent Registered Public Accounting Firm.
|
|
|
|
|
|
Consolidated Balance Sheets, December, 31, 2018 and 2017.
|
|
|
|
|
|
Consolidated Statements of Operations for the Year Ended December 31, 2018 and Year Ended December 31, 2017
|
|
|
|
|
|
Consolidated Statements of Stockholders’ Equity for the Year Ended December 31, 2018 and Year Ended December 31, 2017
|
|
|
|
|
|
Consolidated Statements of Cash Flows for the Year Ended December 31, 2018 and Year Ended December 31, 2017
|
|
|
|
|
|
Notes to Consolidated Financial Statements.
|
|
|
|
|
2.
|
Financial Statement Schedules:
|
|
|
|
|
|
Valuation and Qualifying Accounts. See note 1(e) to the Consolidated Financial Statements above.
|
|
|
|
|
3.
|
Exhibits:
|
|
|
|
2.1
|
|
Agreement and Plan of Merger dated January 21, 2019, among UQM Technologies, Inc., Danfoss Power Solutions (US) Company and Danfoss-2019 Merger Sub Inc. Reference is made to Exhibit 2.1 of our current report on Form 8-K filed on January 22, 2019, which is incorporated herein by reference.
|
|
|
|
3.1
|
|
Amended and Restated Articles of Incorporation as further amended. Reference is made to Exhibit 3.1 of our current report on Form 8-K filed on January 10, 2017, which is incorporated herein by reference.
|
|
|
|
3.2
|
|
Bylaws, as amended. Reference is made to Exhibit 3.2 of our Annual Report on Form 10-K filed May 30, 2014, which is incorporated herein by reference.
|
|
|
|
4.1
|
|
Specimen Stock Certificate. Reference is made to Exhibit 3.1 of our Registration Statement on Form 10 dated February 27, 1980, which is incorporated herein by reference.
|
|
|
|
4.2
|
|
Form of Common Stock Purchase Warrant (expiration August 5, 2018). Reference is made to Exhibit 4.1 of our current report on Form 8-K, filed February 5, 2014, which is incorporated herein by reference.
|
|
|
|
4.3
|
|
Form of Common Stock Purchase Warrant (expiration October 30, 2020). Reference is made to Exhibit 4.1 of our current report on Form 8-K, filed October 30, 2015, which is incorporated herein by reference.
|
|
|
|
10.1
|
|
Credit Agreement dated March 15, 2017 between UQM Properties, Inc. and Bank of the West pertaining to the Company’s working capital and cash management non-revolving line of credit. Reference is made to Exhibit 4.4 of our Transition Report on Form 10-KT filed March 30, 2017, which is incorporated herein by reference.
|
|
|
|
10.2
|
|
Supply Agreement dated October 20, 2015 by and between ITL and UQM Technologies, Inc. Reference is made to Exhibit 10.1 of our current report on Form 8-K filed on October 26, 2015, which is incorporated herein by reference.
|
|
|
|
10.3
|
|
Employment Agreement dated as of July 1, 2017, between UQM Technologies, Inc. and Joseph R. Mitchell. ** Reference is made to Exhibit 10.1 of our Current Report on Form 8-K filed on July 6, 2017, which is incorporated herein by reference.
|
|
|
|
10.4
|
|
First Amendment to Employment Agreement, dated as of September 25, 2017, between UQM Technologies, Inc. and Joseph R. Mitchell. ** Reference is made to Exhibit 10.1 of our Current Report on Form 8-K filed on September 29, 2017, which is incorporated herein by reference.
|
|
|
|
10.5
|
|
Employment Agreement dated as of July 1, 2017, between UQM Technologies, Inc. and David I. Rosenthal. ** Reference is made to Exhibit 10.2 of our Current Report on Form 8-K filed on July 6, 2017, which is incorporated herein by reference.
|
|
|
|
10.6
|
|
Employment Agreement dated as of July 1, 2017, between UQM Technologies, Inc. and Adrian P. Schaffer. ** Reference is made to Exhibit 10.3 of our Current Report on Form 8-K filed on July 6, 2017, which is incorporated herein by reference.
|
|
|
|
10.7
|
|
Stock Bonus Plan. ** Reference is made to Exhibit 10.2 of our Current Report on Form 8-K filed on August 12, 2005, which is incorporated herein by reference.
|
|
|
|
10.8
|
|
Amendment to UQM Technologies, Inc. Stock Bonus Plan dated May 9, 2012. ** Reference is made to Exhibit 10.22 of our Annual Report on Form 10-K filed May 24, 2012, which is incorporated herein by reference.
|
|
|
|
10.9
|
|
Amendment to UQM Technologies, Inc. Stock Bonus Plan adopted August 13, 2014.** Reference is made to Appendix B of our Proxy Statement filed July 2, 2014, which is incorporated herein by reference.
|
|
|
|
10.10
|
|
UQM Technologies, Inc. 2012 Equity Incentive Plan adopted April 11, 2012.** Reference is made to Exhibit 10.19 of our Annual Report on Form 10-K filed May 24, 2012, which is incorporated herein by reference.
|
|
|
|
10.11
|
|
Amendment to UQM Technologies, Inc. 2012 Equity Incentive Plan adopted August 13, 2014.** Reference is made to Appendix A of our Proxy Statement filed July 2, 2014, which is incorporated herein by reference.
|
|
|
|
10.12
|
|
Amended and Restated UQM Technologies, Inc. Employee Stock Purchase Plan. ** Reference is made to Appendix A of our Proxy Statement filed October 25, 2017, which is incorporated herein by reference.
|
|
|
|
10.13
|
|
UQM Technologies, Inc. Outside Director Stock Option Plan amended November 2, 2011. ** Reference is made to Exhibit 10.21 of our Annual Report on Form 10-K filed May 24, 2012, which is incorporated herein by reference.
|
|
|
|
10.14
|
|
Form of Incentive Stock Option Agreement. ** Reference is made to Exhibit 10.6 of our Annual Report on Form 10-K, filed on May 22, 2008, which is incorporated herein by reference.
|
|
|
|
10.15
|
|
Form of Non-Qualified Stock Option Agreement. ** Reference is made to Exhibit 10.7 of our Annual Report on Form 10-K, filed on May 22, 2008, which is incorporated herein by reference.
|
|
|
|
10.16
|
|
Form of Restricted Stock Agreement, amended May 9, 2012. ** Reference is made to Exhibit 10.20 of our Annual Report on Form 10-K filed May 24, 2012, which is incorporated herein by reference.
|
|
|
|
10.17
|
|
Omitted.
|
|
|
|
10.18
|
|
Registration Rights Agreement, dated September 25, 2017, between UQM Technologies, Inc. and Sinotruk (BVI) Limited. Reference is made to Exhibit 10.1 of our Current Report on Form 8-K filed on September 28, 2017, which is incorporated herein by reference.
|
|
|
|
10.19
|
|
Joint Venture Agreement, dated November 30, 2017, among China National Heavy Duty Truck Group Co., Ltd., UQM Technologies, Inc., and Sinotruk Global Village Investment Limited. Reference is made to Exhibit 10.1 of our Current Report on Form 8-K filed on December 1, 2017, which is incorporated herein by reference.
|
|
|
|
10.20
|
|
Technology License and Services Agreement, dated November 6, 2017, between UQM Technologies, Inc. and Sinotruk Qingdao Zhongqi New Energy Automobile Co., Ltd. Reference is made to Exhibit 10.1 of our Current Report on Form 8-K filed on December 27, 2017, which is incorporated herein by reference.
|
|
|
|
10.21
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Form of Voting Agreement. Reference is made to Exhibit 2.1 of our current report on Form 8-K filed on January 22, 2019, which is incorporated herein by reference.
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10.22
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|
Changes in Terms Agreement between UQM Properties, Inc. and Bank of the West dated March 11, 2019. Filed herewith.
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16.1
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Letter of Hein & Associates LLP. Reference is made to Exhibit 16.1 of our Current Report on Form 8-K filed on November 17, 2017, which is incorporated herein by reference.
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21.1
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Subsidiaries of the Company.
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23.1
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Consent of Moss Adams LLP.
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31.1
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Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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31.2
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Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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32.1
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Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act 2002.
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|
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
** management contract or compensation plan.
P
paper filing
ITEM 16.
FORM 10-K SUMMARY
None.
SIGNATURES
Pursuant to the requirements of Section 13
or 15(d)
of the Securities Exchange Act of 1934, UQM Technologies, Inc. has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in Longmont, Colorado on the 27
th
day of March, 2019.
UQM TECHNOLOGIES, INC.,
a Colorado Corporation
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By:
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/s/ JOSEPH MITCHELL
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Joseph Mitchell
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President and
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Chief Executive Officer
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Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of UQM Technologies, Inc., in the capacities indicated and on the date indicated.
Signature
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Title
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|
Date
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|
/s/ DONALD W. VANLANDINGHAM
|
|
Chairman of the Board of Directors
|
|
March 27, 2019
|
|
Donald W. Vanlandingham
|
|
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|
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/s/JOSEPH R. MITCHELL
|
|
President and Chief Executive Officer
|
|
March 27, 2019
|
|
Joseph R. Mitchell
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|
/s/DAVID I. ROSENTHAL
|
|
Treasurer and Secretary (Principal Financial and Accounting Officer)
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|
March 27, 2019
|
|
David I. Rosenthal
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/s/STEPHEN J. ROY
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|
Director
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|
March 27, 2019
|
|
Stephen J. Roy
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/s/JOSEPH P. SELLINGER
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|
Director
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|
March 27, 2019
|
|
Joseph P. Sellinger
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|
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/s/JOHN E. SZTYKIEL
|
|
Director
|
|
March 27, 2019
|
|
John E. Sztykiel
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|
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