UQM Technologies, Inc.Annual Report 2009UQM Technologies7501 Miller Drive, PO Box 439Frederick, CO 80530303-278-2002 Fax 303-278-7007www.uqm.com Sales $ 8,728) 7,508)Gross Profi t 1,766) 1,077) Research and Development 593) 462) Net Loss ( 4,402)(4,586)Net Loss Per Common Share(.17)(.18)UQM Technologies, Inc. is a developer and manufacturer of power dense, high effi ciency electric motors, generators and power electronic controllers for the au-tomotive, aerospace, medical, military and industrial markets. A major emphasis of the Company is developing products for the alternative energy technologies sector including propulsion systems for electric, hybrid electric, plug-in hybrid electric and fuel cell electric vehicles, under-the-hood power accessories and other vehicle auxiliaries and distributed power generation applications. Th e Company’s headquarters, engineering and product development center, and motor manufac-turing operation are located in Frederick, Colorado. For more information on the Company, please visit its worldwide website at www.uqm.com.Cash and Short-Term Investments $ 5,794 9,766) Working Capital 6,641 10,510) Total Term Debt 417 523) Th is Report contains statements that constitute “forward-looking statements” within the meaning of Sec-tion 27A of the Securities Act and Section 21E of the Securities Exchange Act. Th ese statements appear in a number of places in this Report and include statements regarding our plans, beliefs or current expectations, including those plans, beliefs and expectations of our offi cers and directors with respect to, among other things the development of markets for our products and the adequacy of our cash balances and liquidity to meet future operating needs. Important risk factors that could cause actual results to diff er from those con-tained in the forward-looking statements are contained in our Form 10-K fi led on May 21, 2009 which is available through our website at www.uqm.com or at www.sec.gov.March 31, 2009 March 31, 2008Executive Offi cers Business UnitsBoard of Directors Corporate InformationWilliam G. RankinChairman of the BoardPresident and Chief Executive Offi cerDonald A. FrenchTreasurer, Secretary and Chief Financial Offi cerLieutenant General Jerome Granrud (ret.)ConsultantStephen J. RoyPrincipalSTL Capital Partners, LLCJoseph P. SellingerRetired Vice President and Group Executiveof Anheuser Busch CompaniesDonald W. VanlandinghamConsultant, Cadwest LLCRetired ChairmanBall Aerospace and Technology CorporationWilliam G. RankinChairman of the BoardPresident and Chief Executive Offi cerDonald A. FrenchTreasurer, Secretary and Chief Financial Offi cerRonald M. BurtonSenior Vice President of OperationsJon F. LutzVice President of TechnologyProduct Engineering Center and Corporate HeadquartersUQM Technologies, Inc.7501 Miller DriveFrederick, CO 80530Tel: 303-278-2002Fax: 303-278-7007www.uqm.comManufacturingUQM Power Products, Inc.7501 Miller DriveFrederick, CO 80530Tel: 303-278-2002Fax: 303-278-7007AuditorsGrant Th ornton LLPDenver, COLegal CounselHolme Roberts & Owen, LLPDenver, COInvestor RelationsFor copies of the Company’s annual report on Form 10-K and quarterly reports on Form 10-Q at no cost, or for additional information, please contact: Investor Relations Tel: 303-278-2002 Fax: 303-278-7007or visit our web site at www.uqm.comTransfer AgentComputershare Trust Company, Inc.P.O. Box 43070Providence, RI 02940-3020Tel: 800-962-4284 303-262-0600Fax: 303-262-0700www.computershare.comAnnual MeetingTuesday, August 11, 200910 a.m. Mountain Daylight TimeTh e Golden Hotel800 Eleventh StreetGolden, Colorado 80401(303) 279-0100Stock ListingsUQM Technologies, Inc. common stock is listed on the NYSE Amex, Pacifi c, Chicago, Berlin and Frank-furt Stock Exchanges, under the ticker symbol UQM.To improve the capability, performance and energy effi ciency of our custom-ers’ products by providing them with technologically advanced electric power systems and components – motors, generators and power electronic control-lers – that are cost eff ective, reliable and of superior quality, creating a com-petitive advantage for them and a cleaner environment for life on our plan-et. Year Ended March 31, 2009 2008 Our Mission CompanyFinancial Profi le (Dollars in thousands, except per share amounts) To our shareholders
“Our increase in revenue for the fi scal year was driven by a
59 percent increase in unit sales of our two primary electric
and hybrid vehicle propulsion system products.“
For the third straight year, we achieved double-digit
growth in our total revenue, driven by increasing prod-
uct sales. Total revenue for fi scal 2009 increased 16 per-
cent to $8.7 million with product sales increasing 22
percent to $6 million compared to last year. As a re-
sult of increasing volume and improved productivity,
our margins improved and losses decreased. Our gross
profi t margins climbed to 20 percent resulting in an in-
crease in gross profi t contribution of $.7 million to $1.8
million for the fi scal year.
In the face of a major recession and declining econo-
my, we were able to improve our fi nancial performance.
Many companies, particularly in the automotive sector,
have been reporting large decreases in revenue and in-
creasing losses while we experienced the opposite. Our
increase in revenue for the fi scal year was driven by a 59
percent increase in unit sales of our two primary electric
and hybrid vehicle propul-
sion system products. In-
terest in, and demand for,
these products continues
to be strong and we are re-
sponding to many new requests for quotes and propos-
als. Th e threat of global warming, the likely return of
high fuel prices, the constant reminder of our depen-
dence on foreign oil and the expected benefi ts of the
U.S. Government’s stimulus package appear to be ef-
fectively motivating vehicle makers and users to keep
vehicle electrifi cation a high priority.
Production Programs
Th e economic downturn has had a negative impact
on our conventional actuator motor business. We expe-
rienced a signifi cant decline in shipments of auxiliary
actuator motors to Lippert Components for use in rec-
reation vehicles, and auxiliary brake actuators to Club
Car that are used in their eight passenger golf carts. Th is
revenue decrease was more than off set by increased rev-
enue from our large propulsion systems.
In order to meet the increased demand for our large
electric propulsion systems, we took a number of steps
during fi scal year 2009 to increase our production capa-
bility and capacity. We expanded our manufacturing or-
ganization and installed, and are now operating, a Phase
I assembly cell which will support the production of
over 5,000 units per year on one shift of operation. Th is
semi-automated cell includes a sophisticated material
handling system, a motor fi nal assembly machine and a
production tester. Th e cell occupies about 1800 square
feet and is tooled for two frame size motors covering a
power range from 50 to 200 kW. In addition to achiev-
ing a signifi cant increase in production capacity, this
new manufacturing cell has provided major improve-
ments in productivity and reductions in assembly costs,
1
contributing to our improved margins. Establishing this
manufacturing capability is a critically important step in
winning production contracts with our larger customers
and will be a key factor in our future success.
In the truck market, we increased our deliveries of
DC-to-DC converters to Eaton Corporation. Our con-
verters are part of Eaton’s hybrid electric propulsion
system which powers medium-duty hybrid trucks in-
cluding International Truck and Engine Corporation’s
DuraStar™ Hybrid, Peterbilt Motor Company’s Mod-
el 330 and Model 335 hybrids and Freightliner Trucks
Business Class® M2e Hybrid. In addition to DC-to-DC
converters, we have developed a companion DC-to-AC
inverter that we expect to move into volume production
to meet the growing demand for onboard and export
power requirements of hybrid trucks. We view Eaton as
a strategic customer and expect to expand the breadth of
components sold to them.
With the addition of
our new large propulsion
motor assembly cell, we
now have four dedicated
manufacturing cells: 1) our auxiliary actuator motor cell
for Lippert Components and Club Car, 2) our auxiliary
compressor motor cell for Keith Products, 3) our DC-
to-DC converter cell for Eaton Corporation and 4) our
new large propulsion motor assembly cell.
Technology Programs
Despite the world economic slowdown, demand for
our electric propulsion systems and related products has
continued to be strong, driven by an expansion in the
number of all-electric and hybrid electric vehicle plat-
forms being developed for potential introduction into
the automobile, truck, bus and military vehicle mar-
kets.
In order to meet this growing breadth of applica-
tions, we have expanded our propulsion system product
off erings. In May of 2008, we introduced a new 125
kW (167 horsepower) propulsion system that is a higher
power version of our existing 75 kW propulsion system.
Th e 125 kW system has the same package size as the 75
kW system and the highest power density of any of our
propulsion systems. In April of 2009, we introduced a
new 145 kW (194 horsepower) propulsion system by
extending the length of the 125 kW system by 2 inches
and increasing its weight by 20 lb. With these additions
we now off er a product family that includes 50 kW, 75
kW, 125 kW and 145 kW peak power systems in our
smaller 11-inch diameter frame size and 100 kW and
150 kW peak power systems in our larger 16-inch di-
ameter frame size, allowing us to meet a wide range of
vehicle performance requirements.
In the passenger automobile market, we have in-
creased our deliveries of prototype and evaluation pro-
pulsion systems and/or generators to six international
automobile manufacturers (up from three last year).
We are also supplying an increased number of electric
propulsion systems and/or generators to eight entrepre-
neurial automobile developers (up from three last year).
Several of these companies have announced plans to
begin low volume production in 2009 and have tak-
en delivery of limited quantities of our systems for fi eld
testing. At the Detroit Auto Show held in mid-January
2009, seven electric and hybrid electric vehicles were
displayed which incorporate UQM® propulsion systems
and/or generators.
A key factor in our growing penetration of the auto-
mobile market has been the recommendation and selec-
tion of UQM® systems by many vehicle integrators for
use in electric and hybrid electric vehicle development
programs that
they are per-
forming
for
their vehicle
manufactur-
ing customers.
One of our
most promi-
nent interna-
tionally based
i n t e g r a t o r s ,
FEV, Inc., re-
cently introduced a Dodge Caliber-based range extend-
ed electric concept vehicle (ReEV) powered by a UQM®
125 kW propulsion system and 75 kW generator. Th e
plug-in Caliber ReEV concept has an all-electric range
of 40 miles, does 0 to 60 mph in 8.3 seconds and has
a top speed of 84 mph. Our selection by FEV and oth-
er integrators for their customer vehicle development
programs is a clear indication of the performance and
packaging advantages of our systems, their ease of ap-
plication and the high level of support we provide our
customers.
FEV’s plug-in hybrid Caliber ReEV
Although our primary focus in the truck market is
through our relationship with Eaton Corporation, we
are also working with both OEM and entrepreneurial
electric and hybrid electric truck developers. One of
our customers, Electrorides Inc., recently announced
that it is developing an all-electric walk-in van based
on a Freightliner Chassis. Th e vehicle is powered by a
UQM PowerPhase® 150 electric propulsion system and
will complement Electrorides’ ZeroTruck™, an all-elec-
tric zero emission medium-duty truck also powered by a
UQM® PowerPhase® electric propulsion system.
On the bus front, we have been providing propulsion
systems to several developers of electric and hybrid elec-
tric buses, including the fl eet of 36 hybrid electric buses
that operate on the 16th Street Mall in downtown Den-
ver. One of our most promising opportunities is with
Proterra LLC, who in October 2008, introduced a 35-
foot, lightweight, hybrid electric bus. Th is 37 passenger
transit bus features a lightweight composite body and
a UQM® PowerPhase® 150 electric propulsion system.
A battery electric version of Proterra’s bus was recent-
ly tested by the Pennsylvania Transportation Institute
and achieved over 20 miles per gallon in fuel economy
equivalency, which is up to 400 percent better perfor-
mance than today’s conventional diesel and competitor’s
hybrid electric transit buses.
Our work on government programs, particularly for
the U.S. military has remained strong and has the poten-
tial of major growth. During the year, we made signifi -
cant progress on our contracts with the U.S. Air Force
to develop advanced silicon carbide based power elec-
tronics, with the U.S. Navy to develop advanced ship-
board electric motors and with the U.S. Department of
Energy and California Energy Commission to develop a
distributed electric power grid-connect interface system
as part of the government’s “smart grid” initiative. We
have been developing and supplying systems to several
major defense contractors as part of the Future Tactical
Truck System (FTTS) and Joint Light Tactical Vehicle
(JLTV) programs for transport vehicles as well as for the
expected replacement for the High Mobility Multipur-
pose Wheeled Vehicle (HMMWV). We expect that our
role in these programs will expand and lead to signifi -
cant opportunities for the Company.
Summary
Although the weak economy has been a signifi cant
challenge to everyone, fi scal 2009 was an exciting and
productive year for UQM Technologies. We believe that
demand for our electric propulsion systems will remain
strong for the foreseeable future as vehicle makers con-
tinue to focus on the development and introduction of
electric and hybrid electric vehicles as part of the re-
structuring of the global automotive industry. While
many automotive suppliers are going to be negatively
impacted by this shift in product direction, there are go-
ing to be winners and we expect to be one of them.
We are very well positioned to benefi t from Presi-
dent Obama’s alternative energy push for energy inde-
pendence, lower vehicle emissions and improved fuel ef-
fi ciency. We are looking forward to additional revenue
growth in fi scal 2010 as the positive impacts of the gov-
ernment’s stimulus package take eff ect and the emerging
markets we serve continue to develop and expand.
May 21, 2009
William G. Rankin
Chairman, President and Chief Executive Offi cer
2
“Potentially large markets are developing as a result of
the electrifi cation of a wide-range of vehicle platforms.”
General
UQM Technologies, Inc., (“UQM”) is a developer
and manufacturer of energy effi cient, power dense, elec-
tric motors, generators and power electronic controllers.
We were incorporated in the state of Colorado in 1967.
Our primary focus is incorporating our advanced tech-
nology into products aimed at emerging markets for
electrically propelled vehicles that are expected to ex-
perience rapid growth as well as selected existing com-
mercial markets. We op-
erate our business in two
segments: 1) technology
- which encompasses the
further advancement and application of our proprietary
motors, generators, power electronics and software; and
2) power products - which encompasses the manufac-
ture of motors, generators, power electronic control-
lers and related products. Our $0.01 par value com-
mon stock trades on the NYSE
Amex, Chicago, Pacifi c, Berlin
and Frankfurt stock exchanges
under the symbol “UQM.”
Th e Company’s
revenue
is derived from two principal
sources: 1) funded contract re-
search and development servic-
es performed for strategic part-
ners, customers and the U.S.
government directed toward
either the advancement of our
proprietary technology portfo-
lio or the application of our proprietary technology to
customers’ products; and 2) the manufacture and sale of
products engineered by us.
UQM® system under the hood of Caliber ReEV
We have two principal operating companies: 1)
UQM Technologies, Inc. which includes the Corporate
Headquarters and Engineering and Product Develop-
ment Center; and 2) wholly-owned subsidiary UQM
Power Products, Inc. (“UQM Power”) which is an ISO
9001 :2000 quality certifi ed manufacturer of our prod-
ucts. Both operating companies are located in Freder-
ick, Colorado.
Vehicle Electrifi cation
Our primary focus is incorporating our advanced
technology into products aimed at emerging markets
for electrically propelled vehicles that are expected to
experience rapid growth as well as selected existing com-
mercial markets.
Existing Markets
Today there are numerous well-established markets
for products that incorporate electric motors, genera-
tors and power electronic controllers that are targets
for replacement by our advantaged systems. Examples
of existing electric vehicle markets that we believe may
present opportunities for the commercialization of our
3
proprietary technology include electric wheelchairs, golf
carts, forklift trucks and other warehouse vehicles, air-
craft tugs and other support equipment, commercial
fl oor cleaning equipment and other similar markets
where the product application generally requires high
torque and variable speed operation. In addition, there
are a multitude of electric auxiliary motors used on con-
ventional vehicles that provide a further opportunity for
replacement by our systems.
We have developed and
commercialized several prod-
ucts for existing markets that
are currently being manufac-
tured by our wholly-owned subsidiary, UQM Power.
Th ese products include a fan blower motor and a com-
pressor drive motor that are used in aircraft air condi-
tioning systems manufactured by Keith Products, Inc.,
a vehicle auxiliary actuator motor for a product manu-
factured by Lippert Components, Inc. and an electric
brake actuation motor that is used in selected golf carts
manufactured by Club Car, Inc.
We expect to continue to commercialize both tech-
nologically advanced and low cost products that we de-
velop to customer specifi cations in selected large, estab-
lished markets.
Emerging Markets
Potentially large markets are developing as a result
of the electrifi cation of a wide-range of vehicle plat-
forms. Th e electrifi cation of vehicles is being pursued
for a variety of application specifi c reasons including: 1)
improved fuel economy, 2) lower vehicle emissions, 3)
greater reliability and lower maintenance, 4) the need
for higher levels of available onboard electric power to
run electrical devices, and 5) improved performance
and vehicle control. Of these reasons, improved fuel
economy has emerged as a signifi cant factor in the de-
velopment and potential rate of growth of the emerg-
ing vehicle electrifi cation markets as crude oil prices are
expected to resume their rise, and consumers and busi-
nesses alike have to contend with higher gasoline and
diesel prices. Th is trend toward higher fuel prices is ex-
pected to continue for the foreseeable future, driven by
tight supply levels, geopolitical turmoil in key oil pro-
ducing countries and expected future increases in world
demand, driven principally by escalating consumption
of fossil fuels by developing countries such as China and
India. In addition to these factors, government regu-
lations mandating reductions in pollutants from diesel
engines are expected to further accelerate the trend to-
ward electrifi cation as increasingly stringent regulations
continue, with the next reduction set for 2010. Fur-
ther, Corporate Average Fuel Economy (CAFÉ) stan-
dards recently received their fi rst overhaul in more than
30 years. Th e Energy Independence and Security Act
of 2007 requires, in part, that automakers boost fl eet-
wide gas mileage to 35 mpg by the year 2020. Th is re-
“We believe that the trend toward increasing electrifi ca-
tion of vehicles will continue at an accelerated pace.”
quirement applies to all passenger automobiles, includ-
ing “light trucks.” Other recent government legislation,
including the Advanced Tech-
nology Vehicles Manufactur-
ing Incentive Program and
the American Recovery and
Reinvestment Act of 2009 (Stimulus Bill), encourage
the development and introduction of environmentally
friendly vehicles. A partial listing of some of the more
notable provisions of this legislation includes:
•
•
•
•
•
Tax credits for the purchase of environmentally
friendly vehicles
Low cost loans to manufacturers and compo-
nent suppliers to purchase infrastructure and de-
velop manufacturing capacity for clean vehicles
and components used in these vehicles
Funding for government agencies to acquire en-
vironmentally friendly vehicles
Grants for the development of clean vehicles and
clean vehicle component technology
Grants for the development of a “smart” elec-
tric grid
Crude oil consumption in the United States as re-
ported by the Transportation Energy Data Book; Edi-
tion 27 and the EIA Annual Energy Outlook 2009 av-
erages approximately 21 million barrels per day. Of this
amount, approximately two-thirds are used for trans-
portation.
Th e electrifi cation of conventional vehicles, ranging
from passenger vehicles and over-the-road trucks to off -
road vehicles such as agricultural tractors, construction
equipment and military vehicles, can potentially off er
improvements in fuel economy and emissions. Nearly
all conventional vehicles are powered by a gasoline or
diesel fueled internal combustion engine that converts
the energy stored in the fuel to rotating power out of
the engine. Th e power out of the engine’s rotating shaft
is used to propel the vehicle and operate all of the ve-
hicles auxiliaries either directly with belts, pulleys and
gears or indirectly through electricity generated from a
belted alternator.
4
Internal combustion engines are relatively ineffi cient,
typically converting only 25 to 35 percent of the input
energy in the fuel to the
output shaft to do useful
work. Th e remaining 65
to 75 percent of the input
energy is wasted by the engine as heat loss. Electric mo-
tors on the other hand, are much more effi cient in con-
verting input electric energy to the rotating shaft to do
useful work. UQM® electric propulsion systems have
some of the highest effi ciencies (input energy to output
work) in the industry ranging from 80 to 95 percent.
Th e electrifi cation of vehicles can range from sim-
ply replacing ineffi cient belt and gear driven under-the-
hood auxiliaries (water pump, power steering, HVAC,
cooling fans etc.) with effi cient electric powered ones,
to eliminating the internal combustion engine entirely
and replacing it with full electric propulsion such as in
a battery or fuel cell powered vehicle. Generally, as the
vehicle power plant content becomes increasingly more
electric, the fuel effi ciency improves and the cost and
complexity increases. With rising fuel prices, vehicle
makers are fi nding it much more feasible to justify this
added complexity and cost.
We believe that the trend toward increasing electri-
fi cation of vehicles will continue at an accelerated pace.
Accordingly, we have developed and continue to devel-
op, with considerable funding from our customers, elec-
tric propulsion systems and other motor and electron-
ic products that will enable our customers to introduce
alternative powered vehicles in the markets they serve,
should they elect to do so. An expanded description of
the diff erent degrees of vehicle electrifi cation follows:
Electrifi cation of engine driven auxiliaries – In
most existing conventional gasoline and diesel-powered
vehicles, under-the-hood components such as water, oil
and fuel pumps, power steering systems, cooling fans
and air conditioning compressors are powered by en-
gine belts, pulleys and gears. Th ese devices perform
their functions very ineffi ciently and represent a sig-
nifi cant load on the engine. Because they are directly
connected to the engine, there is no way to indepen-
dently vary their speed or modulate their power. Th e
electrifi cation of these components provides numerous
advantages including: 1) variable speed and power op-
eration which improves effi ciency and fuel economy,
2) the ability to locate them strategically anywhere in
the vehicle because an electric component does not re-
quire proximity to an engine driven belt or gear, 3) im-
proved controllability and reliability and 4) fl exible ar-
chitectures and improved access for service and mainte-
nance. Existing conventional alternators do not provide
enough power to electrify the engine driven auxiliaries
and must be replaced with a higher power generator.
Th e typical UQM® generator is nearly twice as effi cient
Th e range of vehicle electrifi cation
and provides fi ve times the power of a conventional al-
ternator. In addition, these higher power generators can
provide export power to power other on-board or off -
board equipment. Th is electrifi cation strategy is easily
adopted because required changes to vehicle design and
operation are the least disruptive and can improve ve-
hicle fuel economy by 7 to 15 percent.
Parallel hybrids - Parallel hybrid vehicles incorporate
an electric motor to join the internal combustion engine
in propelling the vehicle. In a low power confi guration,
often referred to as a “mild hybrid”, a starter/motor/
generator that is typically integrated into the fl ywheel
of an engine is used to combine three separate func-
tions in one electric machine. Th e machine starts the
engine, eliminating the need for a conventional starter,
performs power generation, eliminating a convention-
al belt driven alternator, and can be run in motoring
mode, supplying supplemental power to the driveline to
improve acceleration and vehicle performance. High-
er power parallel hybrids incorporate additional system
features such as regenerative braking and automatic en-
gine shutdown and all-electric propulsion during cer-
tain operating conditions. In a typical parallel hybrid
vehicle, acceleration from a standing-stop is generally
performed by the electric motor in all-electric mode up
to a given speed, at which time the engine starts and the
engine and electric motor work in parallel to accelerate
the vehicle. Once the vehicle achieves highway speed,
the motor ceases operation and the vehicle is propelled
using the engine only. During braking operations, the
motor is switched to power generation mode and used
to recapture energy that is normally lost as brake heat in
conventional vehicles. Th e stored energy is then con-
sumed by the electric motor in the next acceleration cy-
cle. If the batteries need additional charging, the engine
drives the electric machine in generator mode, sending
electricity to charge the battery pack. Th ese vehicles
have suffi cient battery charging capacity to be self-sus-
taining thereby eliminating the need to plug the vehicle
into the electric power grid. Depending on the vehicle’s
level of electric motive power and its duty cycle, parallel
hybrids can achieve fuel economy improvements of 10
to 45 percent.
Series hybrids - Series hybrid vehicles contain a
greater degree of electrifi cation than parallel hybrids. In
a typical series hybrid vehicle, all of the motive power
for the vehicle is supplied by electric motors, thereby
eliminating conventional driveline components such as
the transmission and drive shaft. Generally, series hy-
brids contain a larger amount of batteries to store elec-
trical energy and the engine’s principal function is to
turn a separate generator to produce the electrical en-
ergy necessary to maintain the state of charge of the on-
board battery pack. As in a parallel hybrid, during brak-
ing operations the electric motor is switched to power
generation mode and used to recapture energy that is
normally lost as brake heat in conventional vehicles.
Th e stored energy is then consumed by the electric mo-
tor in the next acceleration cycle. Also, as in the paral-
lel hybrid, a series hybrid vehicle has suffi cient battery
charging capacity to be self-sustaining, thereby eliminat-
ing the need to plug the vehicle into the electric power
grid. Because the engine serves as an under-the-hood
power plant, series hybrids typically have large amounts
of available onboard power to perform additional func-
tions while the vehicle is operating or when it reaches its
fi nal destination. Depending on vehicle confi guration
and duty cycle, series hybrids can achieve fuel economy
improvements of 35 to 50 percent.
Plug-in hybrids - A plug-in hybrid vehicle can be
confi gured as either a parallel or a series hybrid. What
distinguishes this category of hybrid is that it is designed
to operate in all-electric only mode for a range of 20 to
40 miles and be charge depleting therefore requiring it
to be periodically plugged into and recharged from the
electric grid. Because a portion of the energy consumed
by a plug-in hybrid vehicle is acquired at a relatively low
cost from the electrical grid in addition to the effi cien-
cies obtained from its hybrid confi guration, this catego-
ry of vehicle can achieve fuel economy improvements of
60 to 75 percent.
All-electric battery and fuel cell vehicles - All-elec-
tric battery and fuel cell vehicles are powered entirely
from electric energy stored on board in batteries or gen-
erated on board by a fuel cell. In this category of ve-
hicle, all motive power is produced by electric motors
and there is no engine and associated fuel, driveline and
exhaust components. Similarly, many vehicle functions
currently performed by auxiliaries attached to the en-
gine through belts or gears, such as power steering and
air conditioning, must be performed using electric mo-
tors. As with hybrid electric vehicles, all-electric bat-
tery-powered vehicles can switch the electric propulsion
motor during braking operations; the electric motor is
switched to power generation mode and used to recap-
ture energy that is normally lost as brake heat in con-
ventional vehicles. Th e stored energy is then consumed
by the electric motor in the next acceleration cycle. Th e
energy needs of all-electric battery-powered vehicles are
obtained by recharging their batteries using the electric
power grid. Fuel cells are energy production devices
that generate electricity through a chemical reaction re-
sulting from combining hydrogen and oxygen. Th e by-
5
product of this reaction is water, therefore allowing for
the total elimination of vehicle exhaust emissions in this
category of vehicle. Because there is no battery energy
storage in a fuel cell powered vehicle, there is no oppor-
tunity for regenerative braking energy recapture. Fuel
economy improvements for all-electric battery and fuel
cell vehicles are generally 75 percent or greater.
automotive suppliers. Many of these automobile com-
panies are also developing fuel cell or battery-powered
vehicles that they hope to introduce at a future date.
We have recently shipped electric and hybrid electric
propulsion systems and /or generators to fi ve interna-
tional automobile companies for use in vehicle develop-
ment programs.
“We believe that our technology and products are well-
suited for application in a wide-range of vehicles as the
trend toward electrifi cation continues to gain momentum.“
Markets
We have historically focused our resources on the de-
velopment of highly effi cient electric propulsion systems
for each category of vehicle described above with power
levels of 0.5 kW to 150 kW, which are suitable for vehi-
cles ranging from wheelchairs
to passenger automobiles to
large trucks, buses, tractors,
construction equipment and
military vehicles. In addi-
tion, we have developed elec-
tric motors, generators and electronic controls to power
under-the-hood auxiliaries such as water, oil and fuel
pumps, power steering, cooling fans and air condition-
ing compressors. We have also developed DC-to-DC
converters that step down high voltage electrical systems
to 12 volts and DC-to-AC inverters that convert DC
power to consumer friendly 110-volt alternating cur-
rent power. We are pursuing the commercialization of
our technology and products designed by us in numer-
ous large emerging and existing markets where we in-
tend to introduce technologically advanced products or
lower cost systems or a combination of both.
We believe that our technology and products are
well-suited for application in a wide-range of vehicles as
the trend toward electrifi cation continues to gain mo-
mentum. In this regard, we have focused our attention
on several niche markets where we believe we can most
eff ectively compete and which we expect will have high-
er than average rates of growth and expansion. A brief
description of each of these markets follows:
Passenger automobiles and light trucks - In past
years, approximately 16 million passenger automobiles
and light trucks were sold in the United States each
year, although these production levels have declined
dramatically over the last year to a current annual rate
of approximately 9 million units. Over the last several
years a market has developed for automobiles that are
powered by hybrid electric powertrains. Th ese vehicles
have good performance and provide above average fuel
economy compared to conventional automobiles. Sev-
eral automakers have introduced vehicle models incor-
porating hybrid electric powertrains including Toyota,
Lexus, Nissan, Honda, Ford, Saturn and General Mo-
tors. Th ese automakers to date are using hybrid elec-
tric powertrains that they have developed themselves or
have acquired from other automakers or existing Tier 1
6
In addition to established automakers, there are a va-
riety of small entrepreneurial companies that are devel-
oping and hope to commercialize electric, hybrid elec-
tric and/or plug-in hybrid electric cars. Although many
of these companies lack substantial fi nancial resources
and/or signifi cant automobile industry experience, they
are pursuing a variety of
strategies to introduce
these types of automo-
biles into either niche
markets, such as for fl eet
users or high-end luxury
sports car buyers, or the consumer vehicle market gen-
erally. Should any of these companies be successful in
commercializing their product off erings, it could cause
the growth rate of this market to accelerate signifi cantly.
Th ese companies are generally using electric or hybrid
electric powertrains that they have developed them-
selves or have been developed by other entrepreneur-
ial companies. We have recently shipped electric and
hybrid electric propulsion systems and/or generators to
eight of these companies and have been and continue
to be in discussions with nearly all of these companies
regarding the use of our equipment in their vehicle de-
velopment programs.
Trucks, Buses and Recreational Vehicles - Th e U.S.
Department of Energy estimated that in 2007, trucks
consumed 6.3 million barrels of crude oil per day and
they project that by 2030, trucks will consume approxi-
mately 55 percent of all crude oil used in transporta-
tion, or 10 million barrels of crude oil per day.
In recent years, approximately 6 million trucks, bus-
es and other medium and heavy-duty on-road vehicles
were sold in the United States each year, although these
quantities have declined substantially over the last year.
Th e market for these vehicles is characterized by a large
number of suppliers, a wide-range of vehicle designs
and confi gurations, diverse power and performance lev-
els and relatively low production volumes for each mod-
el. As a result, the typical truck, bus and other medium
and heavy-duty vehicle manufacturer is unlikely to have
the technical expertise or fi nancial resources to internal-
ly develop components that can compete in emerging
markets for increasingly electrifi ed vehicles. According-
ly, we expect these manufacturers to purchase products
from suppliers who have developed technologically ad-
vanced electric motors; generators and power electron-
ic energy management controls that can be applied to
their vehicles.
Proterra’s all-electric bus
We are currently supplying an automotive qualifi ed
DC-to-DC convert-
er to Eaton Corpo-
ration which is used
onboard medium and
heavy-duty
hybrid
trucks. We have also
developed a DC-to-
AC inverter that we
expect to sell into the
truck market to meet
the growing onboard
and export power requirements of hybrid trucks. Some
medium and heavy-duty hybrid electric trucks manu-
factured by customers of Eaton currently have our DC-
to-DC converter on board. We expect the medium and
heavy-duty hybrid electric truck market to grow at an
accelerating rate as potential customers for these vehi-
cles gain a greater understanding of their operational,
environmental and economic advantages. In addition
to our supplier relationship with Eaton, we have been
and expect to continue to be in discussion with truck
OEMs regarding potential niche vehicle programs. We
have supplied a hybrid electric propulsion system to a
commercial truck manufacturer in the Middle East and
have been selected as the propulsion system supplier for
the ZeroTruck™, an all-electric medium-duty truck be-
ing developed by Electrorides, Inc.
Also, several truck manufacturers are considering
other electrically-based products that either enhance the
utility of their vehicles, such as the ability to generate
large amounts of exportable electric power, or that may
be necessary to meet regulatory mandates, such as diesel
engine emission standards and restrictions on emissions
arising from diesel engine idling. Th ese products in-
clude electric propulsion systems, higher power engine
generators, electric auxiliaries and DC-to-DC convert-
ers and DC-to-AC inverters. We intend to continue to
aggressively pursue the commercialization of our prod-
ucts for these and other applications in the market for
electric and hybrid trucks as it emerges over the next
several years.
We are also involved in a number of bus programs.
Over the last several years we have supplied generators
and motor controllers to the Denver Regional Trans-
portation District (RTD) for its fl eet of thirty-six Mall-
Ride hybrid electric shuttle buses, the fi rst large-scale
deployment of hybrid electric buses for use in the Unit-
ed States. Th e 45-foot MallRide hybrid electric shuttles
operate on the 16th Street Mall in downtown Denver,
providing a free ride for passengers across the 1.3 mile
long 16th Street Mall.
We also are the propulsion system supplier for a
hybrid electric bus being developed by Proterra LLC,
Golden, Colorado. Th e 40-foot composite body bus is
being developed in both an all-electric battery and plug-
in hybrid confi guration.
We are also the supplier of propulsion motors to
a collaborative advanced hybrid electric bus develop-
ment program being performed by the Flint Michigan
Mass Transportation Authority (“MTA”), Kettering
University, Michigan State University and Transporta-
tion Techniques LLC. MTA currently operates fi ve hy-
brid electric cutaway buses on routes in Flint, Michigan
and throughout Genesee County. Th e replacement of
the existing propulsion systems with a UQM® propul-
sion system is expected to provide additional fuel effi -
ciency improvements of 15 percent to 20 percent over
that achieved by the current hybrid buses, or an overall
improvement of up to 40 percent over standard diesel-
powered vehicles.
We currently supply a vehicle auxiliary actuator mo-
tor to Lippert Components, Inc. for use in convention-
al recreational vehicles. We have manufactured and
shipped over 65,000 units since the launch of produc-
tion in fi scal 2007. Th ere are a variety of specialty on-
road manufacturers of conventional vehicles who rep-
resent an opportunity for us to further expand the de-
ployment of our products, and we intend to continue to
pursue the commercialization of our products for these
applications.
Off -road vehicles - Th ere are a wide-range of off -
road vehicles sold in the United States each year. Th ese
vehicles range from small - wheelchairs, golf carts, fork
trucks, riding lawn mowers, snowmobiles, all-terrain
vehicles, etc., - to large construction, agricultural and
mining equipment. Th e markets for small vehicles are
typically characterized by relatively high volumes, low
power levels and commodity pricing. We expect to
continue to compete selectively in off -road vehicle mar-
kets where the customer re-
quires advanced technolo-
gy or superior performance
and where acceptable gross
profi t margins are obtain-
able.
Th e market for large
equipment - tractors, con-
struction, mining and oth-
er specialty equipment -
possesses many of the same
characteristics as the over-
the-road truck market described above. In recent past
years, it is estimated that approximately 500,000 of
these vehicles were sold in the United States each year.
Accordingly, we expect these vehicle manufacturers to
purchase products with similar specifi cations as those re-
Club Car golf cart
7
“We are currently supplying an automotive qualifi ed DC-DC converter to Eaton
Corporation which is used onboard medium and heavy-duty hybrid trucks. “
quired in the over-the-road truck and bus markets from
suppliers who have developed technologically advanced
electric motors and power electronic energy manage-
ment controls that can be applied to their vehicles. Al-
though these vehicles are produced in relatively lower
volumes, they nevertheless represent a substantial op-
portunity due to
higher power lev-
substantial
els,
technical
com-
plexity and therefore substantially higher product con-
tent and dollar value per vehicle. We currently have sys-
tems under evaluation by several large off -road vehicle
developers for both electric propulsion and under-the-
hood auxiliary applications.
We have also developed electric power products for
the aircraft and aerospace market and the boat and ma-
rine market. In the aerospace market, we have devel-
oped electric auxiliary motors and controllers used in
aircraft air conditioning systems. We have also devel-
oped auxiliary power units for the generation of on-
board power and propulsion systems for various boat
applications. We believe that some of the fuel effi ciency
benefi ts of vehicle electrifi cation can also be realized in
the boat and marine market. Although our focus is pri-
marily on land applications, we will continue to leverage
our technology and products in these potentially large
niche markets as opportunities present themselves.
Military vehicles - Th e U.S. military purchases a
wide-range of ground vehicles each year including com-
bat vehicles such as tanks, self-propelled artillery and
armored personnel carriers, as well as a variety of light,
medium and heavy-duty trucks for convoy and sup-
ply operations and for the transport of fuel used on the
battlefi eld. Th e military is particularly interested in the
electrifi cation of vehicles because the attributes that
these vehicles possess off er exceptional potential for the
military to achieve its long-term objectives of develop-
ing a highly mobile, lethal fi ghting force. Fuel economy
improvements in military vehicles transfer into substan-
tial savings in support infrastructure and transportation
costs associated with transporting fuel to the battlefi eld,
which is typically thousands of miles from the United
States. For example, if fuel economy improvements of
25 percent are achieved in the average truck, a corre-
sponding amount of fuel does not have to be transport-
ed and therefore a corresponding number of airplanes or
tankers are not required in the transportation process.
Also, the availability of onboard electrical power on mil-
itary vehicles opens up new opportunities for the devel-
opment of sophisticated surveillance, detection and bat-
tlefi eld monitoring equipment and for laser, microwave
and electrical pulse weapon systems. It is estimated that
the military purchases approximately 8,000 trucks per
year and greater numbers during periods of armed con-
8
fl ict. As is the case with large off -road equipment, these
vehicles are produced in relatively lower volumes, op-
erate at higher power levels, have substantial technical
complexity and therefore substantially higher product
content and dollar value per vehicle. We have, over the
last several years, been working with a number of mil-
itary
contrac-
tors and vehicle
includ-
makers
ing DRS Tech-
nologies, AM General, BAE Systems, Boeing, General
Dynamics and others, on prototype hybrid electric ve-
hicles, high export power generators, electric auxiliaries,
DC-to-DC converters and DC-to-AC inverters. Al-
though this market has not yet begun to emerge, we be-
lieve that it may begin to soon, driven by the availability
of hybrid electric components in the commercial truck
market that operate at similar power levels as those re-
quired by many military vehicles.
Distributed power generation - Th ere has recently
been an increased focus on the development and adop-
tion of clean, renewable energy products including wind
turbine power generators, solar panels and stationary
fuel cell power generators. In addition, many experts
believe that power users will increasingly consider on-
site power generation using diesel or natural gas fueled
internal combustion engine generators as an alternative
to power supplied over the electrical grid. Th e Stimulus
Bill recently passed by the U.S. government has allocat-
ed substantial funding for power generation technolo-
gies and development of a “smart grid”. We have de-
veloped generators for potential use in this market and
have also developed DC-to-AC electronic power invert-
ers for use in distributed power generation applications
to convert the DC output of these devices to usable AC
power for the homeowner or business. We are currently
developing, under the California Energy Commission’s
Public Interest Energy Research Program and with the
U.S. Department of Energy’s National Renewable En-
ergy Laboratory (NREL), an advanced grid-connect in-
verter under its Advanced Power Electronics Interface
(APEI) Initiative. Th e objective of the development ef-
fort is to design a cost-eff ective, fl exible, readily-man-
ufactured, and ready to be commercialized prototype
interface that will standardize the interconnection for
a modular, scalable range of APEI systems. We expect
to compete for additional development funds available
under the Stimulus Bill to further advance our power
generation and management technology and potentially
expand our product off erings in this market.
Th ere is also a developing industry initiative termed
“vehicle-to-grid”, or “V-to-G”, to potentially make avail-
able for use on the electric utility grid, the large amount
of energy in battery electric, hybrid electric, plug-in hy-
brid electric and fuel cell electric vehicles. Under this
initiative, protocols, guidelines and electronic and soft-
ware technologies are being developed to allow for the
intelligent transfer of electric power from these vehicles
to the electric power grid. Th ere are diff erent versions
of the vehicle-to-grid concept: 1) A hybrid or fuel cell
vehicle, which generates power from storable fuel, uses
its generator to produce power for a utility at peak elec-
tricity usage times. Here the vehicles serve as a distribut-
ed power generation system; and 2) A battery-powered
or hybrid vehicle which uses its excess rechargeable bat-
tery capacity to provide power to the electric grid during
peak load times. Th ese vehicles can then be recharged
during off -peak hours at cheaper rates while helping to
absorb excess nighttime generation. Here the vehicles
serve as a distributed battery storage system to buff er
power.
Th e V-to-G concept allows such vehicles to provide
power to help load balance (valley fi ll and peak shave)
localized grid segments during peak load periods when
the selling price of electricity can be very high, and to
buff er electricity, including in power outages.
We are currently developing inverter technology that
we expect will be capable of functioning in this dynamic
energy transfer environment when, and if, it develops
into a commercial opportunity.
Technology
Our technology base includes a number of propri-
etary technologies and patents relating to brushless per-
manent magnet motors, generators and power electron-
ic controllers, together with software code to intelligent-
ly manage the operation of our systems.
Th e typical architecture of a UQM®motor consists of
a stator winding employing a high pole count confi gura-
tion, which allows for high copper utilization (minimiz-
ing energy loss and cost) and a hollow rotor upon which
powerful rare earth permanent magnets are mounted on
the outer circumference. Th e stator is affi xed to a hous-
ing containing a mounting ring and bearings, which al-
lows the rotor to be suspended within the stator. Com-
mutation of the machine is accomplished electronically
by sensing the position of the rotor in relation to the
stator and intelligently pulsing electrical energy into the
stator such that the electric fi eld generated by the stator
interacts with the magnetic fi eld of the rotor, producing
rotational motion (“motor operation”). Conversely, the
application of rotational motion to the rotor by an ex-
ternal force results in the generation of electrical power
(“generator operation”). UQM® machines can be oper-
ated in either a forward or reverse direction of rotation
and either in motor or generator mode and can dynami-
cally change from one mode of operation to another in
millisecond response time. Th e hollow design of the ro-
tor permits the packaging of other components such as
gears and electromechanical brakes in the interior of
Improvements to UQM® propulsion systems
the machine. Th ese design features contribute to lower
usage of copper and iron and other materials generally
(due to smaller package dimensions), reducing manu-
facturing cost over those for conventional machines of
similar power. In addition, the utilization of neodymi-
um-iron-boron (“NdFeB”) magnet material in a wide-
range of consumer devices such as cell phones, disk
drives and medical devices, has dramatically improved
the availability, performance and price of this material,
allowing us to price our advanced motors and controls
competitively with lesser performing conventional mo-
tors, which we believe will accelerate the rate of com-
mercialization of our technology.
Attributes of our permanent magnet motor technol-
ogy include brushless electronic commutation, a rela-
tively large air-gap dimension (useful for hybrid elec-
tric applications where the motor is integrated with an
engine or transmission), the use of powerful rare earth
NdFeB magnet material, good heat rejection, low iron
and copper content and low mechanical losses. As a re-
sult, UQM® motors have high operating effi ciencies,
high power density (high power output to weight ra-
tio) and generally have smaller external dimensions and
weight for a given power output, improving packaging.
Attributes of our microprocessor-based digital pow-
er electronic controllers include high power operation
(up to 500 amps at 400 volts), four-quadrant control
(forward/reverse and motoring/generation), reduced
switching losses, adaptive switch timing control and
controller area network (“CAN”) capability. As a result,
UQM® controllers have high operating effi ciencies, high
power density (high power output to weight ratio) and
generally have smaller external dimensions and weight
for a given power output, improving packaging.
Th e UQM® embedded DSP software is the intelli-
gence that coordinates the interaction between the mo-
tor and motor controller, as well as interfacing with a
vehicle controller. Software control algorithms are a key
piece of the Company’s intellectual property portfolio.
One aspect of the software is a patented method of con-
trol referred to as Phase Timing Advancement that en-
9
ables UQM® motors to deliver both high output torque
at low operating speeds and high power at increasing
operating speeds. We have extended the capability of
Phase Advance Control by using Adaptive Control tech-
niques. Th ese proprietary software algorithms alter the
switching strategy as a function of DC voltage, operat-
ing speed and output power, optimizing system perfor-
mance under dynamic conditions. Th e result is maxi-
mized output and effi ciency which decreases fuel con-
sumption in hybrid electric vehicles and increases the
range of battery electric vehicles. Adaptive Control also
optimizes the output per unit of voltage and current,
maximizing the utilization of the onboard stored energy
and other electrical devices by extracting power from
substantially the entire electrical cycle of the motor. Th e
application of these proprietary control strategies has al-
lowed us to recently increase the peak and continuous
power output and improve the effi ciency of our systems.
In addition, our motor controllers now have user con-
fi gurable functionality and increased data transmission
speeds and response times, improving vehicle capability.
Included in this functionality is the ability to switch be-
tween torque, speed, and voltage control dynamically,
which is especially useful for parallel hybrids and gen-
erator applications of our technology. For vehicle de-
velopers, our new Graphical User Interface provides the
means to tailor any UQM® system to create the desired
driving experience.
Conventional permanent magnet motor designs are
limited to operating at either high torque at low speeds,
sacrifi cing power at high speed, or vice versa. In most
vehicle propulsion applications, high torque is required
to launch the vehicle from a standing-stop, with a sub-
sequent transition to high power as the vehicle is accel-
erated to highway speeds. In the majority of conven-
tional internal combustion engine powered vehicles, the
transition from high torque to high power is accom-
plished through the multiple gear changes performed
by a mechanical transmission. UQM® motors, incorpo-
rating phase advance technology, are suited as propul-
sion drives in electric, hybrid electric, plug-in hybrid
electric and fuel cell electric vehicles due to their abil-
ity to power a vehicle from a standing-stop to highway
speeds without mechanical gear changes, thereby elimi-
nating the size, weight, complexity and cost of mechani-
cal transmissions.
We have also developed a technology that allows
our permanent magnet motors to achieve a 10 to 1 top
speed to base speed ratio. Th is technology also provides
both high torque and high-speed capability in the same
machine, but at levels greater than that of other motor
technologies. Many electric motor applications require
high torque capability for starting and low speed opera-
tion, but must also achieve high speed. For military ve-
hicles, high torque at low speed translates into obstacle
and grade climbing capability, while high speed enables
pursuit, dash and evasive maneuvers as well as on-road
convoy transport. Many commercial applications have
similar requirements. Conventional vehicles achieve
the high torque required for launch and low end accel-
eration and the constant power required for high road
speed by using a transmission and multiple gear chang-
es. Prior to this performance breakthrough, UQM® sys-
tems incorporating phase advance were able to achieve
a top speed to base speed ratio of 4 to 1. Electrically
propelled vehicles designed around a 4 to 1 limitation
sometimes require unwanted gearing and/or have less
than desired performance. Th is has particularly been
the case in the more demanding off -highway equipment
and military vehicle applications. Providing vehicle de-
velopers with electric propulsion systems capable of a
top speed to base speed ratio of 10 to 1 overcomes a sig-
nifi cant limitation and opens up potential new applica-
tion opportunities for UQM® systems.
We have also developed proprietary DC-to-DC con-
verters that convert energy from hybrid electric vehi-
cles with 250 volt to 450 volt battery packs to 12 volts
to power lower voltage devices onboard these vehicles
and high voltage DC-to-AC inverter technology with
output effi ciencies of up to 93 percent for use onboard
electric, hybrid-electric and fuel cell-electric vehicles.
Our inverters convert DC power stored in vehicle bat-
tery packs with nominal operating voltages of 340 volts
to high quality 110 volt or 220 volt AC power. We are
also developing grid-connect capable inverters and as-
sociated smart metering technology for potential future
application as the utility industry pursues “smart-grid”
development.
We have two patent applications pending related to
technology developments that have the potential to fur-
ther improve the performance of our motors. We are
also performing internally funded research and devel-
opment to continually improve the functionality of the
microprocessor software we use to intelligently con-
trol our motor/controller system. Some of these en-
hancements include torque, speed and voltage control
improvements that enable more sophisticated hybrid
electric operating strategies, refi ned generator voltage
regulation to facilitate improved battery pack manage-
ment and further improvements in system effi ciency
and power output through advances in motor control
algorithms. In addition to these activities, the U.S. Air
Force has contracted us to manage a research and de-
velopment project in cooperation with Mississippi State
University, directed toward the development of high
temperature power switching devices using silicon car-
bide that may lead to improved power handling capabil-
ity for our motor controllers.
Th e majority of our research and development activi-
ties are the result of projects contracted with and funded
10
“In 2009 we installed a production cell to assemble our larger
frame size, higher power motors in higher volumes.”
by customers, for which we typically retain intellectual
property rights in the resulting technology developed.
Customer funded development activities are recorded
in our fi nancial statements as contract services revenue
and the associated development costs are shown as cost
of contract services. Internally-funded research and de-
velopment expenditures are charged to research and de-
velopment expense when incurred.
In recent years, we have focused our research and de-
velopment activities on the development of commercial
products and production engi-
neering activities to lower the
cost of manufacture, as well as
enhance the performance and
capability of our systems, as opposed to basic research
in the fi eld. We believe our future growth is dependent,
in part, on the continued advancement of our technol-
ogy portfolio and our ability to commercialize our tech-
nology in additional product applications and markets.
Accordingly, we expect to continue to pursue additional
customer funded programs and to selectively invest in
internally funded development projects to accomplish
these objectives.
Manufacturing
It is our primary objective to become a major man-
ufacturer of electric motor, generator and other pow-
er electronic products that incorporate our proprietary
technology and to supply these products to electric, hy-
brid electric and fuel cell electric vehicle manufacturers
and/or their Tier 1 suppliers. We have established and
are continuing to expand our manufacturing capability
and presence through a planned technology progression
driven by key customer demands to address future ve-
hicle requirements. Our manufacturing operations are
ISO 9001:2000 quality certifi ed.
In March of 2006, we
began the volume pro-
duction of vehicle auxil-
iary actuator motors for
Lippert
Components.
Th is production is per-
formed on a highly au-
tomated, fl exible, mixed
model assembly system
which is computer con-
trolled and monitored
for quality assurance and
consistent performance.
Th e development and in-
stallation of this assembly
system by our organiza-
tion was instrumental in
demonstrating our manu-
facturing know-how and
11
Motor handling system
capability to existing, as well
as potentially new, vehicle
OEM and Tier 1 supplier cus-
tomers. We also produce auxiliary actuator motors for
Club Car, Inc. on this assembly system.
DC-to-DC converter
In September of 2006, we began the volume produc-
tion of DC-to-DC converters for Eaton Corporation as
part of their hybrid electric power system for the heavy
truck market. We designed and installed a manufac-
turing cell for these electronic boxes that includes the
robotic application
of sealant, sixteen
hours of burn-in cy-
cling between hot
and cold temperature
extremes, pressure testing for cooling leaks and com-
plete functional testing.
Over the last several years we have established a pro-
duction engineering group with decades of manufactur-
ing design and production experience, much of which
is specifi c to the automotive industry. Today, this team
consists of nearly twenty professionals. In the last two
years we have made signifi cant improvements in manu-
facturing systems, facilities and space utilization and we
have adopted the Advanced Product Quality Planning
(“APQP”) automotive quality procedures.
In fi scal year 2009 we installed a production cell to
assemble our larger frame size, higher power motors in
higher volumes. Th e capacity of this cell is estimated to
be 5,000 systems annually per shift.
In order to ensure our cost competitiveness, we have
adopted a manufacturing strategy for the near term of
designing all product components and then sourcing
these parts with quality suppliers. Final assembly, test-
ing, pack-out and shipping of the product is performed
at our Frederick, Colorado facility. We have established
relationships with many high-quality, low-cost suppli-
ers, including a number of international companies.
Future plans are to continue the development and in-
troduction of more advanced and automated manufac-
turing systems which we believe will ensure our com-
petitiveness in new and emerging markets.
With the successful introduction of electric auxiliary
motors and power electronic boxes currently in produc-
tion vehicles, we are now turning our attention to the
volume production of high power generators and elec-
tric propulsions systems. We believe that the Company
is well positioned to leverage its technology and pur-
sue signifi cant production programs with major OEMs
and/or their Tier 1 suppliers.
Our Opportunity
We have developed a range of products including
electric propulsion systems, generators, motor control-
lers and other power electronic products that we believe
are ideally suited to the emerging markets for electric,
hybrid electric and fuel cell electric vehicles.
Hybrid electric passenger vehicle sales have grown
substantially since their introduction in the North
American market in 2000, with over one million units
being sold since their introduction. As a result, the fuel
economy and emission benefi ts of hybrid electric tech-
nology are broadly understood by consumers world-
wide. Th is, in concert with higher oil prices, tax credits
for hybrid electric vehicle purchasers, stricter govern-
ment emission regulations and growing environmen-
tal consciousness, has generated market demand for
this class of vehicle. Until recently, passenger vehicle
makers have elected to develop their own hybrid elec-
tric systems and components, either individually or in
cooperation with Tier 1 automotive suppliers; however,
we have recently supplied our propulsion systems to six
international automotive manufacturers as part of their
electric and hybrid electric vehicle development activi-
ties. Should any of these automakers elect to utilize our
products in future model launches, it would have a ma-
terial impact on our future rate of growth.
In addition to the passenger automobile market, ve-
hicle makers of all types have been evaluating the po-
tential of applying hybrid electric technology to their
vehicle platforms. Of these manufacturers, agricultural,
construction, medium and heavy-duty truck and bus
builders have been the most active, driven by the per-
formance and fuel economy advantages available from
this technology, the availability of large amounts of on-
board and exportable power and stricter diesel emission
mandates.
Last year, International Truck and Engine Corpora-
tion, a Navistar Company, announced that it was the
fi rst company to enter line production of hybrid elec-
tric commercial trucks, introducing the Internation-
al® DuraStar™ Hybrid, a diesel electric medium-duty
truck. Similarly, Peterbilt Motors Company, a division
of PACCAR Inc., began full production of its Model
330 and Model 335 medium-duty hybrid trucks at its
manufacturing facility in Ste. Th erese, Quebec, Canada
in the summer of 2008 and Freightliner Trucks, a divi-
sion of Daimler Trucks North America LLC has intro-
duced its Business Class® M2e Hybrid Truck. All of
these truck manufacturers use the Eaton Corporation
hybrid electric system. Th e automotive certifi ed DC-
to-DC converter manufactured by us for Eaton Cor-
poration is on board many of these hybrid trucks. In
addition, Caterpillar, Inc. recently introduced the D7E
crawler tractor incorporating an electric drive system
for track-type tractors with an electric system that pro-
vides power to electric auxiliaries so that no engine belts
are required. We believe that these industry develop-
ments signal the beginning of a potentially large-scale
deployment of electric propulsion and related electronic
products into markets other than mass-market passen-
ger automobiles. Should these products receive broad
customer acceptance, as we expect they will, potentially
substantial opportunities will likely develop over time
for our company and other similarly situated companies
that have developed technologically advanced products
in anticipation of the emergence of these markets.
Th e operating characteristics of electric motors for
vehicle propulsion are diff erent from those of more con-
ventional industrial motors. Propulsion motors ideally
deliver high levels of torque effi ciently at slow rotational
speeds and possess the ability to transition from high
torque to high speed over a relatively constant power
curve allowing, in many cases, the elimination of con-
ventional transmissions. Our proprietary propulsion
systems have been specifi cally developed for these ap-
plications and deliver exceptional torque and high ro-
tational speeds in a compact, energy effi cient machine.
We believe that our portfolio of propulsion systems,
power electronic controllers and related electronic prod-
ucts has well positioned our company to compete eff ec-
tively in these emerging markets. Electric and hybrid
electric vehicle makers to-date have generally adopted a
340-volt electrical system to deliver the energy from the
battery pack to the electric components and vice versa.
Conventional gasoline vehicles generally have a 12-volt
electrical system that operates dashboard instruments,
lights, horns, etc. Th e higher electrical system voltages
of electric and hybrid vehicles are creating opportuni-
ties for companies such as ours to enter the automotive
market with a wide-range of under-the-hood auxiliaries
including generators and motors to drive water, oil and
power steering pumps, air conditioning compressors,
and cooling fans, that operate at the new higher volt-
age.
Th ese industry developments, as well as the poten-
tial production requirements of our existing customers,
may require us to invest a substantially greater amount
of fi nancial and human resources in fi scal 2010 and be-
yond in the commercial launch of products. We believe
these investments are necessary to support our strategy
of aggressively rolling out automotive certifi ed products
to satisfy our customers’ requirements as these new mar-
ket opportunities emerge and expand.
As the markets for these advanced vehicles continue
to emerge and expand into additional vehicle platforms
over the next several years, we expect to experience po-
tentially rapid growth in our revenue coincident with
the introduction of electric products by our custom-
ers. In parallel to these activities in emerging markets,
we expect to continue to pursue additional production
opportunities for our proprietary technology in exist-
ing markets where the performance of our products can
provide our customers with a competitive advantage in
the markets they serve.
12
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Report contains statements that constitute “forward-looking statements” within the meaning of Section 27A of the
Securities Act and Section 21E of the Securities Exchange Act. These statements appear in a number of places in this Report
and include statements regarding our plans, beliefs or current expectations; including those plans, beliefs and expectations
of our officers and directors with respect to, among other things, the development of markets for our products, the adequacy
of our cash balances and liquidity to meet future operating needs, and our ability to issue equity or debt securities.
Introduction
We generate revenue from two principal activities: 1) research, development and application engineering services that are
paid for by our customers; and 2) the sale of motors, generators and electronic controls. The sources of engineering revenue
typically vary from year to year and individual projects may vary substantially in their periods of performance and
aggregate dollar value. Our product sales consist of both prototype low volume sales, which are generally sold to a broad
range of customers, and annually recurring higher volume production. During the fiscal year ended March 31, 2009 our
total revenue increased 16 percent to $8,728,311, driven primarily by increased product sales which rose 22 percent to
$6,011,065.
Production engineering expenses for the year ended March 31, 2009 rose 10 percent to $1,869,848, reflecting engineering
activities associated with the design and installation of a new production cell for our larger propulsion motors and
production design activities on our motor and controller products.
Net loss for the current fiscal year decreased by $184,086 to $4,402,019 or $0.17 per common share versus $4,586,105 or
$0.18 per common share and $3,431,357, or $0.14 per common share for the fiscal years ended March 31, 2008 and 2007,
respectively. The decrease in losses versus last fiscal year is attributable to higher levels of revenue and higher gross profit
margins on product sales revenue.
During the last year the automotive industry experienced a substantial reduction in demand resulting from the global credit
crisis and recessions in the primary national economies worldwide. In reaction to these developments, many countries
around the world passed legislation designed to stimulate industry within their countries, loosened monetary policy to
counteract the credit crisis and promote increased lending activities and, in some cases, nationalized certain companies or
loaned them government funds. In the automotive industry, General Motors and Chrysler both received substantial
government funds, Chrysler has filed for bankruptcy protection and there is, at this time, substantial doubt regarding
General Motor’s ability to avoid seeking bankruptcy protection. Despite these developments in one of the primary
industries served by our company, we experienced strong demand for our propulsion system products. This demand was
fueled, in part, by the efforts of numerous automobile companies worldwide to develop and introduce more fuel-efficient
vehicles including all-electric, hybrid-electric and plug-in hybrid-electric automobiles. Although we are continuing to
experience strong demand for our electric propulsion systems and generators at this time, future developments in the
automobile industry related to original equipment manufacturers or their large suppliers could adversely affect the future
demand for our products. Despite the turmoil automakers are experiencing currently, numerous automobile companies have
publicly announced their strategies to field an increasing number of fuel-efficient vehicles in the future to better match their
product offerings to the type of vehicle consumers demand in an environment of rising oil and gasoline prices. Many of
these new vehicle offerings are expected to be powered by either all-electric or hybrid-electric powertrains. Should these
strategies be implemented, we may experience a substantial increase in product sales revenue arising from the commercial
introduction of this class of vehicles powered by our propulsion systems and/or generators.
In the event industry developments lead to additional demand from our customers, we may be required to invest a
substantial amount of financial and human resources on the commercial launch of our products. Specifically, we may need
to 1) increase the size of our production engineering group, 2) increase the level of our capital expenditures for
manufacturing equipment and tooling, and 3) expand our manufacturing facility in Frederick, Colorado. We believe these
investments may be necessary to support our strategy of aggressively rolling out automotive certified products to satisfy our
customers’ requirements as these new market opportunities emerge and expand.
We believe our existing cash and short-term investments, which amounted to approximately $5.8 million at fiscal year end,
will be adequate to fund our anticipated growth for the fiscal year ended March 31, 2010 and likely beyond, however, if our
growth continues to accelerate we may require additional capital sooner.
1313
Financial Condition
Cash and cash equivalents and short-term investments at March 31, 2009 were $5,793,666 and working capital (the excess
of current assets over current liabilities) was $6,640,877 compared with $9,765,892 and $10,510,175, respectively, at March
31, 2008. The decrease in cash and short-term investments and working capital is primarily attributable to operating losses,
higher levels of inventories and investments in property and equipment offset by lower levels of accounts receivable.
Accounts receivable decreased $387,040 to $917,099 at March 31, 2009 from $1,304,139 at March 31, 2008. The decrease
is primarily attributable to lower levels of contract service billings as of March 31, 2009. Substantially all of our customers
are large well-established companies of high credit quality. Although we have not established an allowance for bad debts at
March 31, 2009 and no allowance for bad debts was deemed necessary at March 31, 2008, in light of current economic
conditions we may need to establish an allowance for bad debts in the future.
Costs and estimated earnings on uncompleted contracts decreased $6,572 to $643,098 at March 31, 2009 versus $649,670 at
March 31, 2008. The decrease is due to more favorable billing terms on certain contracts in process at March 31, 2009
versus March 31, 2008. Estimated earnings on contracts in process decreased to $194,861 or 4.2 percent of contracts in
process of $4,609,747 at March 31, 2009 compared to estimated earnings on contracts in process of $377,822 or 11.1
percent of contracts in process of $3,396,292 at March 31, 2008. The decrease in estimated margins on contracts in process
is attributable to higher cost incurrence than expected on the performance of these contracts.
Inventories increased $345,682 to $1,307,171 at March 31, 2009 versus $961,489 at March 31, 2008 principally due to
increased levels of raw materials, work-in-process and finished goods inventories which increased $73,372, $239,885 and
$32,425, respectively; reflecting higher levels of low volume product builds in process at March 31, 2009.
Prepaid expenses and other current assets decreased to $117,768 at March 31, 2009 from $119,647 at March 31, 2008
primarily due to lower levels of prepaid rent at the end of the current fiscal year versus the prior fiscal year end.
We invested $570,986 for the acquisition of property and equipment during the fiscal year compared to $803,121 last fiscal
year. The decrease in capital expenditures is primarily due to fewer building improvements and purchases of manufacturing
equipment during fiscal 2009.
Patent and trademark costs decreased $39,581 to $438,184 at March 31, 2009 versus $477,765 at March 31, 2008 due to
systematic amortization of patent issuance costs, which was partially offset by the costs associated with the filing of a new
patent application.
Other assets decreased $165,106 to $76,443 at March 31, 2009 from $241,549 at March 31, 2008 due to lower levels of
prepayments on capital equipment purchases at the end of the current fiscal year versus the prior fiscal year end.
Accounts payable decreased $89,398 to $651,129 at March 31, 2009 from $740,527 at March 31, 2008, primarily due to
improved payment processing during the current fiscal year.
Other current liabilities increased $228,387 to $600,672 at March 31, 2009 from $372,285 at March 31, 2008. The increase
is primarily attributable to higher levels of accrued payroll and employee benefits and higher levels of unearned revenue
associated with customer prepayments.
Current portion of long-term debt increased $310,921 to $416,923 at March 31, 2009 from $106,002 at March 31, 2008 and
long-term debt, less current portion, decreased $416,923 to zero at March 31, 2009. Both changes are due to a scheduled
balloon payment in November of 2009 on the mortgage for our Frederick, Colorado facility. We expect to extend the term
of this mortgage debt prior to its maturity; however, we cannot assure you that an extension will be completed.
Short-term deferred compensation under executive employment agreements increased to $397,834 at March 31, 2009 versus
$364,000 at March 31, 2008 reflecting periodic accruals of future severance obligations under executive employment
agreements.
Billings in excess of costs and estimated earnings on uncompleted contracts decreased $636,481 to $71,367 at March 31,
2009 from $707,848 at March 31, 2008 reflecting decreased levels of billings on certain engineering contracts in process at
the end of the fiscal year ended March 31, 2009 in advance of the performance of the associated work versus the prior fiscal
year.
14
Long-term deferred compensation under executive employment agreements increased $41,842 to $675,715 at March 31,
2009 from 633,873 at March 31, 2008 reflecting periodic accruals of future severance obligations under executive
employment agreements.
Common stock and additional paid-in capital increased to $267,277 and $78,767,154, respectively, at March 31, 2009
compared to $265,267 and $77,819,041 at March 31, 2008. The increase in additional paid-in capital was primarily
attributable to the recording of non-cash share based payments.
Results of Operations
Operations for the fiscal year ended March 31, 2009, resulted in a net loss of $4,402,019, or $0.17 per common share,
compared to a net loss of $4,586,105, or $0.18 per common share, and $3,431,357, or $0.14 per common share, for the
fiscal years ended March 31, 2008 and 2007, respectively. The reduction in the current year net loss is primarily
attributable to higher levels of product sales revenue, expanded gross profit margins on product sales, and lower selling,
general and administrative expenses. Non-cash expense arising from share-based payments for the fiscal year ended March
31, 2009, 2008 and 2007 was allocated as follows:
Cost of contract services
Cost of product sales
Research and development
Production engineering
Selling, general and administrative
Year Ended
March 31, 2009
$ 110,329
84,875
37,903
128,553
711,383
Year Ended
March 31, 2008
Year Ended
March 31, 2007
113,507
60,933
25,652
132,494
842,349
154,828
48,606
22,612
113,013
618,697
$ 1,073,043
1,174,935
957,756
Revenue from contract services increased $125,307, or 4.8 percent, to $2,717,246 for the fiscal year ended March 31, 2009
versus $2,591,939 for the fiscal year ended March 31, 2008. The increase is primarily attributable to higher levels of
material purchases for billable programs this fiscal year versus last fiscal year. Revenue from contract services decreased
10.9 percent to $2,591,939 for the fiscal year ended March 31, 2008 compared to $2,907,536 for the fiscal year ended
March 31, 2007. The decrease was primarily attributable to the increased allocation of engineering resources to production
engineering activities during fiscal 2008 versus fiscal 2007.
Product sales this fiscal year increased 22.3 percent to $6,011,065 compared to $4,916,383 for the fiscal year ended March
31, 2008. Product sales for the fiscal year ended March 31, 2008 increased 31.3 percent to $4,916,383 compared to
$3,745,658 for the year ended March 31, 2007. Power products segment revenue for the year ended March 31, 2009
increased $155,268, or 5.0 percent, to $3,272,377 compared to $3,117,109 for fiscal year ended March 31, 2008 due to
increased shipments of DC-to-DC converters and the shipment of electric propulsion systems. Power products segment
revenue for the year ended March 31, 2008 increased to $3,117,109 versus $2,626,939 for fiscal year ended March 31, 2007
due to increased shipments of vehicle auxiliary motors and the shipment of electric propulsion systems. Technology
segment product revenue for the fiscal year ended March 31, 2009 increased $939,414 or 52.2 percent to $2,738,688
compared to $1,799,274 for fiscal year ended March 31, 2008 due to increased shipments of low volume propulsion
systems. Technology segment product revenue for the fiscal year ended March 31, 2008 increased $680,555, or 60.8
percent, to $1,799,274 compared to $1,118,719 for fiscal year ended March 31, 2007 due to increased shipments of low
volume propulsion systems.
Gross profit margins for the current fiscal year increased to 20.2 percent compared to 14.3 percent for the fiscal year ended
March 31, 2008. Gross profit margins for the fiscal year ended March 31, 2008 increased to 14.3 percent compared to 10.0
percent for the fiscal year ended March 31, 2007. Gross profit margins on contract services decreased to 16.1 percent this
fiscal year compared to 21.3 percent for the fiscal year ended March 31, 2008 due to higher incurred costs than planned on
certain engineering contracts in process during the current fiscal year. Gross profit margins on contract services increased
to 21.3 percent for the fiscal year ended March 31, 2008 compared to 8.3 percent for the fiscal year ended March 31, 2007
due to improved program execution during fiscal year 2008. Gross profit margins on product sales this fiscal year increased
to 22.1 percent compared to 10.7 percent for fiscal 2008. The improvement is primarily due to lower material costs and
improved overhead absorption arising from higher production levels during the fiscal year ended March 31, 2009. Gross
profit margins on product sales for the fiscal year ended March 31, 2008 decreased to 10.7 percent compared to 11.3 percent
for the fiscal year ended March 31, 2007 due to reduced overhead absorption.
15
Research and development expenditures for the fiscal year ended March 31, 2009 increased to $593,209 compared to
$461,791 and $321,160 for the fiscal years ended March 31, 2008 and 2007, respectively. The increase in research and
development expenditures for the fiscal year ended March 31, 2009 compared to the prior fiscal year was primarily due to
increased costs on internally funded programs. The increase in research and development expenditures for fiscal 2008
versus fiscal 2007 was primarily due to increased costs on internally funded software development programs.
Production engineering costs were $1,869,848 for the fiscal year ended March 31, 2009 versus $1,706,978 and $1,286,761
for the prior two fiscal years. The increase for the current fiscal year versus fiscal year 2008 is primarily attributable to
engineering activities associated with the design and installation of a new production cell for our larger propulsion motors
and production design activities on our motor and controller products. The increase for the fiscal year ended March 31,
2008 versus fiscal 2007 is primarily attributable to additional staffing during fiscal year 2008.
Selling, general and administrative expense this fiscal year was $3,782,840 compared to $3,905,495 and $2,855,213 for the
fiscal years ended March 31, 2008 and 2007, respectively. The decrease for this fiscal year is primarily attributable to lower
levels of equity based compensation and lower deferred compensation expense recorded during the current fiscal year
partially offset by increased legal fees for litigation. The increase for fiscal 2008 versus fiscal 2007 is primarily attributable
to increased levels of compensation and bonuses, and the amendment of executive employment agreements, which
accelerated the recording of deferred compensation expense associated with the severance provisions of these agreements.
Impairment of long-lived assets for the fiscal years ended March 31, 2009, 2008, 2007 were zero, $11,155 and $889,
respectively. The impairment of long-lived assets for the fiscal year ended March 31 2008 was attributable to the
impairment of obsolete equipment. The impairment of long-lived assets for the fiscal year ended March 31, 2007 was
attributable to the write-down of costs associated with an abandoned patent application.
Interest income declined to $198,947 for the current fiscal year compared to $463,248 and $445,578 for the fiscal years
ended March 31, 2008 and 2007, respectively. The decrease for fiscal 2009 versus fiscal 2008 is attributable to lower
invested balances and lower yields during the current fiscal year. The increase for fiscal 2008 versus fiscal 2007 is
attributable to higher invested cash balances.
Interest expense decreased to $33,387 for the year ended March 31, 2009 compared to $40,652 and $47,422 for the fiscal
years ended March 31, 2008 and 2007, respectively. The decrease is due to lower average mortgage borrowings
outstanding throughout the fiscal year as compared to the prior fiscal year.
Liquidity and Capital Resources
Our cash balances and liquidity throughout the fiscal year ended March 31, 2009 were adequate to meet operating needs.
At March 31, 2009, we had working capital (the excess of current assets over current liabilities) of $6,640,877 compared to
$10,510,175 at March 31, 2008.
For the year ended March 31, 2009, net cash used in operating activities was $3,065,281 compared to net cash used in
operating activities of $2,511,723 and $2,732,956 for the years ended March 31, 2008 and 2007, respectively. The increase
in cash used in operating activities in fiscal 2009 is primarily attributable to higher levels of inventories, increased levels of
billings in excess of costs on uncompleted contracts partially offset by lower operating losses, increased depreciation and
amortization and impairment expense. The decrease in cash used for the year ended March 31, 2008 is primarily
attributable to higher levels of billings in excess of costs and estimated earnings on certain uncompleted contracts, partially
offset by higher operating losses.
Net cash provided by investing activities for the fiscal year ended March 31, 2009 was $2,620,118 compared to cash used in
investing activities of $1,446,752 for the previous fiscal year and $428,914 for fiscal 2007, respectively. The change this
fiscal year versus last fiscal year was primarily due to higher levels of maturities of short-term investments offset by lower
expenditures for building improvements and manufacturing equipment. Net cash used in investing activities for fiscal 2008
increased to $1,446,752 versus $428,914 for fiscal 2007 primarily due to higher expenditures for building improvements
and manufacturing equipment and increased purchases of short-term investment securities.
Net cash used in financing activities was $228,922 for the fiscal year ended March 31, 2009 versus cash provided by
financing activities of $5,182,382 and $1,037,241 for the fiscal years ended March 31, 2008 and 2007, respectively. The
change this fiscal year versus fiscal year 2008 is attributable to the purchase of treasury stock this fiscal year, and to the
completion of a private placement in the first quarter of fiscal 2008, which resulted in $5.2 million in cash proceeds. The
16
increase in fiscal 2008 versus 2007 is attributable to the completion of a private placement in the first quarter of fiscal 2008,
which resulted in 5.2 million in cash proceeds.
We expect to fund our operations over the next year from existing cash and short-term investment balances and from
available bank financing, if any. We may need to invest in substantially greater financial resources during fiscal 2010 on
the commercialization of our products in emerging markets, including a significant increase in human resources,
investments and increased the amounts for equipment, tooling and facilities. Although we expect to manage our operations
and working capital requirements to minimize the future level of operating losses and working capital usage consistent with
execution of our business plan, our planned working capital requirements may consume a substantial portion of our cash
reserves at March 31, 2009. If customer demand accelerates substantially, our losses over the short-term may increase
together with our working capital requirements. If our existing financial resources are not sufficient to execute our business
plan, we may issue equity or debt securities in the future. Over the last year, access to the capital markets has been severely
restricted or nonexistent for most companies due to the global credit crisis. In light of current market conditions and the
uncertainty regarding the ability of the capital markets to recover from the credit crisis, we cannot assure you that we will be
able to secure additional capital should it be required to implement our current business plan. In the event financing or
equity capital to fund future growth is not available on terms acceptable to us or at all, we will modify our strategy to align
our operation with then available financial resources.
Contractual Obligations
The following table presents information about our contractual obligations and commitments as of March 31, 2009:
Long-term debt obligations (2)
Interest on long-term debt obligations
Purchase obligations
Executive employment agreements (1)
Total
Payments due by Period
Total
$ 416,923
18,315
677,607
1,073,549
$ 2,186,394
Less Than
1 Year
416,923
18,315
677,607
397,834
1,510,679
2 - 3 Years
-
-
-
654,000
654,000
4 - 5 Years
-
-
-
-
-
More than
5 Years
-
-
-
21,715
21,715
(1)
Includes severance pay obligations under executive employment agreements contingently payable upon six months notice by two officers of the
company, but not annual cash compensation under the agreements.
(2) Represents a balloon payment on a facility mortgage which we expect to refinance.
Off-Balance Sheet Arrangements
None.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted
in the United States of America requires management to make judgments, assumptions and estimates that effect the dollar
values reported in the consolidated financial statements and accompanying notes. Note 1 to the consolidated financial
statements describes the significant accounting policies and methods used in preparation of the consolidated financial
statements. Estimates are used for, but not limited to, allowance for doubtful accounts receivables, costs to complete
contracts, the recoverability of inventories and the fair value of financial and long-lived assets. Actual results could differ
materially from these estimates. The following critical accounting policies are impacted significantly by judgments,
assumptions and estimates used in preparation of the consolidated financial statements.
Accounts Receivable
Our trade accounts receivable are subject to credit risks associated with the financial condition of our customers and their
liquidity. We evaluate all customers periodically to assess their financial condition and liquidity and set appropriate credit
limits based on this analysis. As a result, the collectibility of accounts receivable may change due to changing general
economic conditions and factors associated with each customer’s particular business. Because substantially all of our
customers are large well-established companies with excellent credit worthiness, we have not established a reserve at March
17
31, 2009 and 2008 for potentially uncollectible trade accounts receivable. In light of current economic conditions we may
need to establish an allowance for bad debts in the future. It is also reasonably possible, that future events or changes in
circumstances could cause the realizable value of our trade accounts receivable to decline materially, resulting in material
losses.
Inventories
We maintain raw material inventories of electronic components, motor parts and other materials to meet our expected
manufacturing needs for proprietary products and for products manufactured to the design specifications of our customers.
Some of these components may become obsolete or impaired due to bulk purchases in excess of customer requirements.
Accordingly, we periodically assesses our raw material inventory for potential impairment of value based on then available
information, expectations and estimates and establish impairment reserves for estimated declines in the realizable value of
our inventories. The actual realizable value of our inventories may differ materially from these estimates based on future
occurrences. It is reasonably possible that future events or changes in circumstances could cause the realizable value of our
inventories to decline materially, resulting in additional material impairment losses.
Percentage of Completion Revenue Recognition on Long-term Contracts: Costs and Estimated Earnings in Excess of
Billings on Uncompleted Contracts
We recognize revenue on development projects funded by our customers using the percentage-of-completion method.
Under this method, contract services revenue is based on the percentage that costs incurred to date bear to management’s
best estimate of the total costs to be incurred to complete the project. Many of these contracts involve the application of our
technology to customers’ products and other applications with demanding specifications. Management’s best estimates have
sometimes been adversely impacted by unexpected technical challenges requiring additional analysis and redesign, failure
of electronic components to operate in accordance with manufacturers published performance specifications, unexpected
prototype failures requiring the purchase of additional parts and a variety of other factors that may cause unforeseen delays
and additional costs. It is reasonably possible that total costs to be incurred on any of the projects in process at March 31,
2009 could be materially different from management’s estimates, and any modification of management’s estimate of total
project costs to be incurred could result in material changes in the profitability of affected projects or result in material
losses on any affected projects.
Fair Value Measurements and Asset Impairment
Some of our assets and liabilities may be subject to analysis as to whether the asset or liability should be marked to fair
value and some assets may be evaluated for potential impairment in value. Fair value estimates and judgments may be
required by management for those assets that do not have quoted prices in active markets. These estimates and judgments
may include fair value determinations based upon the extrapolation of quoted prices for similar assets and liabilities in
active or inactive markets, for observable items other than the asset or liability itself, for observable items by correlation or
other statistical analysis, or from our assumptions about the assumptions market participants would use in valuing an asset
or liability when no observable market data is available. Similarly, management evaluates both tangible and intangible
assets for potential impairments in value. In conducting this evaluation, management may rely on a number of factors to
value anticipated future cash flows including operating results, business plans and present value techniques. Rates used to
value and discount cash flows may include assumptions about interest rates and the cost of capital at a point in time. There
are inherent uncertainties related to these factors and management’s judgment in applying them to the analysis of asset
impairment. Changes in any of the foregoing estimates and assumptions or a change in market conditions could result in a
material change in the value of an asset or liability resulting in a material adverse change in our operating results.
New Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting
Standards No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a
framework for measuring fair value and requires additional disclosures about fair value measurements. In February 2008,
the FASB issued FASB Staff Position (FSP) 157-2, Effective Date of FASB Statement No. 157 which delayed the effective
date of SFAS No. 157 for all nonrecurring fair value measurements of nonfinancial assets and liabilities. We adopted the
provisions of SFAS No. 157 related to financial instruments on April 1, 2008, and the provisions related to nonfinancial
assets and liabilities on April 1, 2009 (except for those that are recognized or disclosed at fair value in the financial
statements on a recurring basis). The provisions of this standard adopted by us on April 1, 2008 did not have a material
effect on our financial statements and the adoption of the provisions effective April 1, 2009 will not have a material effect
on our financial statements.
18
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (revised 2007), Business
Combinations ("FAS 141(R)") and Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in
Consolidated Financial Statements ("FAS 160"). These standards goals are to improve, simplify, and converge
internationally the accounting for business combinations and the reporting of noncontrolling interests in consolidated
financial statements. The provisions of FAS 141(R) and FAS 160 are effective for our fiscal year beginning April 1, 2009.
We intend to adopt these standards for future acquisitions after the effective date.
In April 2008, the FASB issued FASB Staff Position (FSP) 142-3, Determination of the Useful Life of Intangible Assets
(”FSP 142-3”). FSP 142-3 amends the factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible
Assets. FSP 142-3 is effective for fiscal years beginning after December 15, 2008. The adoption of this standard will not
have a material effect on our financial statements.
In May 2008, the FASB issued Statement of Financial Accounting Standards No. 162, The Hierarchy of Generally Accepted
Accounting Principles (“SFAS No. 162”). SFAS No. 162 identifies the sources of accounting principles and the framework
for selecting the principles used in the preparation of financial statements. SFAS No. 162 is effective 60 days following the
SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of
Present Fairly in Conformity with Generally Accepted Accounting Principles”. The adoption of this standard will not have
a material effect on our financial statements.
In June 2008, the FASB ratified Emerging Issues Task Force (EITF) Issue No. 08-3, Accounting for Lessees for
Maintenance Deposits Under Lease Arrangements (“EITF 08-3”). EITF 08-3 provides guidance for accounting for
nonrefundable maintenance deposits. It also provides revenue recognition accounting guidance for the lessor. EITF 08-3 is
effective for fiscal years beginning after December 15, 2008. The adoption of this EITF will not have a material effect on
our financial statements.
In October 2008, the FASB issued FASB Staff Position (FSP) 157-3, Determining the Fair Value of a Financial Asset
When the Market for That Asset Is Not Active (“FSP 157-3”). FSP 157-3 clarifies the application of SFAS No. 157 in a
market that is not active, and addresses application issues such as the use of internal assumptions when relevant observable
data does not exist, the use of observable market information when the market is not active, and the use of market quotes
when assessing the relevance of observable and unobservable data. FSP 157-3 is effective for all periods presented in
accordance with SFAS No. 157. The adoption of FSP 157-3 did not have a material effect on our financial statements.
In April 2009, the FASB issued FASB Staff Position (FSP) 157-4, Determining Fair Value When Volume and Level of
Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (“FSP
157-4”). FSP 157-4 provides guidance on how to determine the fair value of assets and liabilities when the volume and
level of activity for the asset/liability has significantly decreased. FSP 157-4 also provides guidance on identifying
circumstances that indicate a transaction is not orderly. In addition, FSP 157-4 requires disclosure in interim and annual
periods of the inputs and valuation techniques used to measure fair value and a discussion of changes in valuation
techniques. FSP 157-4 is effective for us beginning in the first quarter of fiscal year 2010. The adoption of FSP 157-4 will
not have a material impact on our consolidated financial statements.
In April 2009, the FASB issued FASB Staff Position (FSP) 115-2 and Statement of Financial Accounting Standards (FAS)
No. 124-2, Recognition and Presentation of Other-Than-Temporary Impairment (“FSP 115-2/FAS No. 124-2”). FSP 115-
2/FAS No. 124-2 amends the requirements for the recognition and measurement of other-than-temporary impairments for
debt securities by modifying the pre-existing “intent and ability” indicator. Additionally, FSP 115-2/FAS No. 124-2 changes
the presentation of an other-than-temporary impairment in the income statement for those impairments involving credit
losses. FSP 115-2/FAS No. 124-2 is effective for us beginning in the first quarter of fiscal year 2010. The adoption of this
standard will not have a material effect on our financial statements.
In April 2009, the FASB issued FASB Staff Position (FSP) 107-1 and Accounting Principals Board (APB) Opinion 28-1,
Interim Disclosure about Fair Value of Financial Instruments (“FSP 107-1/APB 28-1”). FSP 107-1/APB 28-1 requires
interim disclosures regarding the fair values of financial instruments that are within the scope of FAS 107, Disclosures
about the Fair Value of Financial Instruments. Additionally, FSP 107-1/APB 28-1 requires disclosure of the methods and
significant assumptions used to estimate the fair value of financial instruments on an interim basis as well as changes of the
methods and significant assumptions from prior periods. FSP 107-1/APB 28-1 does not change the accounting treatment for
these financial instruments and is effective for us beginning in the first quarter of fiscal year 2010. The adoption of this
standard will not have a material effect on our financial statements.
19
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency exchange
and interest rates. We do not use financial instruments to any degree to manage these risks and do not hold or issue
financial instruments for trading purposes. All of our product sales, and related receivables are payable in U.S. dollars. We
are not subject to interest rate risk on our debt obligations.
20
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(cid:32) (cid:76)(cid:97)(cid:110)(cid:100)(cid:32)(cid:32)
(cid:32) (cid:66)(cid:117)(cid:105)(cid:108)(cid:100)(cid:105)(cid:110)(cid:103)(cid:32)
(cid:32) (cid:77)(cid:97)(cid:99)(cid:104)(cid:105)(cid:110)(cid:101)(cid:114)(cid:121)(cid:32)(cid:97)(cid:110)(cid:100)(cid:32)(cid:101)(cid:113)(cid:117)(cid:105)(cid:112)(cid:109)(cid:101)(cid:110)(cid:116)(cid:32)(cid:32)
(cid:32)
(cid:32) (cid:76)(cid:101)(cid:115)(cid:115)(cid:32)(cid:97)(cid:99)(cid:99)(cid:117)(cid:109)(cid:117)(cid:108)(cid:97)(cid:116)(cid:101)(cid:100)(cid:32)(cid:100)(cid:101)(cid:112)(cid:114)(cid:101)(cid:99)(cid:105)(cid:97)(cid:116)(cid:105)(cid:111)(cid:110)(cid:32)
(cid:32)
(cid:32)
(cid:32)
(cid:80)(cid:97)(cid:116)(cid:101)(cid:110)(cid:116)(cid:32)(cid:97)(cid:110)(cid:100)(cid:32)(cid:116)(cid:114)(cid:97)(cid:100)(cid:101)(cid:109)(cid:97)(cid:114)(cid:107)(cid:32)(cid:99)(cid:111)(cid:115)(cid:116)(cid:115)(cid:44)(cid:32)(cid:110)(cid:101)(cid:116)(cid:32)(cid:111)(cid:102)(cid:32)(cid:97)(cid:99)(cid:99)(cid:117)(cid:109)(cid:117)(cid:108)(cid:97)(cid:116)(cid:101)(cid:100)(cid:32)(cid:97)(cid:109)(cid:111)(cid:114)(cid:116)(cid:105)(cid:122)(cid:97)(cid:116)(cid:105)(cid:111)(cid:110)(cid:32)(cid:32)
(cid:32)
(cid:32)
(cid:79)(cid:116)(cid:104)(cid:101)(cid:114)(cid:32)(cid:97)(cid:115)(cid:115)(cid:101)(cid:116)(cid:115)(cid:32)
(cid:32)
(cid:32)
(cid:32)
(cid:32)
(cid:32)
(cid:32)
(cid:32)
(cid:32)
(cid:32)
(cid:32)
(cid:83)(cid:101)(cid:101)(cid:32)(cid:97)(cid:99)(cid:99)(cid:111)(cid:109)(cid:112)(cid:97)(cid:110)(cid:121)(cid:105)(cid:110)(cid:103)(cid:32)(cid:110)(cid:111)(cid:116)(cid:101)(cid:115)(cid:32)(cid:116)(cid:111)(cid:32)(cid:99)(cid:111)(cid:110)(cid:115)(cid:111)(cid:108)(cid:105)(cid:100)(cid:97)(cid:116)(cid:101)(cid:100)(cid:32)(cid:102)(cid:105)(cid:110)(cid:97)(cid:110)(cid:99)(cid:105)(cid:97)(cid:108)(cid:32)(cid:115)(cid:116)(cid:97)(cid:116)(cid:101)(cid:109)(cid:101)(cid:110)(cid:116)(cid:115)(cid:46)(cid:32)
(cid:32)
(cid:32) (cid:78)(cid:101)(cid:116)(cid:32)(cid:112)(cid:114)(cid:111)(cid:112)(cid:101)(cid:114)(cid:116)(cid:121)(cid:32)(cid:97)(cid:110)(cid:100)(cid:32)(cid:101)(cid:113)(cid:117)(cid:105)(cid:112)(cid:109)(cid:101)(cid:110)(cid:116)(cid:32)
(cid:111)(cid:102)(cid:32)(cid:32)(cid:36)(cid:55)(cid:51)(cid:51)(cid:44)(cid:53)(cid:57)(cid:52)(cid:32)(cid:97)(cid:110)(cid:100)(cid:32)(cid:36)(cid:54)(cid:55)(cid:55)(cid:44)(cid:57)(cid:53)(cid:55)(cid:32)
(cid:32) (cid:84)(cid:111)(cid:116)(cid:97)(cid:108)(cid:32)(cid:97)(cid:115)(cid:115)(cid:101)(cid:116)(cid:115)(cid:32)
(cid:32)
(cid:32)
(cid:50)(cid:50)
UQM TECHNOLOGIES, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
Other current liabilities
Current portion of long-term debt
Short-term deferred compensation under executive employment
agreements
Billings in excess of costs and estimated earnings on
uncompleted contracts
Total current liabilities
Long-term debt, less current portion
Long-term deferred compensation under executive employment agreements
Total liabilities
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.01 par value, 50,000,000 shares
authorized; 26,727,694 and 26,526,737 shares
issued and outstanding
Additional paid-in capital
Accumulated deficit
Total stockholders’ equity
March 31, 2009 March 31, 2008
$ 651,129
600,672
416,923
740,527
372,285
106,002
397,834
364,000
71,367
707,848
2,137,925
2,290,662
-
675,715
675,715
416,923
633,873
1,050,796
2,813,640
3,341,458
267,277
78,767,154
(69,425,239)
265,267
77,819,041
(65,023,220)
9,609,192
13,061,088
Total liabilities and stockholders’ equity
$ 12,422,832
$ 16,402,546
See accompanying notes to consolidated financial statements.
23
UQM TECHNOLOGIES, INC.
AND SUBSIDIARIES
Consolidated Statements of Operations
Revenue:
Contract services
Product sales
Operating costs and expenses:
Costs of contract services
Costs of product sales
Research and development
Production engineering
Selling, general and administrative
Loss (gain) on disposal of assets
Year Ended
March 31, 2009
Year Ended
Year Ended
March 31, 2008 March 31, 2007
$ 2,717,246
6,011,065
8,728,311
2,591,939
4,916,383
7,508,322
2,907,536
3,745,658
6,653,194
2,279,956
4,682,711
593,209
1,869,848
3,782,840
( 510)
13,208,054
2,039,017
4,392,442
461,791
1,706,978
3,905,495
(2,159)
12,503,564
2,666,316
3,323,577
321,160
1,286,761
2,855,213
889
10,453,916
Loss before other income (expense)
(4,479,743)
(4,995,242)
(3,800,722)
Other income (expense):
Interest income
Interest expense
Impairment of investment
Other
198,947
(33,387)
(89,369)
1,533
77,724
463,248
(40,652)
-
(13,459)
409,137
445,578
(47,422)
-
(28,791)
369,365
Net loss
$ (4,402,019)
(4,586,105)
(3,431,357)
Net loss per common share-basic and diluted:
$(0.17)
(0.18)
(0.14)
Weighted average number of shares of common
stock outstanding - basic and diluted
26,651,130
26,196,278
25,116,354
See accompanying notes to consolidated financial statements.
24
UQM TECHNOLOGIES, INC.
AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity
Balances at April 1, 2006
Issuance of common stock under
employee stock purchase plan
Issuance of common stock upon
exercise of employee options
Issuance of common stock upon
exercise of warrants
Issuance of common stock to
directors
Compensation expense from
employee and director stock
option and common stock grants
Cumulative effect of adoption of
SAB 108
Net loss
Number of
common
shares
issued
24,776,042
7,095
215,440
165,812
12,500
-
-
Common
stock
$ 247,760
Additional
paid-in
capital
69,293,461
Accumulated
deficit
(56,796,847)
Total
stockholders’
equity
12,744,374
71
17,695
681,539
426,136
39,875
917,756
2,154
1,659
125
-
-
-
-
-
-
-
17,766
683,693
427,795
40,000
917,756
-
-
-
(3,431,357)
(3,431,357)
-
(208,911)
(208,911)
Balances at March 31, 2007
25,176,889
251,769
71,376,462
(60,437,115)
11,191,116
Issuance of common stock in follow-on
offering, net of offering costs
Issuance of common stock under
employee stock purchase plan
Issuance of common stock upon
exercise of employee options
Issuance of common stock under
stock bonus plan
Compensation expense from
employee and director stock
option and common stock grants
1,250,000
12,500
5,171,177
14,664
24,362
60,822
146
244
608
40,644
56,431
46,623
-
-
-
-
5,183,677
40,790
56,675
47,231
-
-
1,127,704
-
1,127,704
Net loss
-
-
-
(4,586,105)
(4,586,105)
Balances at March 31, 2008
26,526,737
265,267
77,819,041
(65,023,220)
13,061,088
Issuance of common stock under
employee stock purchase plan
Purchase of treasury stock
Issuance of common stock under
stock bonus plan
Compensation expense from
employee and director stock
option and common stock grants
22,268
(70,269)
248,958
223
(703)
2,490
33,994
(156,434)
(2,490)
-
-
-
34,217
(157,137)
-
-
-
1,073,043
-
1,073,043
Net loss
-
-
-
(4,402,019)
(4,402,019)
Balances at March 31, 2009
26,727,694
$ 267,277
78,767,154
(69,425,239)
9,609,192
See accompanying notes to consolidated financial statements.
25
UQM TECHNOLOGIES, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization
Gain on disposal of assets
Impairment of long-lived assets
Impairment of investment
Impairment of inventories
Non-cash equity based compensation
Change in operating assets and liabilities:
Accounts receivable and costs and estimated
earnings in excess of billings on
uncompleted contracts
Inventories
Prepaid expenses and other current assets
Other assets
Accounts payable and other current liabilities
Billings in excess of costs and estimated
earnings on uncompleted contracts
Deferred compensation under executive
employment agreements
Net cash used in operating activities
Cash flows from investing activities:
Maturities (purchases) of short-term investments
Increase in other long-term assets
Prepayments on property and equipment
Acquisition of property and equipment
Increase in patent and trademark costs
Proceeds from sale of assets
Net cash provided by (used in) investing activities
Year Ended Year Ended Year Ended
March 31, 2009 March 31, 2008 March 31, 2007
$(4,402,019)
(4,586,105)
(3,431,357)
546,843
(510)
-
89,369
41,613
1,073,043
393,612
(387,295)
1,879
-
138,989
437,799
(13,314)
11,155
-
-
1,174,935
414,322
-
889
-
-
957,756
(255,113)
(61,604)
159,696
2,101
(228,918)
(736,243)
(432,400)
(160,904)
2,102
436,201
(636,481)
395,311
90,911
75,676
(3,065,281)
452,334
(2,511,723)
125,767
(2,732,956)
3,208,772
(607,980)
27,566
(2,122)
(188,427)
(382,559)
(16,056)
510
$ 2,620,118
(2,217)
(186,633)
(616,488)
(51,099)
17,665
(1,446,752)
(52,699)
-
(397,008)
(6,773)
-
(428,914)
See accompanying notes to consolidated financial statements.
(Continued)
26
UQM TECHNOLOGIES, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
Cash flows from financing activities:
Repayment of debt
Issuance of common stock in follow-on offering,
net of offering costs
Issuance of common stock upon exercise of
employee options
Purchase of treasury stock
Issuance of common stock upon exercise of warrants
Issuance of common stock under employee stock
purchase plan
Net cash provided by (used in) financing activities
Year Ended
Year Ended Year Ended
March 31, 2009 March 31, 2008 March 31, 2007
$ (106,002)
(98,760)
(92,013)
-
5,183,677
-
-
(157,137)
-
56,675
-
-
683,693
-
427,795
34,217
(228,922)
40,790
5,182,382
17,766
1,037,241
Increase (decrease) in cash and cash equivalents
(674,085)
1,223,907
(2,124,629)
Cash and cash equivalents at beginning of year
3,176,084
1,952,177
4,076,806
Cash and cash equivalents at end of year
$ 2,501,999
3,176,084
1,952,177
Supplemental Cash Flow Information:
Interest paid in cash during the year
$ 33,738
40,979
47,726
See accompanying notes to consolidated financial statements.
27
UQM TECHNOLOGIES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies
(a) Description of Business
UQM Technologies, Inc. and our wholly-owned subsidiary UQM Power Products, Inc. are engaged in the
research, development and manufacture of permanent magnet electric motors and the electronic controls for such
motors. Our facility is located in Frederick, Colorado. Our revenue is derived primarily from product sales to
customers in the automotive, agriculture, industrial, medical and aerospace 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 those of all majority-
owned or controlled subsidiaries. All intercompany accounts and transactions have been eliminated in
consolidation.
(c) Cash and Cash Equivalents and Short-term Investments
We consider cash on hand and investments with original maturities of three months or less to be cash and cash
equivalents. Investments with original maturities of greater than three months and less than one year from the
balance sheet date are classified as short-term.
(d) Investments
We have an investment policy approved by the Board of Directors that governs the quality, acceptability and
dollar concentration of our investments. Investments are comprised of marketable securities and consist
primarily of commercial paper, asset-backed and mortgage-backed notes and bank certificates of deposits with
original maturities beyond three months. All marketable securities are held in our name at two major financial
institutions who hold custody of the investments. All of our investments are held-to-maturity investments that
we have the positive intent and ability to hold until maturity. These securities are recorded at amortized cost.
Investments with an original maturity of greater than three months and less than one year from the balance sheet
date are classified as short-term.
The amortized cost and unrealized gain or loss of our investments were:
Short-term investments:
U.S. government and government agency
securities
Commercial paper, corporate and foreign bonds
Certificates of deposit
Long-term investment:
Certificates of deposit (included in other assets)
March 31, 2009
March 31, 2008
Amortized Cost Gain (Loss) Amortized Cost Gain (Loss)
$ 2,055,176
137,418
1,099,073
3,291,667
57,038
$ 3,348,705
2,755
(3,454)
-
(699)
-
(699)
1,656,515
1,912,779
3,020,514
6,589,808
(3,193)
(9,050)
-
(12,243)
54,916
6,644,724
-
(12,243)
28
UQM TECHNOLOGIES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The time to maturity of held-to-maturity securities were:
Three to six months
Six months to one year
Over one year
(e) Accounts Receivable
March 31,
2008
1,311,373
5,278,435
54,916
6,644,724
2009
$ -
3,291,667
57,038
$ 3,348,705
We extend unsecured credit to most of our customers following a review of the customers’ financial condition
and credit history. We establish an allowance for doubtful 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 uncollectible accounts receivable. At
March 31, 2009 and 2008, no allowance for uncollectible accounts receivable was deemed necessary. Accounts
receivable are deemed to be past due when they have not been paid by their contractual due date.
(f) Inventories
Inventories are stated at the lower of cost or market. Cost is determined by the first-in, first-out method.
Inventory reserves are based on our assessment of recoverability of slow moving or obsolete inventory items.
We did not have any reserves recorded as of March 31, 2009 and 2008.
(g) Property and Equipment
Property and equipment is stated at cost. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets, which range from 3 to 5 years, except for buildings, which are depreciated
over 27.5 years. Maintenance and repairs are charged to expense as incurred. Depreciation expense for the
fiscal years ended March 31, 2009, 2008 and 2007 was $491,206, $382,162 and $337,470, respectively.
(h) 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 17 years for patents, and 40 years for
trademarks. Amortization expense for the fiscal years ended March 31, 2009, 2008 and 2007 was $55,637,
$55,637 and $76,852, respectively.
( i) 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.
( j) Product Warranties
Our warranty policy generally provides three months to three 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
29
UQM TECHNOLOGIES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
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.
(k) Revenue and Cost Recognition
We manufacture proprietary products and other products. Revenue from sales of products are generally
recognized at the time title to the goods and the benefits and risks of ownership passes to the customer which is
typically when products are shipped based on the terms of the customer purchase agreement.
Revenue relating to long-term fixed price contracts is recognized using the percentage of completion method.
Under the percentage of completion method, contract revenues and related costs are recognized based on the
percentage that costs incurred to date bear to total estimated costs.
Changes in job performance, estimated profitability and final contract settlements may result in revisions to cost
and revenue, and are recognized in the period in which the revisions are determined.
Contract costs include all direct materials, subcontract and labor costs and other indirect costs. Selling, general
and administrative costs are charged to expense as incurred. At the time a loss on a contract becomes known,
the entire amount of the estimated loss is accrued.
The aggregate of costs incurred and estimated earnings recognized on uncompleted contracts in excess of related
billings is shown as a current asset, and billings on uncompleted contracts in excess of costs incurred and
estimated earnings is shown as a current liability.
(l) Income Taxes
The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No.
109, Accounting for Income Taxes (“SFAS 109”). Under the asset and liability method of SFAS 109, 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 in the period that
includes the enactment date.
(m) Research and Development
Costs of researching and developing new technology, or significantly altering existing technology, are expensed
as incurred.
(n) Loss per Common Share
Basic earnings per share is computed by dividing income or loss available to common stockholders by the
weighted average number of common shares outstanding during the periods presented. Diluted earnings per
share is computed by dividing income or loss available to common stockholders by all outstanding and
potentially dilutive shares during the periods presented, unless the effect is antidilutive. At March 31, 2009,
2008 and 2007, respectively, issued but not yet earned common shares of 225,870, 283,480, and 136,035 were
being held in safekeeping by the Company. For the fiscal years 2009, 2008, and 2007, shares in the amount of
zero, 7,887, and 9,767 shares were potentially included in the calculation of diluted loss per share under the
treasury stock method but were not included, because to do so would be antidilutive. At March 31, 2009, 2008
and 2007, options to purchase 2,995,214, 2,679,740 and 2,771,914 shares of common stock, respectively, and
warrants to purchase zero, 85,267 and 157,267 shares of common stock, respectively, were outstanding. For the
30
UQM TECHNOLOGIES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
fiscal years ended March 31, 2009, 2008 and 2007, respectively, options and warrants for 2,957,734, 1,400,051
and 1,582,262 shares were not included in the computation of diluted loss per share because the option or
warrant exercise price was greater than the average market price of the common stock. In-the-money options
and warrants determined under the treasury stock method to acquire 3,554 shares, 335,477 shares and 381,096
shares of common stock for the fiscal years ended March 31, 2009, 2008 and 2007, respectively, were
potentially includable in the calculation of diluted loss per share but were not included, because to do so would
be antidilutive.
(o) Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America, requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting period. Actual results could
differ from those estimates.
(p) Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
(q) New Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial
Accounting Standards No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No. 157 defines fair value,
establishes a framework for measuring fair value and requires additional disclosures about fair value
measurements. In February 2008, the FASB issued FASB Staff Position (FSP) 157-2, Effective Date of FASB
Statement No. 157 which delayed the effective date of SFAS No. 157 for all nonrecurring fair value
measurements of nonfinancial assets and liabilities. We adopted the provisions of SFAS No. 157 related to
financial instruments on April 1, 2008, and the provisions related to nonfinancial assets and liabilities on April 1,
2009 (except for those that are recognized or disclosed at fair value in the financial statements on a recurring
basis). The provisions of this standard adopted by us on April 1, 2008 did not have a material effect on our
financial statements and the adoption of the provisions effective April 1, 2009 will not have a material effect on
our financial statements.
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (revised 2007),
Business Combinations ("FAS 141(R)") and Statement of Financial Accounting Standards No. 160,
Noncontrolling Interests in Consolidated Financial Statements ("FAS 160"). These standards goals are to
improve, simplify, and converge internationally the accounting for business combinations and the reporting of
noncontrolling interests in consolidated financial statements. The provisions of FAS 141(R) and FAS 160 are
effective for our fiscal year beginning April 1, 2009. We intend to adopt these standards for future acquisitions
after the effective date.
In April 2008, the FASB issued FASB Staff Position (FSP) 142-3, Determination of the Useful Life of Intangible
Assets (”FSP 142-3”). FSP 142-3 amends the factors that should be considered in developing renewal or
extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142,
Goodwill and Other Intangible Assets. FSP 142-3 is effective for fiscal years beginning after December 15,
2008. The adoption of this standard will not have a material effect on our financial statements.
In May 2008, the FASB issued Statement of Financial Accounting Standards No. 162, The Hierarchy of
Generally Accepted Accounting Principles (“SFAS No. 162”). SFAS No. 162 identifies the sources of
accounting principles and the framework for selecting the principles used in the preparation of financial
statements. SFAS No. 162 is effective 60 days following the SEC’s approval of the Public Company
Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity with
Generally Accepted Accounting Principles”. The adoption of this standard will not have a material effect on our
31
UQM TECHNOLOGIES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
financial statements.
In June 2008, the FASB ratified Emerging Issues Task Force (EITF) Issue No. 08-3, Accounting for Lessees for
Maintenance Deposits Under Lease Arrangements (“EITF 08-3”). EITF 08-3 provides guidance for accounting
for nonrefundable maintenance deposits. It also provides revenue recognition accounting guidance for the lessor.
EITF 08-3 is effective for fiscal years beginning after December 15, 2008. The adoption of this EITF will not
have a material effect on our financial statements.
In October 2008, the FASB issued FASB Staff Position (FSP) 157-3, Determining the Fair Value of a Financial
Asset When the Market for That Asset Is Not Active (“FSP 157-3”). FSP 157-3 clarifies the application of SFAS
No. 157 in a market that is not active, and addresses application issues such as the use of internal assumptions
when relevant observable data does not exist, the use of observable market information when the market is not
active, and the use of market quotes when assessing the relevance of observable and unobservable data. FSP
157-3 is effective for all periods presented in accordance with SFAS No. 157. The adoption of FSP 157-3 did
not have a material effect on our financial statements.
In April 2009, the FASB issued FASB Staff Position (FSP) 157-4, Determining Fair Value When Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are
Not Orderly (“FSP 157-4”). FSP 157-4 provides guidance on how to determine the fair value of assets and
liabilities when the volume and level of activity for the asset/liability has significantly decreased. FSP 157-4 also
provides guidance on identifying circumstances that indicate a transaction is not orderly. In addition, FSP 157-4
requires disclosure in interim and annual periods of the inputs and valuation techniques used to measure fair
value and a discussion of changes in valuation techniques. FSP 157-4 is effective for us beginning in the first
quarter of fiscal year 2010. The adoption of FSP 157-4 will not have a material impact on our consolidated
financial statements.
In April 2009, the FASB issued FASB Staff Position (FSP) 115-2 and Statement of Financial Accounting
Standards (FAS) No. 124-2, Recognition and Presentation of Other-Than-Temporary Impairment (“FSP 115-
2/FAS No. 124-2”). FSP 115-2/FAS No. 124-2 amends the requirements for the recognition and measurement of
other-than-temporary impairments for debt securities by modifying the pre-existing “intent and ability” indicator.
Additionally, FSP 115-2/FAS No. 124-2 changes the presentation of an other-than-temporary impairment in the
income statement for those impairments involving credit losses. FSP 115-2/FAS No. 124-2 is effective for us
beginning in the first quarter of fiscal year 2010. The adoption of this standard will not have a material effect on
our financial statements.
In April 2009, the FASB issued FASB Staff Position (FSP) 107-1 and Accounting Principals Board (APB)
Opinion 28-1, Interim Disclosure about Fair Value of Financial Instruments (“FSP 107-1/APB 28-1”). FSP
107-1/APB 28-1 requires interim disclosures regarding the fair values of financial instruments that are within the
scope of FAS 107, Disclosures about the Fair Value of Financial Instruments. Additionally, FSP 107-1/APB 28-
1 requires disclosure of the methods and significant assumptions used to estimate the fair value of financial
instruments on an interim basis as well as changes of the methods and significant assumptions from prior
periods. FSP 107-1/APB 28-1 does not change the accounting treatment for these financial instruments and is
effective for us beginning in the first quarter of fiscal year 2010. The adoption of this standard will not have a
material effect on our financial statements.
(2) Stock Based Compensation
Stock Option Plans
As of March 31, 2009 we had 805,966 shares of common stock available for future grant to employees, consultants
and key suppliers under our 2002 Equity Incentive Plan (“Plan”). Under the Plan, the exercise price of each option is
set at the fair value of the common stock on the date of grant and the maximum term of the option is 10 years from
the date of grant. Options granted to employees generally vest ratably over a three-year period. The maximum
32
UQM TECHNOLOGIES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
number of options that may be granted to an employee under the Plan in any calendar year is 500,000 options.
Forfeitures under the Plan are available for re-issuance at any time prior to expiration of the Plan in 2013. Options
granted under the Plan to employees require the option holder to abide by certain Company policies, which restrict
their ability to sell the underlying common stock. Prior to the adoption of the Plan, we issued stock options under
our 1992 Incentive and Non-Qualified Option Plan, which expired by its terms in 2002. Forfeitures under the 1992
Incentive and Non-Qualified Option Plan may not be re-issued.
Non-Employee Director Stock Option Plan
In February 1994 our Board of Directors ratified a Stock Option Plan for Non-Employee Directors (“Directors
Plan”) pursuant to which Directors may elect to receive stock options in lieu of cash compensation for their services
as directors. As of March 31, 2009, we had 204,304 shares of common stock available for future grant under the
Directors Plan. Option terms range from 3 to 10 years from the date of grant. Option exercise prices are equal to the
fair value of the common shares on the date of grant. Options granted under the plan generally vest immediately.
Forfeitures under the Directors Plan are available for re-issuance at a future date.
Stock Purchase Plan
We have established a Stock Purchase Plan under which eligible employees may contribute up to 10 percent of their
compensation to purchase shares of our common stock at 85 percent of the fair market value at specified dates. As of
March 31, 2009 we had 67,969 shares of common stock available for issuance under the Stock Purchase Plan.
During the years ended March 31, 2009, 2008 and 2007, respectively, 22,268, 14,664 and 7,095 shares of common
stock were issued under the Stock Purchase Plan. Cash received by us upon the issuance of shares under the Stock
Purchase Plan for the years ended March 31, 2009, 2008 and 2007, was $34, 217, $40,790 and $17,766, respectively.
Stock Bonus Plan
We have a Stock Bonus Plan (“Stock Plan”) administered by the Board of Directors. As of March 31, 2009 there
were 6,794 shares of common stock available for future grant under the Stock Plan. Under the Stock Plan, shares of
common stock may be granted to employees, key consultants, and directors who are not employees as additional
compensation for services rendered. Vesting requirements for grants under the Stock Plan, if any, are determined by
the Board of Directors at the time of grant. There were 191,348 and 204,558 shares granted under the Stock Plan
during the years ended March 31, 2009, and March 31, 2008, respectively.
We use the straight-line attribution method to recognize share-based compensation costs over the requisite service
period of the award. Options granted by us generally expire ten years from the grant date. Options granted to
existing and newly hired employees generally vest over a three-year period from the date of the grant. The exercise
price of options is equal to the market price of our common stock (defined as the closing price reported by the NYSE
Amex) on the date of grant.
We use the Black-Scholes-Merton option pricing model for estimating the fair value of stock option awards. Total
share-based compensation expense and the classification of these expenses for the last three fiscal years were as
follows:
Cost of contract services
Cost of product sales
Research and development
Production engineering
Selling, general and administrative
Year Ended
March 31, 2009
$ 110,329
84,875
37,903
128,553
711,383
Year Ended
March 31, 2008
113,507
60,933
25,652
132,494
842,349
Year Ended
March 31, 2007
154,828
48,606
22,612
113,013
618,697
$ 1,073,043
1,174,935
957,756
33
UQM TECHNOLOGIES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Share-based compensation capitalized in inventories was insignificant as of March 31, 2009 and 2008.
In accordance with SFAS No. 123(R), 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 March 31, 2009, 2008 and 2007 was insignificant.
All options granted under the Non-Employee Director Stock Option Plan are vested. A summary of the status of
non-vested shares under the Equity Incentive Plan as of March 31, 2009, 2008 and 2007, and changes during the
years ended March 31, 2009, 2008 and 2007 are presented below:
Year Ended
March 31, 2009
Shares
Under
Option
337,888
-
(10,000)
(2,000)
325,888
381,615
(72,588)
(1,500)
633,415
-
(346,294)
-
287,121
-
(3,667)
-
283,454
Weighted-
Average
Grant Date
Fair Value
$ 1.85
$ -
$ 2.10
$ 1.61
$ 1.84
$ 1.08
$ 1.69
$ 1.61
$ 1.40
$ -
$ 1.39
$ -
$ 1.41
$ -
$ 1.78
$ -
$ 1.40
Year Ended
March 31, 2008
Shares
Under
Option
554,940
-
(10,000)
(2,387)
542,553
106,159
(39,702)
(2,000)
607,010
-
(246,455)
(2,000)
358,555
6,000
(26,667)
-
337,888
Weighted-
Average
Grant Date
Fair Value
$ 1.71
$ -
$ 2.10
$ 2.01
$ 1.70
$ 1.89
$ 1.52
$ 1.61
$ 1.75
$ -
$ 1.63
$ 1.61
$ 1.83
$ 1.03
$ 1.41
$ -
$ 1.85
Year Ended
March 31, 2007
Shares
Under
Option
926,197
-
(10,000)
(14,481)
901,716
119,605
-
(48,276)
973,045
-
(252,117)
-
720,928
5,000
(165,520)
(5,468)
554,940
Weighted-
Average
Grant Date
Fair Value
$ 1.61
$ -
$ 2.10
$ 1.17
$ 1.61
$ 1.53
$ -
$ 1.59
$ 1.60
$ -
$ 1.63
$ -
$ 1.60
$ 2.69
$ 1.23
$ 1.78
$ 1.71
Non-vested at March 31
Granted
Vested
Forfeited
Non-vested at June 30
Granted
Vested
Forfeited
Non-vested at September 30
Granted
Vested
Forfeited
Non-vested at December 31
Granted
Vested
Forfeited
Non-vested at March 31
As of March 31, 2009, there was $266,896 of total unrecognized compensation costs related to stock options granted
under our stock option plans. The unrecognized compensation cost is expected to be recognized over a weighted
average period of 22 months. The total fair value of stock options that vested during the years ended March 31,
2009, 2008 and 2007 was $633,106, $519,978 and $635,894, respectively.
34
UQM TECHNOLOGIES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
A summary of the non-vested shares under the Stock Bonus Plan as of March 31, 2009 and 2008 and changes
during the years ended March 31, 2009, 2008 and 2007 is presented below:
Year Ended
March 31, 2009
Shares
Under
Contract
283,480
-
-
-
283,480
191,348
(184,692)
-
290,136
-
(64,266)
-
225,870
-
-
-
225,870
Weighted-
Average
Grant Date
Fair Value
$ 3.34
$ -
$ -
$ -
$ 3.34
$ 2.18
$ 2.43
$ -
$ 3.15
$ -
$ 3.40
$ -
$ 3.08
$ -
$ -
$ -
$ 3.08
Year Ended
March 31, 2008
Shares
Under
Contract
136,035
-
-
-
136,035
-
(45,349)
-
90,686
204,558
(11,764)
-
283,480
-
-
-
283,480
Weighted-
Average
Grant Date
Fair Value
$ 3.20
$ -
$ -
$ -
$ 3.20
$ -
$ 3.20
$ -
$ 3.20
$ 3.40
$ 3.40
$ -
$ 3.34
$ -
$ -
$ -
$ 3.34
Year Ended
March 31, 2007
Shares
Under
Contract
-
-
-
-
-
149,735
(12,500)
(1,200)
136,035
-
-
-
136,035
-
-
-
136,035
Weighted-
Average
Grant Date
Fair Value
$ -
$ -
$ -
$ -
$ -
$ 3.20
$ 3.20
$ 3.20
$ 3.20
$ -
$ -
$ -
$ 3.20
$ -
$ -
$ -
$ 3.20
Non-vested at March 31
Granted
Vested
Forfeited
Non-vested at June 30
Granted
Vested
Forfeited
Non-vested at September 30
Granted
Vested
Forfeited
Non-vested at December 31
Granted
Vested
Forfeited
Non-vested at March 31
As of March 31, 2009 there was $184,997 of total unrecognized compensation costs related to common stock
granted under our Stock Bonus Plan. The unrecognized compensation cost is expected to be recognized over a
weighted average period of 23 months. The total fair value of common stock granted under the Stock Bonus Plan
that vested during the years ended March 31, 2009, 2008 and 2007 was $667,384, $185,114 and $40,000,
respectively.
During the years ended March 31, 2009, 2008 and 2007 options to acquire 550,358, 201,060 and 148,344 shares of
common stock, respectively, were granted under our Equity Incentive and Non-Employee Director Stock Option
Plans. 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 March 31, 2009, 2008 and
2007, were based on estimates at the date of grant as follows:
Weighted average estimated
fair value of grant
Expected life (in years)
Risk free interest rate
Expected volatility
Expected dividend yield
Year Ended March 31,
2007
2008
2009
$ 2.19 Per option
3.4 years
3.20 %
60.56 %
0.0 %
3.41 Per option
3.3 years
4.17 %
60.03 %
0.0 %
3.24 Per option
3.5 years
4.9 %
59.7 %
0.0 %
Expected volatility is based on historical volatility. The expected life of options granted prior to January 1, 2008
was based on the simplified calculation of expected life described in the U.S. Securities and Exchange
Commission’s Staff Accounting Bulletin 107 (“SAB 107”). In addition, options granted to members of the board of
directors and executives on July 23, 2008 with option terms of less than ten years utilize the simplified calculation
35
UQM TECHNOLOGIES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
of expected life described by SAB 107 because we do not have sufficient historical experience for option grants
with option terms of less than ten years. The expected life of all other options granted subsequent to December 31,
2007 are based on historical experience.
Additional information with respect to stock option activity during the year ended March 31, 2009 under our
incentive and non-qualified stock option plans is as follows:
Outstanding at March 31, 2008
Granted
Exercised
Forfeited
Outstanding at June 30, 2008
Granted
Exercised
Forfeited
Outstanding at September 30, 2008
Granted
Exercised
Forfeited
Outstanding at December 31, 2008
Granted
Exercised
Forfeited
Shares
Under
Option
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life
Aggregate
Intrinsic
Value
2,543,306
-
-
(2,000)
$ 3.94
$ -
$ -
$ 3.57
2,541,306
381,615
-
(1,500)
$ 3.94
$ 2.18
$ -
$ 3.57
2,921,421
-
-
-
$ 3.71
$ -
$ -
$ -
2,921,421
-
-
(180,606)
$ 3.71
$ -
$ -
$ 4.38
5.2 years
$ -
$ -
5.0 years
$ 3,060
$ -
4.9 years
$ 584,914
$ -
4.6 years
$ -
$ -
Outstanding at March 31, 2009
2,740,815
$ 3.66
4.7 years
$ -
Exercisable at March 31, 2009
2,457,361
$ 3.78
4.5 years
$ -
Vested and expected to vest at March 31, 2009
2,726,859
$ 3.67
4.6 years
$ -
36
UQM TECHNOLOGIES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Additional information with respect to stock option activity during the year ended March 31, 2008 under our
incentive and non-qualified stock option plans is as follows:
Outstanding at March 31, 2007
Granted
Exercised
Forfeited
Outstanding at June 30, 2007
Granted
Exercised
Forfeited
Outstanding at September 30, 2007
Granted
Exercised
Forfeited
Outstanding at December 31, 2007
Granted
Exercised
Forfeited
Shares
Under
Option
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life
Aggregate
Intrinsic
Value
2,692,400
-
(1,599)
(3,579)
$ 4.33
$ -
$ 2.41
$ 2.68
2,687,222
106,159
(4,245)
(2,000)
$ 4.33
$ 3.57
$ 2.41
$ 3.57
2,787,136
-
-
(2,000)
$ 4.30
$ -
$ -
$ 3.57
2,785,136
6,000
-
(247,830)
$ 4.30
$ 1.69
$ -
$ 8.00
5.7 years
$ 1,972,876
$ 2,942
5.4 years
$ 2,070,665
$ 8,193
5.2 years
$ 1,343,718
$ -
5.0 years
$ 1,006,016
$ -
Outstanding at March 31, 2008
2,543,306
$ 3.94
5.2 years
$ -
Exercisable at March 31, 2008
2,205,418
$ 3.99
4.9 years
$ -
Vested and expected to vest at March 31, 2008
2,523,959
$ 3.94
5.2 years
$ -
37
UQM TECHNOLOGIES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Additional information with respect to stock option activity during the year ended March 31, 2007 under our
incentive and non-qualified stock option plans is as follows:
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life
Outstanding at March 31, 2006
Granted
Exercised
Forfeited
Outstanding at June 30, 2006
Granted
Exercised
Forfeited
Outstanding at September 30, 2006
Granted
Exercised
Forfeited
Outstanding at December 31, 2006
Granted
Exercised
Forfeited
Shares
Under
Option
3,006,329
-
(186,814)
(9,037)
2,810,478
119,605
-
(99,758)
2,830,325
-
-
(11,666)
2,818,659
5,000
(28,626)
(102,633)
$ 4.28
$ -
$ 3.29
$ 2.26
$ 4.35
$ 3.20
$ -
$ 5.61
$ 4.26
$ -
$ -
$ 2.17
$ 4.27
$ 4.31
$ 2.43
$ 3.31
Aggregate
Intrinsic
Value
$ 306,117
6.1 years
$ 518,535
6.0 years
$ 330,706
5.7 years
$ 307,679
$ 51,606
Outstanding at March 31, 2007
2,692,400
$ 4.33
5.7 years
$ 1,972,876
Exercisable at March 31, 2007
2,137,460
$ 4.58
4.9 years
$ 1,540,910
Vested and expected to vest at March 31, 2007
2,666,940
$ 4.33
5.6 years
$ 1,957,156
38
UQM TECHNOLOGIES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Additional information with respect to stock option activity during the year ended March 31, 2009 under our non-
employee director stock option plan is as follows:
Outstanding at March 31, 2008
Granted
Exercised
Forfeited
Outstanding at June 30, 2008
Granted
Exercised
Forfeited
Outstanding at September 30, 2008
Granted
Exercised
Forfeited
Outstanding at December 31, 2008
Granted
Exercised
Forfeited
Outstanding at March 31, 2009
Shares
Under
Option
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life
Aggregate
Intrinsic
Value
131,644
-
-
-
$ 3.33
$ -
$ -
$ -
131,644
109,302
-
(18,027)
$ 3.33
$ 2.18
$ -
$ 3.22
222,919
59,441
-
(59,441)
$ 2.77
$ 3.39
$ -
$ 3.39
2.7 years
$ -
$ -
2.4 years
$ 1,736
$ -
3.2 years
$ 71,345
$ -
222,919
-
-
-
222,919
$ 2.77
$ -
$ -
$ -
$ 2.77
3.0 years
$ -
$ -
2.7 years
$ -
Exercisable at March 31, 2009
222,919
$ 2.77
2.7 years
$ -
Vested and expected to vest at March 31, 2009
222,919
$ 2.77
2.7 years
$ -
39
UQM TECHNOLOGIES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Additional information with respect to stock option activity during the year ended March 31, 2008 under our non-
employee director stock option plan is as follows:
Outstanding at March 31, 2007
Granted
Exercised
Forfeited
Outstanding at June 30, 2007
Granted
Exercised
Forfeited
Outstanding at September 30, 2007
Granted
Exercised
Forfeited
Outstanding at December 31, 2007
Granted
Exercised
Forfeited
Outstanding at March 31, 2008
Shares
Under
Option
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life
Aggregate
Intrinsic
Value
70,520
-
-
-
$ 2.91
$ -
$ -
$ -
70,520
24,039
(18,518)
(9,259)
$ 2.91
$ 3.57
$ 2.30
$ 2.30
66,782
57,918
-
-
$ 3.40
$ 3.40
$ -
$ -
1.4 years
$ 87,911
$ -
1.2 years
$ 92,083
$ 21,111
2.0 years
$ 21,111
$ -
124,700
6,944
-
-
131,644
$ 3.40
$ 1.95
$ -
$ -
$ 3.33
2.8 years
$ 7,614
$ -
2.7 years
$ -
Exercisable at March 31, 2008
131,644
$ 3.33
2.7 years
$ -
Vested and expected to vest at March 31, 2008
131,644
$ 3.33
2.7 years
$ -
40
UQM TECHNOLOGIES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Additional information with respect to stock option activity during the year ended March 31, 2007 under our non-
employee director stock option plan is as follows:
Outstanding at March 31, 2006
Granted
Exercised
Forfeited
Outstanding at June 30, 2006
Granted
Exercised
Forfeited
Outstanding at September 30, 2006
Granted
Exercised
Forfeited
Outstanding at December 31, 2006
Granted
Exercised
Forfeited
Outstanding at March 31, 2007
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life
Aggregate
Intrinsic
Value
$ 2.90
$ -
$ -
$ -
$ 2.90
$ 3.20
$ -
$ -
$ 2.99
$ -
$ -
$ -
$ 2.99
$ -
$ -
$ 3.40
$ 2.91
1.2 years
$ 16,666
1.2 years
$ 16,666
1.6 years
$ 12,222
1.4 years
$ 11,666
1.4 years
$ 87,911
Shares
Under
Option
59,281
-
-
-
59,281
23,739
-
-
83,020
-
-
-
83,020
-
-
(12,500)
70,520
Exercisable at March 31, 2007
70,520
$ 2.91
1.4 years
$ 87,911
Vested and expected to vest at March 31, 2007
70,520
$ 2.91
1.4 years
$ 87,911
Cash received by us upon the exercise of stock options for the years ended March 31, 2009, 2008 and 2007 was
zero, $56,675 and $683,693, respectively. The source of shares of common stock issuable upon the exercise of
stock options is from authorized and previously unissued common shares.
41
UQM TECHNOLOGIES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(3) Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts and Billings in Excess of
Costs and Estimated Earnings on Uncompleted Contracts
At March 31, 2009, the estimated period to complete contracts in process ranged from one to six months, and we
expect to collect substantially all related accounts receivable arising therefrom within sixty days of billing.
The following summarizes contracts in process:
Costs incurred on uncompleted contracts
Estimated earnings
Less billings to date
Included in the accompanying balance sheets as follows:
Costs and estimated earnings in excess of billings on
uncompleted contracts
Billings in excess of costs and estimated earnings on
uncompleted contracts
(4) Inventories
Inventories consist of:
Raw materials
Work-in-process
Finished products
March 31, 2009
March 31, 2008
$ 4,414,886
194,861
4,609,747
(4,038,016)
$ 571,731
3,018,470
377,822
3,396,292
(3,454,470)
(58,178)
$ 643,098
649,670
(71,367)
$ 571,731
(707,848)
(58,178)
March 31, 2009
March 31, 2008
$ 794,663
419,270
93,238
$ 1,307,171
721,291
179,385
60,813
961,489
Our raw material inventory is subject to obsolescence and potential impairment due to bulk purchases in excess of
customers’ requirements. We periodically assess our inventory for recovery of its carrying value based on available
information, expectations and estimates, and adjust inventory carrying-value to the lower of cost or market for
estimated declines in the realizable value. For the fiscal year ended March 31, 2009 we impaired obsolete inventory
with a carrying value of $41,613.
(5) Impairment of Long-Lived Assets
During the fiscal years ended March 31, 2009, 2008 and 2007, we recorded total impairment charges of zero,
$11,155 and $889, respectively, for obsolete equipment and abandoned patent applications.
Average annual depreciation expense for the equipment impaired during the fiscal year ended March 31, 2008, for
years preceding the year of impairment, was $4,308.
42
UQM TECHNOLOGIES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(6) Patents and Trademarks
Intangible assets, which consist entirely of patents and trademarks owned by the Company, had a gross carrying
amount of $1,171,778 and $1,155,722, accumulated amortization of $733,594 and $677,957, and a net carrying
amount of $438,184 and $477,765, at March 31, 2009 and 2008, respectively. Amortization expense for the years
ended March 31, 2009, 2008 and 2007, was $55,637, $55,637 and $76,852, respectively. Patents and trademarks
are amortized on a straight-line basis over a period of 17 years and 40 years, respectively.
Estimated future amortization of these intangible assets is as follows:
2010
2011
2012
2013
2014
Thereafter
$ 54,906
47,207
39,493
38,363
34,221
223,994
$ 438,184
(7) Other Current Liabilities
Other current liabilities consist of:
Accrued payroll and employee benefits
Accrued personal property and real estate taxes
Accrued warranty costs
Accrued losses on engineering contracts
Unearned revenue
Accrued royalties
Other
March 31, 2009
March 31, 2008
$ 165,221
82,396
84,445
520
149,355
73,773
44,962
$ 600,672
125,677
58,184
117,645
5,209
20,690
33,923
10,957
372,285
43
UQM TECHNOLOGIES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(8) Long-Term Debt
Long-term debt consists of:
Note payable to bank, payable in monthly installments
with interest at 7.0%; matures November 2009;
secured by land and building
March 31, 2009
March 31, 2008
$ 416,923
522,925
(9) Income Taxes
Income tax benefit attributable to loss from operations differed from the amounts computed by applying the U.S.
federal income tax rate of 34 percent as a result of the following:
Computed “expected” tax benefit
Increase (decrease) in taxes resulting from:
Adjustment of expiring net operating loss
carry-forwards
Adjustment to deferred tax assets and liabilities
for prior period corrections
Increase (decrease) in valuation allowance for
net deferred tax assets
Other, net
Year Ended
Year Ended
Year Ended
March 31, 2009 March 31, 2008 March 31, 2007
$(1,497,208)
(1,554,700)
(1,156,872)
1,450,222
1,124,302
825,774
-
(104,562)
865,148
(67,423)
114,409
588,902
(53,942)
(525,326)
(8,724)
Income tax benefit
$ -
-
-
44
UQM TECHNOLOGIES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The tax effects of temporary differences that give rise to significant portions of the net deferred tax asset are
presented below:
Deferred tax assets:
Research and development credit carry-forwards
Net operating loss carry-forwards
Deferred compensation
Property and equipment
Intangible assets
Stock compensation
Other
Total deferred tax assets
Deferred tax liabilities:
Intangible assets
Total deferred tax liabilities
Net deferred tax assets
March 31, 2009 March 31, 2008
$ 113,471
20,050,531
397,835
333,382
6,180
383,514
126,658
21,411,571
130,798
20,259,647
369,790
343,429
-
363,974
26,197
21,493,835
-
-
14,841
14,841
21,411,571
21,478,994
Less valuation allowance
(21,411,571)
(21,478,994)
Net deferred tax assets, net of valuation allowance
$ -
-
As of March 31, 2009 we had net operating loss carry-forwards (NOL) of approximately $59 million for U.S.
income tax purposes that expire in varying amounts through 2029. Approximately $4.5 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. 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 $21.4 million and $21.5 million at March 31, 2009 and March 31,
2008, respectively, relates principally to the uncertainty of the utilization of certain deferred tax assets, primarily net
operating loss carry forwards 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.
(10) Stockholders’ Equity
In June 2007 we completed a private placement of 1,250,000 shares of our common stock to two institutional
investors. Cash proceeds, net of offering costs, were $5,183,677.
In November 2004 we completed a follow-on offering of 3,600,000 shares of our common stock. The placement
agent was issued four-year warrants to acquire 360,000 shares of common stock at an exercise price of $2.58 per
share, which were recorded at fair value. Cash proceeds, net of offering costs, were $6,767,465. Warrants to
acquire zero and 85,267 shares of our common stock were outstanding at March 31, 2009 and 2008, respectively.
45
UQM TECHNOLOGIES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(11) Significant Customers
We have historically derived significant revenue from a few key customers. Revenue from Quantum Fuel Systems
Technologies Worldwide Inc. totaled $1,360,909, $256,393 and zero for the years ended March 31, 2009, 2008 and
2007, respectively, which was 16 percent, 3 percent and nil of total consolidated revenue, respectively. Revenue
from Invacare Corporation totaled $292,414, $508,903 and $830,637 for the years ended March 31, 2009, 2008 and
2007, respectively, which was 3 percent, 7 percent and 12 percent of total revenue, respectively. Revenue from
Lippert Components, Inc. totaled $635,144, $1,271,502 and $1,059,930 for the years ended March 31, 2009, 2008
and 2007, respectively, which was 7 percent, 17 percent and 16 percent of total revenue, respectively. Revenue
from the Denver Regional Transportation District totaled $3,337, $864,540 and $417,750 for the years ended March
31, 2009, 2008 and 2007, respectively, which was nil, 12 percent and 6 percent of total revenue, respectively.
Trade accounts receivable from Quantum Fuel Systems Technologies Worldwide Inc. were 16 percent and 8 percent
of total accounts receivable as of March 31, 2009 and 2008, respectively. Inventories consisting of raw materials,
work-in-progress and finished goods for this customer totaled zero as of March 31, 2009 and 2008. Trade accounts
receivable from Invacare Corporation were 2 percent and 16 percent of total accounts receivable as of March 31,
2009 and 2008, respectively. Inventories consisting of raw materials, work-in-progress and finished goods for this
customer totaled zero and $45,615 as of March 31, 2009 and 2008, respectively. Trade accounts receivable from
Lippert Components, Inc. were nil and 8 percent of total accounts receivable as of March 31, 2009 and 2008,
respectively. Inventories consisting of raw materials, work-in-progress and finished goods for this customer totaled
$349,066 and $211,571 as of March 31, 2009 and 2008, respectively. Trade accounts receivable from the Denver
Regional Transportation District were nil and 20 percent of total accounts receivable as of March 31, 2009 and
2008, respectively. Inventories consisting of raw materials, work-in-progress and finished goods for this customer
totaled zero as of March 31, 2009 and 2008.
Contract services revenue derived from contracts with agencies of the U.S. Government and from subcontracts with
U.S. Government prime contractors totaled $1,989,872, $2,329,248 and $2,313,856 for the years ended March 31,
2009, 2008 and 2007, respectively, which was 23 percent, 31 percent and 35 percent of total consolidated revenue,
respectively. Accounts receivable from government-funded contracts represented 6 percent and 12 percent of total
accounts receivable as of March 31, 2009 and 2008, respectively.
(12) Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of each class of financial instruments:
Cash and cash equivalents, certificates of deposit, accounts receivable and accounts payable:
The carrying amounts approximate fair value because of the short maturity of these instruments.
Short-term investments:
The carrying value of these instruments is the amortized cost of short-term investments which approximates fair
value. See Note 1(d).
Long-term debt:
The carrying amount of our long-term debt approximates fair value because the interest rate on this debt
approximates the interest rate currently available on similar financing offering comparable security to the lender.
46
UQM TECHNOLOGIES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(13) Fair Value Measurements
Liabilities measured at fair value on a recurring basis as of March 31, 2009 are summarized below:
Fair Value Measurements at Reporting Date Using
Significant
Other
Significant
Quoted Prices
In Active
Markets
For Identical
Liabilities
(Level 1)
Total
Observable
Inputs
(Level 2)
Unobservable
Inputs
(Level 3)
Deferred Compensation under
executive employment agreements (1)
$ 1,073,549
-
-
1,073,549
Note(1)
$397,834 included in current liabilities and $675,715 included in long term liabilities on our
consolidated balance sheet as of March 31, 2009.
Liabilities measured at fair value on a recurring basis as of March 31, 2008 are summarized below:
Fair Value Measurements at Reporting Date Using
Significant
Other
Significant
Quoted Prices
In Active
Markets
For Identical
Liabilities
(Level 1)
Total
Observable
Inputs
(Level 2)
Unobservable
Inputs
(Level 3)
Deferred Compensation under
executive employment agreements (1)
$ 997,873
-
-
997,873
Note(1)
$364,000 included in current liabilities and $633,873 included in long term liabilities on our
consolidated balance sheet as of March 31, 2008.
47
UQM TECHNOLOGIES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Deferred compensation under executive employment agreements represents the future compensation potentially
payable under the retirement and voluntary termination provisions of executive employment agreements. The
value of the Level 3 liability in the foregoing table was determined under the income approach, using inputs that
are both unobservable and significant to the value of the obligation including changes in the company’s credit
worthiness and changes in interest rates.
A summary of the liability measured at fair value on a recurring basis using significant unobservable inputs (Level
3) follows:
Fair Value Measurements Using Significant
Unobservable Inputs
(Level 3) for the
Fiscal Year Ended
March 31, 2009
March 31, 2008
Deferred
Deferred
Compensation
Compensation
On Executive
On Executive
Employment
Employment
Agreements
Agreements
$ 997,873
545,539
75,676
-
-
-
$ 1,073,549
452,334
-
-
-
997,873
Balance at beginning of fiscal year
Total gains or losses (realized and unrealized):
Included in earnings
Included in other comprehensive income
Purchases, sales, issuances, and settlements, net
Transfers in (out) of Level 3
Balance at the end of fiscal year
Loss for the period included in earnings attributable
to the Level 3 liability still held at the end of the period
$ 75,676
452,334
(14) 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 who have been employed by us at least six months are
eligible 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 $82,355, $75,028 and $65,658, for the years ended March 31, 2009, 2008, and 2007,
respectively.
(15) Segments
At March 31, 2009, we had two reportable segments: technology and power products. Our reportable segments are
strategic business units that offer different products and services. They are managed separately because each
business requires different business strategies. The technology segment encompasses our technology-based
operations including core research to advance our technology, application and production engineering and product
development and job shop production of prototype components. The power products segment encompasses the
manufacture and sale of permanent magnet motors and electronic controllers. Salaries of the executive officers and
corporate general and administrative expense are allocated to our segments annually based on factors established at
the beginning of each fiscal year. The percentage allocated to the technology segment and power products segment
for the fiscal year ended March 31, 2009 was 76 percent and 24 percent, respectively. The percentage allocated to
the technology segment and power products segment for the fiscal years ended March 31, 2008, and 2007 were 75
48
UQM TECHNOLOGIES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
percent and 25 percent, and 61 percent and 39 percent, in each year, respectively. Intersegment sales or transfers,
which were eliminated upon consolidation, were $970,277, $710,416 and $143,880 for the years ended March 31,
2009, 2008, and 2007, respectively.
The technology segment leases office, production and laboratory space in a building owned by the power products
segment, based on a negotiated rate for the square footage occupied. Intercompany lease payments, were $174,000,
$169,562 and $184,164 for the years ended March 31, 2009, 2008, and 2007, respectively, and were eliminated
upon consolidation.
The following table summarizes significant financial statement information after deducting intersegment
eliminations of each of the reportable segments as of and for the year ended March 31, 2009:
Revenue
Interest income
Interest expense
Depreciation and amortization
Impairment of long-lived assets
Impairment of inventories
Impairment of investment
Segment loss
Total assets
Expenditures for long-lived segment assets
Technology
$ 5,455,934
$ 194,384
$ -
$ (312,154)
$ -
$ (28,546)
$ (89,369)
$ (4,123,174)
$ 8,840,077
$ (579,932)
Power
Products
3,272,377
4,563
(33,387)
(234,689)
-
(13,067)
-
(278,845)
3,582,755
(7,110)
Total
8,728,311
198,947
(33,387)
(546,843)
-
(41,613)
(89,369)
(4,402,019)
12,422,832
(587,042)
The following table summarizes significant financial statement information after deducting intersegment
eliminations of each of the reportable segments as of and for the year ended March 31, 2008:
Revenue
Interest income
Interest expense
Depreciation and amortization
Impairment of long-lived assets
Impairment of inventories
Impairment of investment
Segment loss
Total assets
Expenditures for long-lived segment assets
Technology
$ 4,391,213
$ 454,466
$ -
$ (223,815)
$ ( 820)
$ -
$ -
$ (3,874,639)
$ 12,511,384
$ (610,303)
Power
Products
3,117,109
8,782
(40,652)
(213,984)
(10,335)
-
-
(711,466)
3,891,162
(243,917)
Total
7,508,322
463,248
(40,652)
(437,799)
(11,155)
-
-
(4,586,105)
16,402,546
(854,220)
49
UQM TECHNOLOGIES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The following table summarizes significant financial statement information after deducting intersegment
eliminations of each of the reportable segments as of and for the year ended March 31, 2007:
Technology
$ 4,026,255
$ 439,460
$ -
$ (244,401)
$ -
$ -
$ -
$ (2,870,307)
$ 10,168,939
$ (162,690)
Power
Products
2,626,939
6,118
(47,422)
(169,921)
(889)
-
-
(561,050)
3,843,668
(241,091)
Total
6,653,194
445,578
(47,422)
(414,322)
(889)
-
-
(3,431,357)
14,012,607
(403,781)
Revenue
Interest income
Interest expense
Depreciation and amortization
Impairment of long-lived assets
Impairment of inventories
Impairment of investment
Segment loss
Total assets
Expenditures for long-lived segment assets
(16) Commitments and Contingencies
Employment Agreements
The Company has entered into Employment Agreements with Messrs. Rankin, French, Burton and Lutz pursuant to
which each has agreed to serve in his present capacity for a five year term expiring on August 22, 2012. Pursuant to
the Employment Agreements, Messrs. Rankin, French, Burton and Lutz shall receive an annual base salary of
$327,000, $217,000, $195,000 and $177,000, respectively. Each executive also receives the use of an automobile
and may receive bonuses, stock awards and stock options.
Messrs. Rankin and French’s Employment Agreements provide that if employment is terminated by the Company
or the executive without cause during or after the term of the agreement upon attaining twenty years of service as an
officer, or upon retirement after attaining age 62 1/2, the officer shall receive 24 months salary. If the officer
voluntarily terminates his employment after attaining twenty years of service as an officer and provides at least six
months notice, he shall receive one month of pay for each year of service as an officer up to a maximum payment of
24 months pay. If the executive has less than twenty years of service or does not provide at least six months notice,
he shall receive three months salary, unless the Company is in default under the Agreement, which shall be
considered termination by the Company without cause.
Messrs. Burton and Lutz’s Employment Agreements provide that if employment is terminated by the Company or
the executive without cause during or after the term of the agreement, the officer shall receive the greater of six
months pay or one month of pay for each year of service as an officer. If the officer voluntarily terminates his
employment and provides at least six months notice, he shall receive six months pay. If the executive does not
provide at least six months notice, he shall receive two months salary, unless the Company is in default under the
Agreement, which shall be considered termination by the Company without cause. If the Executive provides at
least six months notice of his voluntary retirement after attaining 62 1/2 years of age, executive shall receive a total
payment consisting of one month of pay for each year of service as an officer plus six months of pay, up to a
maximum total payment of 24 months pay.
Messrs. Rankin, French, Burton and Lutz’s Employment Agreements provide that upon termination by the
Company following a hostile change of control of the Company, the officer shall receive twice the payment due on
a termination by the Company. If an officer dies during employment, his estate shall receive three months
compensation. If the officer elects to retire at 62 1/2 years of age or upon attaining 20 years of service with the
Company, the officer shall be entitled to continue to participate in the Company’s group health insurance plan (at
the same cost as employees) until attaining age 65.
50
UQM TECHNOLOGIES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The employment agreements further provide that the Company shall maintain at its expense, life insurance coverage
on Messrs. Rankin, French, Burton and Lutz payable to their designees in an amount equal to three times the annual
compensation payable to each executive.
The aggregate future base salary payable to these four executive officers under the Employment Agreements over
their remaining forty-one month term is $3,129,667. In addition, the Company has recorded a liability of
$1,073,549 representing the potential future compensation payable to Messrs. Rankin, French, Burton and Lutz
under the retirement and voluntary termination provisions of their Employment Agreements.
Lease Commitments
At March 31, 2009 there were no operating leases with initial non-cancelable terms in excess of one year.
Rental expense, after deducting sublease payments of zero, zero and $185,500 for the years ended March 31, 2009,
2008 and 2007, respectively, was $59,648, $59,400 and $66,644.
Litigation
In November 2007, we filed an arbitration claim with the American Arbitration Association ("AAA") against
Phoenix MC, Inc., as successor by merger to Phoenix Motorcars, Inc. ("Phoenix") seeking damages for Phoenix's
breach of the Purchase and Supply Agreement between Phoenix and UQM Technologies, Inc. dated January 12,
2007. The matter was heard by an AAA arbitration panel (the "Panel") in December 2008. On February 24, 2009,
the AAA notified us of the Panel's findings that Phoenix had materially breached the Agreement and awarded
monetary damages to us in the amount of $5,309,649. In addition, the Panel awarded us post-award interest at the
rate of 10 percent per annum on the unpaid amount of the award subsequent to February 6, 2009. On April 27,
2009, Phoenix filed a Chapter 11 Bankruptcy petition with the U.S. Bankruptcy Court. As a result of the
bankruptcy filing, efforts to collect on the arbitration award are stayed. At this time, whether, to what extent, and
when, we will be able to recover any of the amounts that Phoenix owes is uncertain.
We are involved in various claims and legal actions arising in the ordinary course of business. In the opinion of
management, and based on current available information, the ultimate disposition of these matters is not expected to
have a material adverse effect on our financial position, results of operations or cash flow, although adverse
developments in these matters could have a material impact on a future reporting period.
(17) Interim Financial Data (Unaudited)
Fiscal year 2009
Sales
Gross profit
Net loss
Quarters Ended
June 30
September 30 December 31
March 31
$ 1,793,355
$ 194,260
$ (999,715)
2,277,331
415,114
(1,538,111)
2,873,595
863,560
(764,101)
1,784,030
292,710
(1,100,092)
Net loss per common share basic and diluted:
$(0.04)
(0.06)
(0.03)
(0.04)
51
UQM TECHNOLOGIES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Fiscal year 2008
Sales
Gross profit
Net loss
Quarters Ended
June 30
September 30 December 31
March 31
$ 1,454,452
$ 28,903
$ (1,128,751)
1,990,591
363,902
(1,139,894)
1,714,858
273,570
(1,306,996)
2,348,421
410,488
(1,010,464)
Net loss per common share basic and diluted:
$(0.05)
(0.04)
(0.05)
(0.04)
Fiscal year 2007
Sales
Gross profit
Net loss
Quarters Ended
June 30
June 30
June 30
June 30
$ 1,301,332
$ 122,131
$ (762,796)
1,614,218
121,840
(879,570)
1,726,526
153,186
(824,019)
2,011,118
266,144
(964,972)
Net loss per common share basic and diluted:
$(0.03)
(0.04)
(0.03)
(0.04)
(18) Valuation and Qualifying Accounts
Additions
Charged to Charged
to Other
Costs and
Expenses Accounts
Balance at
Beginning
of Year
Deductions
Balance at End
of Year
Year ended March 31, 2009
Not deducted from asset accounts:
Accrued warranty cost
Year ended March 31, 2008
Not deducted from asset accounts:
Accrued warranty cost
Year ended March 31, 2007
Not deducted from asset accounts:
Accrued warranty cost
$ 117,645
121,776
-
154,976 (A)
84,445
$ 74,850
98,434
-
55,639 (A)
117,645
$ 39,480
85,955
-
50,585 (A)
74,850
Note (A) Represents actual warranty payments for units returned under warranty.
52
Sales $ 8,728) 7,508)Gross Profi t 1,766) 1,077) Research and Development 593) 462) Net Loss ( 4,402)(4,586)Net Loss Per Common Share(.17)(.18)UQM Technologies, Inc. is a developer and manufacturer of power dense, high effi ciency electric motors, generators and power electronic controllers for the au-tomotive, aerospace, medical, military and industrial markets. A major emphasis of the Company is developing products for the alternative energy technologies sector including propulsion systems for electric, hybrid electric, plug-in hybrid electric and fuel cell electric vehicles, under-the-hood power accessories and other vehicle auxiliaries and distributed power generation applications. Th e Company’s headquarters, engineering and product development center, and motor manufac-turing operation are located in Frederick, Colorado. For more information on the Company, please visit its worldwide website at www.uqm.com.Cash and Short-Term Investments $ 5,794 9,766) Working Capital 6,641 10,510) Total Term Debt 417 523) Th is Report contains statements that constitute “forward-looking statements” within the meaning of Sec-tion 27A of the Securities Act and Section 21E of the Securities Exchange Act. Th ese statements appear in a number of places in this Report and include statements regarding our plans, beliefs or current expectations, including those plans, beliefs and expectations of our offi cers and directors with respect to, among other things the development of markets for our products and the adequacy of our cash balances and liquidity to meet future operating needs. Important risk factors that could cause actual results to diff er from those con-tained in the forward-looking statements are contained in our Form 10-K fi led on May 21, 2009 which is available through our website at www.uqm.com or at www.sec.gov.March 31, 2009 March 31, 2008Executive Offi cers Business UnitsBoard of Directors Corporate InformationWilliam G. RankinChairman of the BoardPresident and Chief Executive Offi cerDonald A. FrenchTreasurer, Secretary and Chief Financial Offi cerLieutenant General Jerome Granrud (ret.)ConsultantStephen J. RoyPrincipalSTL Capital Partners, LLCJoseph P. SellingerRetired Vice President and Group Executiveof Anheuser Busch CompaniesDonald W. VanlandinghamConsultant, Cadwest LLCRetired ChairmanBall Aerospace and Technology CorporationWilliam G. RankinChairman of the BoardPresident and Chief Executive Offi cerDonald A. FrenchTreasurer, Secretary and Chief Financial Offi cerRonald M. BurtonSenior Vice President of OperationsJon F. LutzVice President of TechnologyProduct Engineering Center and Corporate HeadquartersUQM Technologies, Inc.7501 Miller DriveFrederick, CO 80530Tel: 303-278-2002Fax: 303-278-7007www.uqm.comManufacturingUQM Power Products, Inc.7501 Miller DriveFrederick, CO 80530Tel: 303-278-2002Fax: 303-278-7007AuditorsGrant Th ornton LLPDenver, COLegal CounselHolme Roberts & Owen, LLPDenver, COInvestor RelationsFor copies of the Company’s annual report on Form 10-K and quarterly reports on Form 10-Q at no cost, or for additional information, please contact: Investor Relations Tel: 303-278-2002 Fax: 303-278-7007or visit our web site at www.uqm.comTransfer AgentComputershare Trust Company, Inc.P.O. Box 43070Providence, RI 02940-3020Tel: 800-962-4284 303-262-0600Fax: 303-262-0700www.computershare.comAnnual MeetingTuesday, August 11, 200910 a.m. Mountain Daylight TimeTh e Golden Hotel800 Eleventh StreetGolden, Colorado 80401(303) 279-0100Stock ListingsUQM Technologies, Inc. common stock is listed on the NYSE Amex, Pacifi c, Chicago, Berlin and Frank-furt Stock Exchanges, under the ticker symbol UQM.To improve the capability, performance and energy effi ciency of our custom-ers’ products by providing them with technologically advanced electric power systems and components – motors, generators and power electronic control-lers – that are cost eff ective, reliable and of superior quality, creating a com-petitive advantage for them and a cleaner environment for life on our plan-et. Year Ended March 31, 2009 2008 Our Mission CompanyFinancial Profi le (Dollars in thousands, except per share amounts) UQM Technologies, Inc.Annual Report 2009UQM Technologies7501 Miller Drive, PO Box 439Frederick, CO 80530303-278-2002 Fax 303-278-7007www.uqm.com