UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________
FORM 10-K
_____________________
[X]
[ ]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2013
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-10869
UQM TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
______________________
Colorado
(State or other jurisdiction
of incorporation or organization)
4120 Specialty Place, Longmont, Colorado
(Address of principal executive offices)
84-0579156
(I.R.S. Employer
Identification No.)
80504
(Zip Code)
Registrant’s telephone number, including area code: (303) 682-4900
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class
Common Stock
Name of each exchange on which registered
NYSE MKT
Chicago Stock
Exchange
Pacific Stock Exchange
Berlin Stock
Exchange
Frankfurt Stock
Exchange
Stuttgart Stock
Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act.
Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes [ ] No [X]
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every interactive data
file required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
[ ] Large accelerated filer
[ ] Accelerated filer
[X] Non-accelerated filer
[ ] Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). ( Do not check if a smaller reporting company)
Yes [ ] No [X]
The aggregate market value of the registrant’s common stock (“Common Stock”) held by non-affiliates as of September 30, 2012, based on
the closing price of the Common Stock as reported by the NYSE MKT on such date was approximately $41,618,125. As of May 20, 2013,
there were 37,028,364 shares of the registrant’s Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Document
Portions of the Proxy Statement for the Annual
Meeting of Shareholders to be held August 7,
2013.
Parts Into Which Incorporated
Part III
Table of Contents
PART I ………………………………………………………………………………………………… .
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Item 1. Business ……………………………………………………………………………………… … ……
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Item 1A. Risk Factors ………………………………………………………………………………… .….
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Item 1B. Unresolved Staff Comments ……………………………………… . ……………………… …
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Item 2. Properties …………………………………………………………… . …………………… ….
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Item 3. Legal Proceedings ………………………………………………………… .. ……………… …..
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Item 4. Mine Safety Disclosure ………………………………………………………… .. …………… ..
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PART II ……………………………………………………………………………………………… …
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Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities… …………………………………… …..
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Item 6. Selected Financial Data .. ……………………………… … … …….
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ...…
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk ………………………… …..
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Item 8. Financial Statements and Supplementary Data ……………………………………… …
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Reports of Independent Registered Public Accounting Firm ……………………… …
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Consolidated Bal ance Sheets as of March 31, 2013 and March 31, 2012 ………… …
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Consolidated Statements of Operations for the Fiscal Years ended March 31, 201 3 , 201 2
and 2011 ………………………………………………………………………………………… …
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Consolidated Statements of Stockholders’ Equity for the Fiscal Years
ended March 31, 2013 , 201 2 and 2011
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Consolidated Statements of Cash Flows for the Fiscal Years ended March 31, 201 3 , 201 2
and 2011 ……………………………………………………………………………………………
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Notes to Consolidated Financial Statements ……………………………………………………………
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Item 9. Change In and Disagreements with Independent Accountants on Accountin g and Financial
Disclosure..
Item 9A. Controls and Procedures ………………………………………………………………………………
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Item 9B. Other Information ……………………………………………………………………………………
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PART III …………………………………………………………………………………………………………
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Item 10. Directors, Executive Officers and Corporate Governance ……………………………………………
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Item 11. Executive Compensation ………………………………………………………………………………
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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters …………………………………………………………………………………………… ...
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Item 13. Certain Relationships and Related Transactions and Director Independence ……………………… …
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Item 14. Principal Accountant Fees and Services ………………………………………………………… …
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PART IV ……………………………………………………………………………………………………… …
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Item 15. Exhibits and Financial Statement Schedules ………………………………………………………… .
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Table of Contents
ITEM 1.
BUSINESS
PART I
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, future orders to be received from our customers,
sales of products from inventory, future financial results, liquidity and the continued growth of the electric-powered vehicle industry. Important Risk Factors that
could cause actual results to differ from those contained in the forward-looking statements are listed below in Part I, Item 1A. Risk Factors .
Overview
UQM Technologies, Inc., (“UQM” or the “Company”) is a developer and manufacturer of power dense, high efficiency electric motors, generators and power
electronic controllers for the automotive, commercial truck, bus , marine and military markets. Our primary focus is incorporating our advanced technology into
products for clean vehicles including propulsion systems for electric, hybrid electric, plug-in hybrid electric and fuel cell electric vehicles that are expected to
experience rapid growth over the next ten years. We were incorporated in 1967 as a Colorado corporation. Our headquarters and manufacturing facility is located
in Longmont, Colorado.
The global automotive market is experiencing substantial change driven by a number of factors including changing consumer preferences, global macro-economic
and geo-political developments, the high price of gasoline, increasing competition and additional governmental regulation and incentives. As a result of these
factors, particularly carbon dioxide standards in Europe and the Corporate Average Fuel Economy (“CAFE”) standards in the United States, automakers are
developing and introducing, or planning to introduce, additional vehicle models with increasing levels of electrification, including serial and parallel hybrid-electric
vehicles (“HEV”), plug-in hybrid electric vehicles (“PHEV”) and all-electric vehicles (“EV”) and fuel cell all-electric vehicles (“FCEV”). These vehicles offer
improved energy equivalent gas mileage, lower operating and repair costs and reduced or no tailpipe emissions. The California Air Resources Board has also
passed rules to require 15.4% of all new vehicles sold in California to be EVs, PHEVs or hydrogen fuel cell powered vehicles by 2025. Currently, there are ten
additional states that have or are expected to adopt the zero emission vehicle (“ZEV”) portion of these rules and are considering adopting the remainder of this new
rule. Further, governments around the globe have launched initiatives to subsidize the cost of developing clean vehicles and the components used by them
including motors and generators, batteries, and power management systems. Government incentives have also been adopted to encourage the purchase of HEVs,
PHEVs, EVs and FCEVs by consumers in many developed nations around the world, including a $7,500 federal tax credit in the United States and additional tax
credits in various states for purchases of qualifying vehicles. Additionally, Europe and China have cash incentives and other incentives such as high occupancy
vehicles (“HOV”) lane access, preferred parking, licensing, etc. The International Energy Agency has forecast that nearly 20 million EVs and PHEVs will be on
the road worldwide by 2020 based on announced electric vehicle country goals.
We make propulsion system products, generators and related auxiliary components for EVs HEVs, PHEVs and FCEVs. We market our products in many segments
of the transportation sector including passenger vehicles and light trucks, commercial trucks and buses, off-road vehicles including agricultural and construction
equipment, boats and military vehicles. We believe our proprietary permanent magnet propulsion motor and motor control technology delivers exceptional
performance at a highly competitive cost. Our principal products include propulsion motors and generators with power ratings from 25 kilowatts to 220 kilowatts,
auxiliary motors and electronic controls and DC-to-DC converters. The principal attributes that we believe differentiate our proprietary products are compact size,
high torque delivery, high power density (the ratio of power output to weight) and high energy efficiency .
We believe we are well-positioned to participate in the expanding worldwide market for clean vehicles. In addition to our portfolio of high performance products,
we have taken a number of steps over the last several years to position the C ompany to meet the needs of our automotive custo mers, including: 1) adding senior
executives from leading automobile and Tier 1 suppliers to the automobile industry; 2) adding additional technical and manufacturing resources and capability; 3)
designing, installing and qualifying volume production lines for our motors and generators and their related electronic controllers; 4) establishing a global sourcing
capability; 5) enhancing our
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logistics, production and administrative processes to support higher volumes of manufacturing operations; 6) relocating our headquarters and manufacturing
operations into a 129,304 square foot, world-class facility with 15 adjacent acres for future expansion; 7) launching the next generation of our products which are
expected to have improved performance and efficiency, a smaller package size and a lower production cost , and 8) pursuing the more rigorous TS 16949 quality
certification.
Our electric propulsion systems are powering a large fleet of all-electric Audi A1 e-tron development vehicles, dozens of which are being tested on the streets of
Munich, Germany. Audi has logged over 50,000 kilometers in its first phase of testing with the A1 e-tron extended-range electric vehicles and has expanded
testing of the vehicle in the NPE (National Platform of Electrification) in Germany in 2013. In addition to these programs, we are supplying our electric propulsion
systems and generators to other international automakers and entrepreneurial automobile developers as part of their HEV, PHEV, EV and FCEV vehicle
development programs.
We also supply electric propulsion systems to Proterra, Inc., a developer and manufacturer of all-electric composite transit buses and Boulder EV, a developer and
manufacturer of all-electric delivery trucks and work utility vehicles under multi-year supply agreements. We also supply electric propulsion systems to Electri c
Vehicles International (“EVI” ) a developer and manufacturer of all-electric medium-duty delivery trucks and Hino, a subsidiary of Toyota Motor Corporation , for
their all-electric city bus featuring its Poncho low floor bus platform. Proterra has completed durability testing of its vehicles at Altoona which simulate 500,000
miles and 12 years of operation. Completion of Altoona testing is required by many municipalities who purchase buses. Boulder EV is supplying delivery vans to
FedEx and other customers. EVI is currently completing a build of 100 all-electric delivery vans for UPS and delivery trucks for Frito Lay powered by UQM ®
electric propulsion systems. EVI is also participating in an initiative to deploy 500 fully electric return-to-base delivery trucks under an executive order issued by
California Governor Brown directed towards achieving widespread deployment of electric vehicles throughout California. Hino expects to put more buses in
service this year as new routes are established in cooperation with Japan’s Ministry of Land, Infrastructure, Transport and Tourism.
We have signed a Memorandum of Understanding with a major Chinese company for the development and marketing of UQM ? electric propulsion systems for n
ew e nergy v ehicles ( “ NEV s” ) in China. This agreement expands the global reach of UQM, and represents the initial step in our strategy to penetrate the
Chinese market with our leading electric propulsion products. Under the agreement, UQM and its China-based partner will work collaboratively to introduce
UQM products into the Chinese market for use in NEVs . The China State Council published its New Energy Vehicles plan in July, 2012, setting a goal of 500,000
energy-efficient and clean vehicles on the road in China by 2015, and five million vehicles by 2020. We are also in discussions with several other potential
Chinese partners to supply our products for both all-electric and hybrid-electric vehicles.
We have recently begun to deploy an array of our PowerPhase® systems to the marine market in collaboration with ReGen Nautics, a Florida based developer of
electric and hybrid marine solutions to boat manufacturers. ReGen Nautics use of our propulsion technology has allowed our systems to reach a wide marine
audience, with international involvement. ReGen Nautics has three outboard motors, the E100, E180 and E300 along with several combinations of full electric and
hybrid inboard combinations utilizing both the PowerPhase Pro and the PowerPhase HD propulsion systems.
In 2010, we entered into a ten year Supply Agreement with CODA Automotive (“CODA”) to supply UQM PowerPhase Pro ? 100 kW electric propulsion systems
for CODA’s all-electric four-door sedan. Shortly after our production launch in 2011, CODA experienced delays in the commercial launch of their vehicle and
subsequently ceased production operations due to funding constraints. As a result of substantial uncertainty regarding CODA’s ability to honor their obligations to
us under the Supply Agreement, during the third quarter of fiscal year 2013, we recorded an allowance for doubtful accounts for all trade accounts receivable from
CODA and booked a charge to earnings of $3.8 million. On May 1, 2013 , CODA filed for reorganization under the U.S. Bankruptcy Code. We will file claims
against the CODA Bankruptcy Estat e , however we expect to ultimately recover only a small percentage of the amount claimed. During the fourth quarter of fiscal
year 2013 , we recorded an additional charge of $1 .1 million representing our estimated cost of settling outstanding purchase obligations arising from the CODA
program. The settlement of any such obligations is subject to future negotiation and the timing and amount of any such payments to such suppliers is not currently
determinable, although we expect to settle these potential obligations within a one year period. As of March 31, 2013, we believe we have recorded all
impairments and liabilities that have or could arise as a result of the CODA Bankruptcy.
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We have been awarded a $45.1 million grant (the “Grant”) from the U.S. Department of Energy (“DOE” ) under the American Recovery and Reinvestment Act
(“ARRA”). The period of the Grant is through January 12, 2015. The objective of the Grant is to accelerate the commercialization of products and the installation
of manufacturing infrastructure necessary for the deployment of electric vehicles, batteries and components in the United States. Capital expenditures for facilities,
tooling and manufacturing equipment and the qualification and testing of products associated with the launch of volume production qualify for 50 percent
reimbursement under the DOE program. Our ability to utilize funding from this Grant has allowed us to accelerate the production qualification of our product
portfolio and install volume production lines and other infrastructure , providing us with a n advantage over other motor manufactures and competitors who do not
have access to such funds. Through March 31, 2013, we have qualified for reimbursements under the DOE Grant of $21.2 million, of which $19.6 million has been
received.
We derive our revenue from two principal sources: 1) the manufacture and sale of products engineered by us; and 2) funded contract research and development
services performed for strategic partners, customers and the U.S. government directed toward either the advancement of our proprietary technology portfolio or the
application of our proprietary technology to customers’ products. For the fiscal year ended March 31, 2013, total revenue declined 29 percent to $7,178,709,
principally due to reductions in revenue from CODA. Total revenue, after excluding CODA revenue, increased by 20 percent over the comparable prior year
revenue. Net loss for the fiscal year increased to $10, 688,312, or $0.29 per common share , from $4,928,520 , or $0.14 per common share last fiscal year, and
include s CODA related impairment charges of $4,883,860 , or $0.13 per common share.
Electrification of Vehicles
Potentially large markets are developing as a result of the electrification of a wide-range of vehicle platforms. Increased electrification is being pursued for a
variety of application specific reasons, including: 1) changing consumer preferences; 2) global macro-economic and geo-political developments; 3) the high price
of gasoline; 4) increasing competition; and 5) additional governmental regulation and incentives. Of these reasons, additional governmental regulations and
incentives has emerged as a significant factor in the development and potential rate of growth of the emerging vehicle electrification markets and is being
reinforced by rising crude oil prices and higher gasoline and diesel prices. We expect this trend toward higher fuel prices to continue for the foreseeable future,
driven by tight supply levels, geopolitical turmoil in key oil producing countries and expected future increases in world demand, driven principally by escalating
consumption of fossil fuels by developing countries such as China and India. The U.S. government has adopted new regulations extending fuel economy standards
to medium- and heavy-duty trucks for the first time beginning with model year 2014. CAFE standards will increase the average fuel economy of each
manufacturer’s passenger car and light truck model offerings to 35.5 miles per gallon by 2016 and 54.5 miles per gallon by 2025. The California Air Resources
Board has also passed rules to require 15.4% of all new vehicles sold in California to be EVs, PHEVs or hydrogen fuel cell powered vehicles by 2025. Currently,
there are ten additional states that have or are expected to adopt the ZEV portion of these rules and are considering adopting the remainder of this new rule.
Other recent U.S. Government legislation provides incentives for the production and sale of environmentally friendly vehicles, including the Advanced Technology
Vehicles Manufacturing Incentive Program and the American Recovery and Reinvestment Act of 2010. A partial listing of some of the more notable provisions of
this legislation includes:
• Federal and state tax credits for the purchase of environmentally friendly vehicles;
• Low cost loans to manufacturers and component suppliers to purchase infrastructure and develop manufacturing capacity for clean vehicles and
components used in these vehicles;
• Funding for government agencies to acquire environmentally friendly vehicles;
• Grants for the development of clean vehicles and clean vehicle component technology; and
• Grants for the development of a “smart” electric grid.
The U.S. Government has a policy goal of one million electric vehicles on the road by 2015 and President Obama has announced a directive to government
agencies to ensure that by 2015, all new vehicles they purchase are alternative-fuel vehicles, including hybrid and electric vehicles. The Federal government
operates more than 600,000 fleet vehicles.
There are similar programs in other countries around the world. For example, Germany has a goal of one million electric vehicles by 2020 and five million by
2030. China has announced a goal of 500,000 new energy vehicles by
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2015 and five million by 2020 and has supported this objective by allocating $100 billion Yuan (approximately $15 billion USD) over ten years for investment in
core technologies related to all-electric and hybrid electric vehicles.
Numerous studies have been conducted over the last several years indicating the potential for electric vehicles to capture significant market share over the next five
to ten years. Table 1 summarizes the forecasts of these studies:
PHEV
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Table 1: Electrification Forecast – Unit Sales (thousands)
Forecast
Geography
Pike Research United States
Deloitte
Consulting
BCG
JD Power and
Associates
McKinsey &
Company
Forecast Year
2015
2015
2020
2020
North America
Worldwide and
United States
up to 1,350
World: 1,300
US: 100
up to 1,500
up to 7,000
up to 4,500
up to 22,000
United States
2020
2030
up to 1,350
Worldwide
EV
60
2020
Combined
260
up to 50-80
up to 300-800
2,700
up to 6,000
up to 29,000
We believe that the trend toward increasing electrification of vehicles will continue at an accelerated pace providing a substantial opportunity for the broad
commercial application of our products.
Source: UCLA Luskin School of Public Affairs, May 2011
Technology
Our technology base includes a number of proprietary technologies and patents related to brushless permanent magnet motors, generators and power electronic
controllers, together with software code to intelligently manage the operation of our systems.
The operating characteristics of electric motors for vehicle propulsion are different from those of more conventional industrial motors. Propulsion motors ideally
deliver high levels of torque efficiently at variable rotational speeds and possess the ability to transition from high torque to high speed over a relatively constant
power curve allowing, in some cases, the elimination of conventional transmissions. Our proprietary propulsion systems have been specifically developed for these
applications and deliver exceptional torque and high rotational speeds in a compact, energy efficient machine.
The typical architecture of a UQM ? electric machine (motor/generator) consists of a stator winding employing a high pole count configuration, which allows for
high copper utilization (minimizing energy loss and cost), and a rotor that contains powerful rare earth permanent magnets. Commutation 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 field generated by the stator interacts with the magnetic field of the rotor, producing rotational motion (motor operation). Conversely, the application of
rotational motion by an external force results in the generation of electrical power (generator operation). UQM ? machines can be operated in either a forward or
reverse direction of rotation and either in motor or generator mode and can dynamically change from one mode of operation to another in millisecond response
time. The design features inherent to the electric machine contribute to lower usage of copper, iron and other materials generally (due to smaller package
dimensions), reducing manufacturing costs compared to conventional machines of similar power. UQM ® machines have high operating efficiencies, high power
density (high power output to weight ratio) and generally have smaller external dimensions and weight for a given power output, improving packaging. These
attributes have allowed us to price our advanced motors and controls competitively with lesser performing conventional motors and controls, which we believe will
accelerate the rate of commercialization of our technology.
Rare-earth magnet pricing has been volatile over the last three years, peaking in late 2011 before retreating substantially in 2012 and 2013. There are many factors
that contribute to this volatility, and as a result of future pricing uncertainty, UQM is pursuing an advanced motor technology that eliminates rare-earth
elements. The technology incorporates permanent magnets of an alternate chemistry, arranged in a unique way that maintains the high efficiency and performance
benefits associated with the Company’s products. A patent application has been submitted to protect this innovation. UQM was also selected and awarded $3
million by the DOE in a competitive
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solicitation to pursue this technology. This award was announced in August 2011 and is a multi-year technology development program.
Attributes of our microprocessor-based digital power electronic controllers include high power operation (up to 600 amps and 700 volts), four-quadrant control
(forward/reverse and motoring/generating), reduced switching losses relative to conventional technology, adaptive switch timing control and controller area
network (“CAN”) capability. As a result, UQM ® controllers have high operating efficiencies, high power density (high power output to weight ratio) and generally
have smaller external dimensions and weight for a given power output, improving packaging.
The UQM ? embedded digital signal processor (“DSP”) software is the intelligence that coordinates the interaction between the motor/generator and controller, as
well as interfacing with a vehicle controller. Software control algorithms are an important part of our intellectual property portfolio. One aspect of the software is a
patented method of control referred to as Phase Timing Advancement that enables 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 techniques. These proprietary
software algorithms alter the switching strategy as a function of DC voltage, operating speed, output power and temperature to optimize system performance under
dynamically changing conditions. The result is maximized output and efficiency that decreases fuel consumption in hybrid electric vehicles and increases the range
of battery electric vehicles. Our software 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/generator. The development and application of these
proprietary control algorithms have allowed us to continue increasing the power output and efficiency of our systems. In addition, our controllers have user
configurable functionality and increased data transmission speeds and response times, improving vehicle capability. Included in this functionality is the ability to
switch between torque and speed control dynamically, which is especially useful for parallel hybrids and generator applications of our technology.
Desired propulsion attributes for automotive consist of high torque to launch the vehicle from a standing-stop, with a subsequent transition to high power as the
vehicle is accelerated to highway speeds. In the majority of conventional internal combustion engine powered vehicles, the transition from high torque to high
power is accomplished through multiple gear changes performed by a mechanical transmission. UQM ? systems, incorporating proprietary DSP software
technology, are suited as pr opulsion drives in HEVs, PHEVs and EV s due to their ability to power a vehicle from a standing-stop to highway speeds with reduced
or no mechanical gear changes, thereby reducing or eliminating the size, weight, complexity and cost of multi-speed mechanical transmissions.
The ability to provide both high torque and high top speed creates additional advantages in military vehicles. High torque at low speed translates into obstacle and
grade climbing capability that is more challenging in an off-road environment, while high speed enables pursuit, dash and evasive maneuvers as well as convoy
transport. Conventional propulsion systems meet the high torque and high road speed requirements by using a transmission and additional gearing beyond that used
for commercial vehicles.
We have also developed auxiliary electronic products that perform other functions on HEVs, PHEVs and EV s. We currently manufacture proprietary DC-to-DC
converters that reduce the voltage level of a 250 volt to 450 volt vehicle battery pack to 12 or 24 volts powering lower voltage devices onboard these vehicles.
We have two U.S. patent applications pending related to new technology: one that covers rotor technology for a permanent magnet electric machine and another
that covers a brushless permanent magnet machine construction using low coercivity (non-rare-earth) magnets. We are also performing research and development
to continually improve the functionality of the microprocessor software we use to intelligently control our motor/controller system.
The majority of our research and development activities are the result of projects contracted with and funded by customers, for which we typically retain
intellectual property rights in the resulting technology developed. Customer funded development activities are recorded in our financial statements as contract
services revenue and the associated development costs are shown as costs of contract services. Internally-funded research and development expenditures are
charged to research and development expense when incurred.
In recent years, we have focused our development activities on the product validation of commercial products and production engineering 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 field. We believe our future growth is
dependent, in part, on the continued advancement of our technology portfolio and our ability to commercialize our technology in additional
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product applications and markets, driven by customer and market demand. Accordingly, we expect to selectively invest in internally funded development projects
to accomplish these objectives.
Markets for our Products
We believe that our technology and products are well-suited for application in a wide-range of vehicles as the trend toward electrification continues to gain
momentum. In this regard, we have focused our attention on several markets where we believe we can most effectively compete and which we expect will have
higher than average rates of growth and expansion. A brief description of each of these markets follows:
Passenger automobiles and light trucks - In past years, more than 50 million passenger automobiles and light trucks were sold worldwide of which 11 to 17
million units were sold annually in the United States. Over the last several years, a market has developed for automobiles that are powered by hybrid electric
powertrains. These vehicles have good performance and provide above average fuel economy compared to conventional automobiles. In addition, several
automakers have introduced all-electric passenger vehicles including Nissan, Ford, Mitsubishi, GM Fiat, Honda and Tesla.
We are also supplying UQM ® electric propulsion systems to Audi for their test fleet of A-1 e-tron all-electric passenger cars , which are currently under test in
locations across Europe.
In addition to established automakers, there are a variety of small entrepreneurial companies that are developing and have introduced or intend to introduce all-
electric, hybrid-electric or plug-in hybrid-electric cars. Most visible of these is Tesla, which introduced an all-electric sports car and an all-electric passenger car.
Although many of these entrepreneurial companies lack substantial financial resources of established automobile manufacturers and/or significant automobile
industry experience, they are pursuing a variety of strategies to introduce these types of automobiles into either niche markets, such as for fleet users or high-end
luxury sports car buyers, or the consumer vehicle market generally. Should any of these companies be successful in commercializing their product offerings, it
could cause the growth rate of this market to accelerate. These companies are generally using electric or hybrid electric powertrains that they have developed
themselves or have been developed by other entrepreneurial companies.
Trucks, Buses and Recreational Vehicles - In 2012, according to ACT research an estimated 425,000 medium and heavy-duty on-road trucks were sold in the
United States. The market for these vehicles is characterized by a large number of suppliers, a wide-range of vehicle designs and configurations, diverse power and
performance levels and relatively low production volumes for each model. As a result, the typical truck, bus and other medium and heavy-duty vehicle manu
facturer have traditionally out sourced many of these components and will likely continue to do so for the components necessary to electrify their vehicles.
Accordingly, we expect these manufacturers to purchase products from suppliers who have developed technolog ically advanced electric motors, generators and
power electronic energy management controls that can be applied to their vehicles. Recently, a subsector of this market has begun to develop for medium-duty
delivery trucks that operate on a well-defined route where average daily mileage requirements have little variability. In this subsector, truck manufacturers are
beginning to offer delivery trucks with custom designed battery capacity, whereby the delivery vehicle has only the battery content onboard that is necessary to
achieve its route mileage plus a small increment of additional energy for contingencies. For these trucks, the optimized amount of energy stored in batteries reduces
the cost of the batteries onboard an all-electric truck to a point where the vehicle is nearly competitively priced, on a life-cycle cost basis, with a conventional
internal combustion powered delivery truck of the same size. We believe this pricing parity will accelerate the growth of this subsector in the near term. We are
supplying electric propulsion systems to Electric Vehicles International, who has developed an all-electric medium-duty delivery truck. EVI recently announced an
order for 100 delivery trucks for UPS and an order from Frito Lay for delivery trucks powered by UQM ® electric propulsion systems. EVI has launched an
initiative to deploy 500 fully electric return-to-base delivery trucks over the next two years to help implement California’s Governor Brown’s executive order to
achieve widespread deployment of electric vehicles throughout California. We are also supplying electric propulsion systems to Boulder EV under a three - year
supply agreement, who has developed an all-electric delivery truck. Boulder EV has announced a program to provide test fleet vehicles to FedEx. We expect the
medium and heavy-duty hybrid electric truck market to grow at an accelerating rate as potential customers for these vehicles gain a greater understanding of their
operational, environmental and economic advantages.
We are currently supplying an automotive qualified DC-to-DC converter to Eaton Corporation which is used onboard medium and heavy-duty hybrid trucks sold
by Freightliner, International and Paccar, and we offer for sale a DC-to-AC inverter to meet the growing onboard and export power requirements of hybrid trucks.
6
Several truck manufacturers are also 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. We intend to continue to aggressively pursue the commercialization of our products for these and other applications in
the market for electric and hybrid trucks as it emerges over the next several years.
We are also supplying propulsion systems for electric buses being developed and produced by Proterra under a three - year supply agreement. The 37-foot Proterra
composite body bus is being developed in both an all-electric battery and plug-in hybrid configuration. Proterra recently announced that they increased their
production capacity to 400 buses per year at their 200,000 square foot bus manufacturing facility in Greenville, South Carolina. Proterra also recently completed
the rigorous Altoona vehicle durability and full-life testing program required to sell buses to many municipal transit operators. We also are providing electric
propulsion systems for Hino’s electric city-bus, featuring their ‘Poncho’ low floor bus platform currently in service at the Hamura City and Tokyo Sky Tree
tourist locations in Japan. Hino expects to put more buses in service this year as new routes are established in cooperation with Japan’s Ministry of Land,
Infrastructure, Transport and Tourism. Hino Bus is a subsidiary of Toyota Motor Corporation.
We are also executing a strategy to enter the bus market in China with a China - based partner. The market for electric buses in China is expected to grow
substantially over the next several years, primarily driven by incentives from the Chinese government. New reports indicate that China is now the world’s largest
producer of vehicles and that its medium- and heavy-duty vehicle market is expected to be a key area of deployment activity for New Energy Vehicles.
Commercial vehicles, such as truck and buses, represent a much larger portion of the overall vehicle population in China than they do in the U.S. and the number of
buses is expected to grow rapidly. China currently has an aggressive 25 city demonstration program for NEVs, including electric and hybrid medium and heavy-
duty vehicles. The Chinese government has recently expressed greater openness to foreign collaboration on NEV technologies to help it meet its deployment goals
which presents an opportunity for us to enter this potentially high growth market. We are also in discussions with several other potential Chinese partners to
supply our products for both all-electric and hybrid-electric vehicles.
Off-road vehicles – We have also developed electric power products for the aircraft and aerospace market and the boat and marine market. In the boat market,
we have developed generators for onboard power production in hybrid-electric boats as well as electric propulsion systems. The marine market is forecast ed to be
a growing segment of electrified vehicles. During the year we saw increased activity and interest within the marine segment. Regen Nautics has three UQM
based outboard motors, the E100, E180 and E300 along with several combinations of full electric and hybrid inboard combinations utilizing both the PowerPhase
Pro and PowerPhase HD propulsion systems. They have prominently displayed our product at several International Boat shows including Dusseldorf , Monaco and
Miami, and in a variety of boats including the all-electric Mylne Bolt 18 yacht tender, the Bruce Runabout all-electric motorboat, the Goldfish 23 e-Fusion, Alibi
Catamarans, Rhea Marine, Bering Yachts and Grand Banks.
Military vehicles - The U.S. military purchases a wide-range of ground vehicles each year, including combat 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 supply operations and for the transport of fuel used on the
battlefield. The military is particularly interested in the electrification of vehicles because the attributes that these vehicles possess offer exceptional potential for
the military to achieve its long-term objectives of developing a highly mobile, lethal fighting force. Fuel economy improvements in military vehicles transfer into
substantial savings in support infrastructure and transportation costs associated with transporting fuel to the battlefield, 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 corresponding amount of fuel does not have to be
transported and therefore a corresponding number of airplanes or tankers are not required in the transportation process. Also, the availability of onboard electrical
power on military vehicles opens up new opportunities for the development of sophisticated surveillance, detection and battlefield 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 conflict. As is the case with large off-road equipment, these vehicles are produced in relatively lower volumes, operate 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 military contractors and vehicle makers including DRS Technologies, AM General, BAE Systems, Boeing, General Dynamics and
others, on prototype hybrid electric vehicles, high export power g enerators, electric auxiliaries and DC-to-DC converters. Although this market has not yet
emerged, we believe 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 required by many military vehicles.
7
Marketing Channels and Sales
Based on the global aspect of the electrification market, we believe that opportunities exist on a global basis and we have developed a strategy to address markets
in all regions. These regions include North America, Asia Pacific, Europe, and the Middle East. We believe each region has opportunities that lie within the
markets that we have identified as areas of strategic growth for our company.
We have several sales channels where the markets differ based on the complexity of the product. These channels consist of:
• Direct Sales to Original Equipment Manufacturers (“OEM”). In this environment, the account team works directly with designers and manufacturers of
particular applications within the Automotive, Industrial and Commercial Truck and Bus marketplace to supply off-the-shelf as well as custom designed
solutions to customers.
• Tier 1 channels, where the account team engages suppliers of OEMs. In this environment, we provide sub-systems to the Tier 1 suppliers from a Tier 2
position. Our technology is integrated and validated as a system and provided to the OEM as part of the Tier 1 solution.
• Vehicle Integrators - This marketing channel is characterized by the development of a relationship with companies that perform vehicle development
activities for automobile companies worldwide. Many of these companies have substantial autonomy to source vehicle components at the earliest stages of
a vehicle development program. As a result of our multi-year relationships supplying many of these companies with our products, we have been able to
develop and foster within their organizations a confidence in the performance characteristics, ease of application and durability of our products that has
led to additional early stage placements of our products in automakers vehicle development programs.
• Conferences and Symposiums also provide marketing channels for additional product offerings.
U.S. Department of Energy Stimulus Grant
We have been awarded a $45.1 million Grant from the DOE under the American Recovery and Reinvestment Act. The Grant provides funds to facilitate the
manufacture and deployment of electric drive vehicles, batteries and electric drive vehicle components in the United States. Pursuant to the terms of our Grant
Agreement, the DOE will reimburse 50 percent of qualifying costs incurred for the purchase of facilities, tooling and manufacturing equipment, and for
engineering expenditures related to product qualification and testing of our electric propulsion systems and other products. The period of the Grant is through
January 12, 2015.
The $45.1 million size of the Grant is based on the estimated cost of a project to implement high volume manufacturing operations provided in our application to
the DOE under the Electric Drive Vehicle Battery and Component Manufacturing Initiative. Funding for qualifying project costs is currently limited to $32 million
until July 12, 2013, at which time we are required to provide the DOE with an updated total estimated cost of the project along with evidence of firm commitments
for our 50 percent share of the total estimated cost of the project in excess of our currently accepted cost share match of $32 million. If an extension or modification
of this requirement has not occurred or all such funds have not been secured, we must submit, by such date, a funding plan to obtain the remainder of such funds,
which is acceptable to the DOE, or the award may be terminated.
The Grant is also subject to our compliance with certain reporting requirements. As specified in the American Recovery and Reinvestment Act, we are required to
use the Grant funds in a manner that maximizes job creation and economic benefits. The American Recovery and Reinvestment Act and the Grant Agreement
impose minimum construction wages and labor standards for projects funded by the Grant and some sourcing restrictions.
If we dispose of assets acquired using Grant funding, we may be required to reimburse the DOE upon such sale date if the fair value of the asset on the date of
disposition exceeds $5,000. The amount of any such reimbursement shall be equal to 50 percent of the fair value of the asset on the date of disposition.
While we have exclusive patent ownership rights for any technology developed with Grant funds, we are required to grant the DOE a non-exclusive, non-
transferable, paid-up license to use such technology.
The Grant has numerous benefits to the Company and its shareholders including: 1) substantially reducing our cost of capital; 2) substantially mitigating the
financial risk of production qualification of our products and acquiring the facilities and equipment necessary to support volume production of our products; 3)
substantially reducing our product
8
qualification and testing costs; and 4) improving product margins on products manufactured on equipment subsidized by the Grant.
Through March 31, 2013, we have qualified for reimbursements under the DOE Grant of $21.2 million, of which $19.6 has been received. Of the amount received,
$9.1 million was for capital assets and $10.5 million was reimbursements of product qualification and testing costs. We had an amount receivable from the DOE at
March 31, 2013 of $1.6 million .
The application of Grant funds to eligible capital asset purchases under the Grant as of March 31, 2013 is as follows:
Land
Building
Machinery and equipment
Manufacturing
Purchase Cost
Grant Funding
Recorded Value
$
$
896,388
9,906,736
7,581,408
18,384,532
448,194
4,953,368
3,790,704
9,192,266
448,194
4,953,368
3,790,704
9,192,266
It is our primary objective to become a major manufacturer of electric motor, generator and other power electronic products that incorporate our proprietary
technology and to supply these products to electric, hybrid electric and fuel cell electric vehicle manufacturers and/or their Tier 1 suppliers. To this end, in
December 2009, we acquired a 129,304 square foot facility on 15 acres together with 15 acres of adjacent vacant land in Longmont, Colorado to support our
expected growth in manufacturing operations. We have installed and qualified two semi-automated production cells at this facility with a two shift production
capacity of up to 40,000 units per year of our automotive 100 kW and 135 kW PowerPhase Pro ? electric motor and motor controller. We expect to add additional
production capacity in this facility and are currently completing installation of additional capacity to support heavy duty systems (truck and bus) with the ability to
handle future product variants that are expected to be released in the future.
Over the last several years, we have established a production engineering group with decades of manufacturing design and production experience, much of which
is specific to the electric motor or automotive industries. We have adopted the Advanced Product Quality Planning (“APQP”) automotive procedures for the
development and volume production of our products . We are also upgrading our software systems and enhancing our internal processes in anticipation of growth
in our production volumes.
We also have a production cell for the assembly of our larger frame size, higher power, lower volume prototype motors. The annual capacity of this cell is
approximately 5,000 systems per shift per year.
We also manufacture a truck qualified DC-to-DC converter for Eaton Corporation as part of their hybrid electric power system for the heavy truck market, as well
as for other electric and hybrid electric vehicle manufacturers. We have a dedicated manufacturing cell for these systems.
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, testing, pack-out and shipping of the product are performed at our Colorado facility. We have established
relationships with many high-quality, low-cost suppliers, including a number of international companies. Future plans are to continue the development and
introduction of more advanced and automated manufacturing systems which we believe will ensure our competitiveness in new and growing markets.
Our company is currently certified under the ISO 9001:2000 quality standards. We are currently working on qualifying our operations under the more difficult TS
16949 standard for the automotive sector with certification expected in calendar 2014.
9
Product Development Activities
We are currently developing product variants of the PowerPhase HD ® electric propulsion system for the medium-duty commercial truck and bus markets. These
product variants will offer specific characteristics requested by customers.
We are also working on the next generation of PowerPhase Pro ® products designed to be smaller, lighter weight, more energy efficient and producible at lower
cost with equal or better performance than our current PowerPhase Pro ® systems. Development targets include a reduction of 50 percent in the size of the motor
controller.
We are also pursuing an advanced motor technology that eliminates rare-earth elements. The technology incorporates permanent magnets of an alternate chemistry,
arranged in a unique way that maintains performance benefits. A patent application has been submitted to protect this innovation. We were awarded a $3 million by
the DOE in a competitive solicitation to pursue this technology. This award was announced in August 2011 and is a three-year technology development program.
Our Opportunity
We have developed a range of products including electric propulsion motors, generators, power electronic controllers and other power electronic products that we
believe are ideally suited to the growing markets for electric, hybrid electric and fuel cell electric vehicles.
Our PowerPhase Pro ? 100 kW and 1 3 5kW electric propulsion system and our PowerPhase HD 220 system, have been fully automotive qualified in commercial
quantities which we believe will provide substantial economies of scale, permitting us to achieve production costs and pricing that will be difficult for others who
have not launched similar high volume production to compete with. We expect that this pricing and product availability advantage will allow us to further expand
the roster of automobile makers who select our propulsion systems for their future vehicle programs.
In addition to the passenger automobile market, vehicle makers of all types have been evaluating the potential of applying electric and hybrid electric technology to
their vehicle platforms. Of these manufacturers, medium and heavy-duty truck and bus builders and military manufacturers have been the most active, driven by
the performance and fuel economy advantages available from this technology. All-electric have the added benefit of quiet operation and emission free driving.
Hybrid electric commercial vehicles have excellent performance, unlimited range and have the capability to generate large amounts of onboard and exportable
power. We believe that these industry developments signal the beginning of a potentially large-scale deployment of electric propulsion and related electronic
products into markets beyond mass-market passenger automobiles. Should these products receive broad customer acceptance, as we expect they will, additional
opportunities will likely develop over time for our company. In addition to developing markets for these vehicles in North America and Europe, China’s current
five - year plan provides substantial incentives to manufacturers of all-electric and hybrid electric trucks and buses which is expected to lead to substantial growth
in the number of such vehicles produced and placed into commercial service over the next several years.
In the past, we have supplied our electric propulsion systems and generators to small niche developers of electrically powered vehicles or as part of technology
development and assessment programs by the U.S. government, and larger commercial customers. However, over the last few years, we have supplied our
propulsion systems to several international automotive manufacturers as part of their electric and hybrid electric vehicle development activities, including publicly
announced fleet build or vehicle development programs with Audi and Rolls Royce. Should any of these automakers elect to utilize our products in future model
launches, it would have a material impact on our future rate of growth.
We have invested substantial amounts of human resource and capital on establishing higher volume manufacturing infrastructure to meet the potential production
requirements of our existing and future customers. As the markets for our customers’ clean vehicles expand, we expect to make additional investments in support
of our strategy to aggressively introduce automotive certified products to satisfy our customers’ requirements.
We also expect to experience potentially rapid growth in our revenue coincident with the introduction of electric products by our customers. In parallel to these
activities in the automotive market, we expect to continue to pursue additional production opportunities for our proprietary technology in existing markets where
the performance of our products can provide our customers with a competitive advantage in the markets they serve.
10
Competition
All of the markets in which we operate are highly competitive and are characterized by rapid changes due to technological advances that can render existing
technologies and products obsolete.
We develop advanced electric propulsion systems and components which we hope to market to vehicle Original Equipment Manufacturers and their Tier 1
suppliers throughout the world for use in electric, hybrid electric, plug-in hybrid electric and fuel cell electric vehicles. In recent years, the market for hybrid
electric automobiles has begun to emerge, led by the introduction and market success of hybrid electric vehicles manufactured by Toyota, Honda, Ford and General
Motors and others. In the commercial vehicle markets, International Truck and Engine Corporation, Freightliner Trucks and Paccar offer hybrid electric medium-
duty trucks, and Caterpillar, Inc. produces a belt-less engine/electric tracked bulldozer. As a result, additional vehicle makers in both on-road and off-road markets
are expected to develop and introduce a variety of hybrid electric and all-electric vehicles as market acceptance of these vehicles continues to grow. We cannot
assure that we will be able to compete successfully in this market or any other market that now exists or may develop in the future. There are numerous companies
developing products that do or soon will compete with our systems. Some of these companies possess significantly greater financial, personnel and other resources
than we do, including established supply arrangements and volume manufacturing operations. We believe our principal competitors include Toyota, Honda,
General Motors, Hitachi, Toshiba, Siemens, Delphi, Danaher, Enova, Continental, Magna, Remy, and Bosch.
Patents
We hold several groups or families of patents.
U.S. Patent No. 5,592,731 and U.S. Patent No. 5,382,859 relate to a stator for high-power density electric motors and generators, and a method of constructing the
same. Corresponding applications have been filed and issued in several foreign countries.
U.S. Patent No. 5,677,605 discloses and claims a brushless motor and drive system using phase timing advancement. Corresponding applications have been filed
and issued in several foreign countries.
U.S. Patent No. 5,982,063 discloses and claims an electric motor having an internal brake. Corresponding applications have been filed and issued in several foreign
countries.
U.S. Patent No. 6,522,130 discloses and claims a method for controlling a brushless electric motor having a rotor, and relates to an accurate method for sensing
rotor position and detecting rotational speed over a broad range of speeds. U.S. Patent No. 6,693,422 is a related U.S. patent entitled “ Accurate Rotor Position
Sensor and Method Using Magnet and Sensors Mounted Adjacent to the Magnet and Motor ” . Corresponding applications have been filed and issued in several
foreign countries.
In 2007, we filed patent applications for a stator design in the United States, Canada, and Europe. The U.S. and Canadian applications have granted as U.S. Patent
No. 7,755,244 and CA 2,615,111, respectively. The European application is currently pending.
In 2007, we filed patent applications for a permanent magnet rotor geometry for permanent magnet electric motors in the United States, Canada, and Europe. The
United States application issued as U.S. Patent No. 7,598,645. The Canadian application issued as CA 2,615,111. The European application is currently pending.
In November 2010, we filed a US patent application for a rotor for a permanent magnet electric machine. This application is pending. Corresponding patent
applications have been filed in Europe and Canada.
In addition, in 2012, we submitted a U.S. and an International PCT application for a Brushless PM Motor Construction Enabling Low Coercivity Magnets. These
applications are still pending .
11
Trademarks
We have registered the letters "UQM" in the U.S. Patent and Trademark Office. Counterpart applications have been filed in numerous countries throughout the
world, most of which have granted registrations or indicated them to be allowable. We own three U.S. Trademark Registrations for "UQM" (International Class 7
for power transducers, Class 12 for utility land vehicles, and Class 16 for publications). The foreign trademark registrations and applications include major markets
where we are doing business or establishing business contacts.
We have also registered the trademark "POWERPHASE" which we use in conjunction with certain of our propulsion systems. The trademark is registered in the
European Community and several other foreign countries .
Financial Information about Geographic Areas
The following summarizes total revenue by geographic area:
United States
Foreign Countries
$
$
5,695,623
1,483,086
7,178,709
7,774,946
2,368,510
10,143,456
6,544,485
2,476,817
9,021,302
2013
2012
2011
Fiscal Year Ended March 31,
Classification of geographic area is determined based upon the country where the purchase transaction originated.
Backlog
We had unperformed service contracts from customers, which will provide future revenue upon completion totaling approximately $1.0 million at April 30, 2013
versus $1.4 million at April 30, 2012. Our order backlog for products at April 30, 2013 was approximately $2.8 million versus $11.5 million at April 30, 2012.
Certain orders are blanket purchase orders which are subject to the issuance of subsequent release orders directing the number and timing of actual deliveries.
Substantially all of the backlog amounts at April 30, 2013 and 2012 are subject to amendment, modification or cancellation. We expect to complete all
unperformed service contracts over the next twenty-one months and ship motor and controller backlog products over the next twelve months.
Customers and Suppliers
We have historically derived significant revenue from a few key customers. Revenue from Electric Vehicles International totaled $1,494,024, $41,388, and
$269,022 for the fiscal years ended March 31 2013, 2012 and 2011, respectively, which was 21 percent, 1 percent and 3 percent of our consolidated total revenue,
respectively.
Trade accounts receivable from Electric Vehicle International were 3 percent and nil of consolidated total accounts receivable as of March 31, 2013 and 2012,
respectively. Inventories consisting of raw materials, work-in-progress and finished goods for this customer totaled $152,987 and zero at March 31, 2 013 and
2012, respectively.
Revenue from Meggitt (Addison), Inc. totaled $816,779, $747,924 and $626,966 for the fiscal years ended March 31, 2013, 2012 and 2011, respectively, which
was 11 percent, 7 percent and 7 percent of our consolidated total revenue, respectively.
Trade accounts receivable from Meggitt (Addison), Inc. were 5 percent and 3 percent of consolidated total accounts receivable as of March 31, 2013 and 2012,
respectively. Inventories consisting of raw materials, work-in-progress and finished goods for this customer totaled $191,176 and $185,007 at March 31, 2013 and
2012, respectively.
Revenue from Audi totaled $728,000, $455,000 and zero for the fiscal years ended March 31, 20 1 3, 2012 and 2011, respectively, which was 10 percent, 4 percent
and nil of our consolidated total revenue, respectively. Inventories consisting of raw materials, work-in-progress and finished goods for this customer totaled zero
and $105,246 at March 31, 2013 and 2012, respectively.
12
Revenue from CODA Automotive totaled $213,745 $4,313,728 and $1,301,224 for the fiscal years ended March 31, 2013, 2012 and 2011, respectively, which was
3 percent 43 percent and 14 percent of our consolidated total revenue, respectively.
Trade accounts receivable from CODA were nil and 61 percent of consolidated total accounts receivable as of March 31, 2013 and 2012, respectively. During 2013
we recorded a $ 3.8 million allowance for uncollectible trade accounts receivable from CODA, reducing the trade accounts receivable to nil. Inventories consisting
of raw materials, work-in-progress and finished goods originally designated for CODA but transferred to general inventory at March 31, 2013 totaled
$8,291,423. Inventories for CODA were $8,048,999 at March 31, 2012. Based on our projections, we believe we will fully utilize our general inventory balances
for production over our planning horizon.
Principal raw materials and components purchased by us include iron, steel, electronic components, magnets and copper wire. Most of these items are available
from several suppliers. Certain components used by us are custom designs and if our current supplier no longer made them available to us, we could experience
production delays.
During calendar year 2011 and 2012 we experienced significant price escalation in the cost of magnets used in our motors, which contain the rare-earth elements
neodymium and dysprosium. These price increases were driven primarily by changes in government policy in China, where our magnets are made. The price of
neodymium and dysprosium have decreased materially from their peak price in the summer of 2011 according to data published by metal-pages.com, but are
nevertheless, are still above the base line prices at the beginning of calendar year 2011. We have not experienced any disruption in supply of magnets and magnet
prices may continue to be volatile until mining operations outside of China increase or restart.
U.S. Government Contracts
Revenue derived from contracts with agencies of the U.S. Government and from subcontracts with U.S. Government prime contractors totaled $1,078,930,
$684,489 and $1,112,307 for the fiscal years ended March 31, 2013, 2012 and 2011, respectively, which was 15 percent, 7 percent and 12 percent of our
consolidated total revenue, respectively. Accounts receivable from government-funded contracts represented 77 and 9 percent of total accounts receivable as of
March 31, 2013 and 2012, respectively.
Some of our busi ness with the U.S. Government i s performed on a cost plus fixed fee basis. These contracts provide for reimbursement of costs, to the extent
allocable and allowable under applicable regulations, and payment of a fee. Certain other contracts with the U.S. Government provide for the reimbursement of
costs on a 50 percent cost-sharing basis and have not-to-exceed billing rates negotiated between the U.S. Government and us. Other U.S. Government business is
performed under firm fixed price contracts. On “cost-share” and “firm fixed price” contracts, we can incur an actual loss in the performance thereof if incurred
costs exceed the contract amount. All of our U.S. Government contracts are subject to modification or cancellation at the convenience of the Government.
We have a Grant for $45,145,534 with the DOE under the American Recovery and Reinvestment Act. The Grant provides funds to facilitate the manufacture and
deployment of electric drive vehicles, batteries and electric drive vehicle components in the United States. Pursuant to the terms of the Assistance Agreement, the
DOE will reimburse us for 50 percent of qualifying costs incurred for the purchase of facilities, tooling and manufacturing equipment, and for engineering related
to product qualification and testing of our electric propulsion systems and other products. The period of the Grant is through January 12, 2015.
Funding for qualifying project costs incurred is currently limited to $32.0 million until July 12, 2013, at which time we are required to provide the DOE an updated
total estimated cost of the project along with evidence of firm commitments for our 50 percent share of the total estimated cost of the project in excess of our
currently accepted cost-share match of $32.0 million. If an extension or modification of this requirement has not occurred or all such funds have not been secured,
we must submit by such date, a funding plan to obtain the remainder of such funds, which is acceptable to the DOE, or the award may be terminated.
If we dispose of assets acquired using Grant funding, we may be required to reimburse the DOE upon such sale date if the fair value of the asset on the date of
disposition exceeds $ 5,000. The amount of any such reimbursement shall be equal to 50 percent of the fair value of the asset on the date of disposition.
At March 31, 2013, we had received reimbursements from the DOE under the Grant totaling $19.6 million of which $9.1 million was for capital assets and $10.5
million was reimbursements of product qualification and testing costs. We also had an amount receivable from the DOE at March 31, 2013 of $1 .6 million .
13
The application of Grant funds to eligible capital asset purchases under the Grant as of March 31, 2013 is as follows:
Land
Building
Machinery and equipment
Purchase Cost
March 31, 2013
Grant Funding
Recorded Value
$
$
896,388
9,906,736
7,581,408
18,384,532
448,194
4,953,368
3,790,704
9,192,266
448,194
4,953,368
3,790,704
9,192,266
We also have a $4.0 million program with the DOE to develop non-rare-earth magnet electric motors for use in electric and hybrid vehicles. The DOE is providing
$3.0 million of funding for this three year program and the Company is providing $1.0 million of cost-share contribution. The objective of the program is to
identify and evaluate magnet materials and technology that can deliver performance comparable to our rare-earth magnet motors, broaden our product portfolio,
potentially lower magnet costs and limit our exposure to price and supply concerns associated with rare-earth magnets. At March 31, 2013, we had received
reimbursements from the DOE of $552,817.
Employee and Labor Relations
As of April 30, 2013, we had 67 total employees, of whom 65 are full-time employees. We have entered into employment agreements with six of our officers. One
of these employment agreements is for Mr. French, our former Treasurer, Secretary and Chief Financial Officer who is retiring at the end of May 2013. Mr.
French’s employment agreement expired on August 22, 2012 ; however, the provisions of the expired agreement will remain in effect until his retirement date. The
remaining employment agreements expire on August 31, 2015. We believe our relationship with employees has been generally satisfactory.
In addition to our full-time staff, we from time to time engage the services of outside consultants and contract employees to meet peak workload or specialized
program requirements. We do not anticipate any difficulty in locating additional qualified engineers, technicians and production workers, if so required, to meet
expanded research and development or manufacturing operations .
Available Information
We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”). Anyone seeking
information about our business can receive copies of our FY2013 Annual Report on Form 10-K, Annual Report to Shareholders, Quarterly Reports on Form 10-Q,
Current Reports on Form 8-K, all amendments to those reports and other documents, filed with the SEC at the public reference section of the SEC at 100 F Street,
NE, Room 1580, Washington, D.C. 20549. These documents also may be obtained, free of charge, by: contacting our Investor Relations office by e-mail at
investor@uqm.com; by phone at (303) 682-4900; writing to UQM Technologies, Inc., Investor Relations, 4120 Specialty Place, Longmont, CO 80504-5400; or
accessing our website at www.uqm.com. We make our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and
amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, available on our website as soon as
reasonably practicable after we file or furnish the materials electronically with the SEC. To obtain any of this information, go to www.uqm.com, select “Investor
Relations” and select the form you would like to access. Our website also includes our Audit Committee Charter, Governance Committee Charter and Code of
Business Conduct and Ethics as well as the procedures for reporting a violation of business ethics . Information on our website does not constitute part of this
Annual Report.
14
Table of Contents
ITEM 1A.
RISK FACTORS
We operate in a challenging and changing environment that involves numerous known and unknown risks and uncertainties that could materially affect our
operations. The risks, uncertainties and other factors set forth below may cause our actual results, performances or achievements to be materially different from
those expressed or implied by our forward-looking statements. If any of these risks or events occur, our business, financial condition or results of operations may
be adversely affected.
We have incurred significant losses and may continue to do so.
We have incurred significant net losses as shown in the following tables:
Fiscal Year Ended March 31,
2012
2011
2013
Net loss
$
10,688,312 $
4,928,520 $
1,992,358
As of March 31, 2013 , we had an accumulated deficit of $91, 175,301 .
In the future, we plan to make additional investments in product development, facilities and equipment and other costs related to the commercialization of our
products. As a result, we expect to continue to incur net losses at least through March 31, 2014 and potentially beyond .
Our operating losses, anticipated capital expenditures and working capital requirements in the longer term may exceed our current cash balances.
Our net loss for the fiscal year ended March 31, 2013 was $10, 688,312 versus a net loss for the fiscal years ended March 31, 2012 and 2011 of $4,928,520 and $
1,992,358 , respectively . At March 31, 2013, our cash and short-term investments totaled $4,527,899. We expect our losses to continue through at least March 31,
2014 and potentially beyond. Our existing cash resources, funding expected from our ARRA grant, proceeds from the sale of our prior facility, together with cash
generated from reductions in our inventories of PowerPhase Pro propulsion systems are expected to be sufficient to complete our business plan for at least the next
two years. Should those resources be insufficient, we may need to secure additional debt or equity funding, which may not be available on terms acceptable to us, if
at all .
CODA has filed for bankruptcy protection and we may not be able to recover any amounts due to us under our Supply Agreement, including substantial
amounts due for accounts receivable, inventory purchases and guaranteed minimum payments.
We executed a ten - year Supply Agreement with CODA in July, 2009 which provided a framework for CODA, or its manufacturing partner, to purchase from us
electric propulsion systems for use in automobiles to be manufactured by CODA. On May 1, 2013, CODA filed for bankruptcy protection. Amounts due from
CODA at March 31, 2013 totaled $3,838,092, all of which had been reserved as uncollectible. In addition, CODA is obligated under the Supply Agreement for
inventory purchases totaling approximately $ 8.2 million and for a guaranteed minimum payment of $2 million due to their failure to purchase at least 15,000
units. It is likely that we will recover only an insignificant amount of the balance owed to us under the Supply Agreement, if any.
We entered into purchase contracts with our supply base to support the CODA program, some of which are non-cancellable by their terms. Our actual
liability under these contracts may vary from our current estimates.
We have recorded a liability of $1,050,000 representing the amount we expect to pay to settle non-cancellable contracts with certain suppliers to the CODA
program that will not be fulfilled due to the bankruptcy filing by CODA. The amount of this liability represents management’s current estimate and may be subject
to further adjustment based on future negotiations or litigation. Settlements in excess of our estimates or any upward revision in our settlement estimate could
result in a material change in our results of operations and financial condition.
15
If we do not satisfy the terms of our U.S. Department of Energy grant, we may not receive the entire $45.1 million grant we were awarded and may be
required to return amounts already paid to us under the grant.
We have a $45.1 million Grant under the American Recovery and Reinvestment Act's Electric Drive Vehicle Battery and Component Manufacturing Initiative with
the U.S. Department of Energy. We have received funding of $19.6 million under this Grant as of March 31, 2013. This Grant is subject to terms and conditions
specified in the agreement between us and the DOE. We are required to make a cash investment on a dollar-for-dollar matching basis to receive funds under this
Grant. If we are unable to match the total amount of the $45.1 million Grant with funding from non-Federal sources, we will be unable to take advantage of the
entire award, and could become ineligible for continued participation in the program. The reimbursement of qualified costs under the award is currently limited to
$32.0 million. On or before July 12, 2013, we are required to provide to the DOE an updated total estimated cost of the project along with firm commitments to
fund our 50 percent share of the total estimated cost of the project above the $32.0 million of matching funds we have previously received credit for. If we have not
obtained an extension or modification of this requirement or all such funds have not been secured, we must submit, by such date, a funding plan to obtain the
remainder of such funds, which is acceptable to the DOE, or the Grant may be terminated. In addition, the award may be terminated at any time at the convenience
of the government. Although we expect to satisfy the requirements in the Grant, we cannot assure that all of the requirements will be satisfied and the contract will
not be terminated prior to receiving all of the proceeds .
Our business depends, in part, on the expansion of the market for hybrid electric vehicles and the future introduction and growth of a market for all-
electric vehicles .
Although our electric propulsion systems may be used in a wide variety of products, the market for electric and hybrid vehicles is fairly new. At the present time,
batteries used to power electric motors have limited life and require several hours to charge, and charging stations for electric motors are not widely available.
Electric and hybrid vehicles also tend to be priced higher than comparable gasoline-powered vehicles. As a result, consumers may experience concerns about
driving range limitations, battery charging time and higher purchase costs of electric or hybrid automobiles. If consumer preferences shift to vehicles powered by
other alternative methods, or if concerns about the availability of charging stations cannot be overcome, the market for all-electric cars, and therefore our electric
propulsion systems, may be limited. In addition, our electric propulsion systems are incorporated in buses used for mass transit in several U.S. cities. If passenger
traffic in these mass transit systems declines or government funding to transportation districts declines from current levels, demand for our products may also
decrease.
The popularity of alternative fuel based vehicles and “green energy” initiatives are highly dependent on macro-economic conditions, including oil prices and the
overall health of the economy. When oil prices fall, interest in and resources allocated to the development of advanced technology vehicles and propulsion systems
may diminish. Downturns in the world economy may also have a severe impact on the automotive industry, slowing the demand for vehicles generally and
reducing consumers' willingness to pay more for environmentally friendly technology .
If our products do not achieve market acceptance, our business may not grow .
Although we believe our proprietary systems are suited for a wide-range of vehicle electrification applications, our business and financial plan relies heavily on the
introduction of new products that have limited testing in the marketplace. We have made substantial investments in manufacturing facilities and equipment,
production and application engineering, among other things, to increase our production capacity in order to capitalize on the anticipated expansion in demand for
electric propulsion systems and generators in the automobile and light truck markets. We are not certain that our existing products will achieve broad market
acceptance, or that we will be able to develop new products or product enhancements that will achieve broad market acceptance .
Our revenue is highly concentrated among a small number of customers.
A large percentage of our revenue is typically derived from a small number of customers, and we expect this trend to continue.
Our customer arrangements generally are non-exclusive, have no long-term volume commitments and are often done on a purchase order basis. We cannot be
certain that customers that have accounted for significant revenue in past periods will continue to purchase our products. Accordingly, our revenue and results of
operations may vary substantially from period to period. We are also subject to credit risk associated with the concentration of our accounts receivable from our
customers. If one or more of our significant customers were to cease doing business with us,
16
significantly reduce or delay its purchases from us or fail to pay us on a timely basis, our business, financial condition and results of operations could be materially
adversely affected .
Our business relies on third parties, whose success we cannot predict.
As a manufacturer of motors, generators, and other component parts, our business model depends on the ability of third parties in our industry to develop, produce
and market products that include or are compatible with our technology and then to sell these products into the marketplace. Our ability to generate revenue
depends significantly on the commercial success of our customers and partners. Failure of these third parties to achieve significant sales of products incorporating
our products and fluctuations in the timing and volume of such sales could have a material adverse effect on our business, financial condition and results of
operations .
Our electric propulsion systems use rare-earth minerals and unavailability or limited supply of these minerals could prevent us from manufacturing our
products in production quantities or increase our costs.
Neodymium, a rare-earth mineral, is a key ingredient used in the production of magnets that are a component of our electric propulsion systems. We currently
source our magnets from China, and China has indicated its intent to retain more of this mineral for the use of Chinese companies, rather than exporting it. Since
the beginning of calendar 2011, we have experienced a significant price escalation in the cost of magnets used in our motors, which contain the rare-earth elements
neodymium and dysprosium. The price escalation is primarily due to changes in government policy in China. Although prices have decreased materially since
peaking in the summer of 2011, they are nevertheless, still above the baseline prices at the beginning of calendar year 2011. We have implemented a magnet
surcharge for all of our customers to recover these escalated costs. Although neodymium iron boron magnets are available from other sources, these alternative
sources are currently more costly. Reduced availability of neodymium from China could adversely affect our ability to obtain magnets in sufficient quantities, in a
timely manner, or at a commercially reasonable cost. In the event that China's actions cause us to seek alternate sources of supply for magnets, it could cause an
increase in our production costs, thereby reducing or eliminating our profit margin on electric propulsion systems if we are unable to pass the increase in our
production costs on to our customers . Increasing prices to our customers due to escalating magnet costs may reduce demand for our motors and make it difficult or
impossible to compete with other motor manufacturers whose motors do not use rare-earth minerals.
Some of our contracts can be cancelled with little or no notice and could restrict our ability to commercialize our technology.
Our contracts with government agencies are subject to the risk of termination at the convenience of the contracting agency and in some cases grant "march-in"
rights to the government. March-in rights are the right of the United States government or the applicable government agency, under limited circumstances, to
exercise a non-exclusive, royalty-free, irrevocable worldwide license to any technology developed under contracts funded by the government to facilitate
commercialization of technology developed with government funding. March-in rights can be exercised if we fail to commercialize the developed technology. The
exercise of march-in rights by the government or an agency of the government could restrict our ability to commercialize our technology.
Some of our orders for the future delivery of products are placed under blanket purchase orders which may be cancelled by our customers at any time. The amount
payable to us, if any, upon cancellation by the customer varies by customer. Accordingly, we may not recognize as revenue all or any portion of the amount of
outstanding order backlog we have reported .
We face intense competition and may be unable to compete successfully .
In developing electric motors for use in vehicles and other applications, we face competition from very large domestic and international companies, including the
world's largest automobile manufacturers. Many of our competitors have far greater resources to apply to research and development efforts than we have, and they
may independently develop motors that are technologically more advanced than ours. These competitors also have much greater experience in and resources for
marketing their products. For these reasons, potential customers may choose to purchase electric motors from our competitors rather than from us. In addition, the
U.S. government has awarded substantial financial grants under the stimulus bill to several large companies who compete with us. To the extent that some of these
competitors received awards under the stimulus bill in amounts greater than we have, this could adversely impact our ability to compete .
17
Changes in environmental policies could hurt the market for our products .
The market for electric and other alternative fuel vehicles and equipment and the demand for our products are influenced, to a degree, by federal, state and local
regulations relating to air quality, greenhouse gases and pollutants. These laws and regulations may change, which could result in transportation or equipment
manufacturers abandoning or delaying their interest in electric or hybrid electric vehicles or equipment. In addition, a failure by authorities to enforce current laws
and regulations or to adopt additional environmental laws or regulations could limit the demand for our products.
Although many governments have identified as a significant priority the development of alternative energy sources, governments may change their priorities, and
any change they make could materially affect our revenue or the development of our products .
If we are unable to protect our patents and other proprietary technology, we will be unable to prevent third parties from using our technology, which
would impair our competitiveness and ability to commercialize our products. In addition, the cost of enforcing our proprietary rights may be expensive
and result in increased losses .
Our ability to compete effectively against other companies in our industry will depend, in part, on our ability to protect our proprietary technology. Although we
have attempted to safeguard and maintain our proprietary rights, we do not know whether we have been or will be successful in doing so. We have historically
pursued patent protection in the United States and a limited number of foreign countries where we believe significant markets for our products exist or where
potentially significant competitors have operations. It is possible that a substantial market could develop in a country where we have not received patent protection
and under such circumstances our proprietary products would not be afforded legal protection in these markets. Further, our competitors may independently
develop or patent technologies that are substantially equivalent or superior to ours. We cannot assure that additional patents will be issued to us or, if they are
issued, as to the scope of their protection. Patents granted may not provide meaningful protection from competitors. Even if a competitor's products were to
infringe patents owned by us, it would be costly for us to pursue our rights in an enforcement action, it would divert funds and resources which otherwise could be
used in our operations and we may not be successful in enforcing our intellectual property rights. In addition, effective patent, trademark, service mark, copyright
and trade secret protection may not be available in every country where we may operate or sell our products in the future. If third parties assert technology
infringement claims against us, the defense of the claims could involve significant legal costs and require our management to divert time and attention from our
business operations. If we are unsuccessful in defending any claims of infringement, we may be forced to obtain licenses or to pay royalties to continue to use our
technology. We may not be able to obtain any necessary licenses on commercially reasonable terms or at all. If we fail to obtain necessary licenses or other rights,
or if these licenses are costly, our results of operations may suffer either from reductions in revenues through our inability to serve customers or from increases in
costs to license third-party technologies .
Use of our motors in vehicles could subject us to product liability claims or product recalls, and product liability insurance claims could cause an increase
in our insurance rates or could exceed our insurance limits, which could impair our financial condition, results of operations and liquidity .
The automotive industry experiences significant product liability claims. As a supplier of electric propulsion systems or other products to vehicle OEMs, we face
an inherent business risk of exposure to product liability claims in the event that our products, or the equipment into which our products are incorporated,
malfunction and result in personal injury or death. We may be named in product liability claims even if there is no evidence that our systems or components caused
an accident. Product liability claims could result in significant losses as a result of expenses incurred in defending claims or the award of damages. The sale of
systems and components for the transportation industry entails a high risk of these claims, which may increase as our production and sales increase. In addition, we
may be required to participate in recalls involving these systems if any of our systems prove to be defective, or we may voluntarily initiate a recall or make
payments related to such claims as a result of various industry or business practices or the need to maintain good customer relationships.
We carry product liability insurance of $10 million covering most of our products. If we were to experience a large insured loss, it might exceed our coverage
limits, or our insurance carriers could decline to further cover us or raise our insurance rates to unacceptable levels, any of which could impair our financial
position and results of operations. Any product liability claim brought against us also could have a material adverse effect on our reputation .
18
We may be subject to warranty claims, and our provision for warranty costs may not be sufficient .
We may be subject to warranty claims for defects or alleged defects in our products, and the risk of such claims arising will increase as our production and sales
increase. In addition, in response to consumer demand, vehicle manufacturers have been providing, and may continue to provide, increasingly longer warranty
periods for their products. As a consequence, these manufacturers may require their suppliers, such as us, to provide correspondingly longer product warranties. As
a result, we could incur substantially greater warranty claims in the future .
Table of Contents
ITEM 1B.
UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
PROPERTIES
We own our offices and manufacturing facilities and believe these facilities to be well maintained, adequately insured and suitable for their present and intended
uses. Information concerning our facilities as of March 31, 2013 is set forth in the table below:
Location
Square Feet Expiration Date of Lease
Longmont, Colorado
Frederick, Colorado (1)
129,304
28,000
Own
Own
Use
Manufacturing, laboratories and offices
Manufacturing, laboratories and offices
Ownership or
(1) This facility has been listed for sale and is classified on the company’s financial statements as a current asset
held for sale
ITEM 3.
LEGAL PROCEEDINGS
Litigation
We are involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, and based on current available
information, the ultimate disposition of these matters is not expected to have a material adverse effect on our financial position, results of operations or cash flow.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable .
19
Table of Contents
Part II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
Our common stock trades on the NYSE MKT (formerly called NYSE Amex), Chicago, Pacific, Frankfurt, Berlin and Stuttgart Stock Exchanges under the symbol
UQM . The high and low trade prices, by fiscal quarter, as reported by the NYSE MKT Stock Exchange for the last two fiscal years are as follows:
2013
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
2012
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
High
$ 0.85
$ 1.44
$ 1.80
$ 1.59
Low
$ 0.69
$ 0.68
$ 0.73
$ 0.70
High
$ 1.90
$ 2.19
$ 2.41
$ 3.15
Low
$ 1.37
$ 1.28
$ 1.54
$ 2.01
On May 20 , 2013 the closing price of our common stock, as reported on the NYSE MKT, was $ 0.83 per share and there were 565 holders of record of our
common stock.
We have not paid any cash dividends on our common stock since inception and we intend for the foreseeable future to retain any earnings to finance the growth of
our business. Future dividend policy will be determined by the Board of Directors based upon consideration of our earnings, capital needs and other factors then
relevant.
20
The following graph represents the yearly percentage change in the cumulative total return on the common stock of UQM Technologies, Inc., the group of
companies comprising the S&P Electrical Equipment Index, and those companies comprising the S&P 500 Index for the five year period from 2009 through 2013:
PERFORMANCE GRAPH 2
UQM Technologies, Inc.
S&P 500
S&P Electrical Components & Equipment
3/08
3/09
3/10
3/11
3/12
3/13
100.00
100.00
100.00
97.04
61.91
55.76
249.11
92.72
99.45
176.33
107.23
130.54
87.57
116.39
123.69
43.79
132.64
146.22
*$100 invested on 3/31/08 in stock or index, including reinvestment of dividends
Fiscal year ending March 31.
2 The stock price performance graph depicted is not “soliciting material,” is not deemed "filed" with the SEC, and is not to be incorporated by reference
into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof and irrespective of
any general incorporation contained in such filing.
21
Table of Contents
ITEM 6.
SELECTED FINANCIAL DATA
The selected consolidated financial data presented below should be read in conjunction with our consolidated financial statements and related notes included
elsewhere in this document.
UQM Technologies, Inc.
Selected Consolidated Financial Data
Years Ended March 31,
$
$
$
$
$
$
$
2013
2012
2011
2010
2009
1,268,556
5,910,153
785,068
9,358,388
608,204
8,413,098
1,384,599
7,307,354
2,717,246
6,011,065
(10,707,432)
(4,953,336)
(2,349,174)
(4,201,091)
(4,479,743)
(10,688,312)
(4,928,520)
(1,992,358)
(4,140,872)
(4,402,019)
(0.29)
(0.14)
(0.06)
(0.13)
(0.17)
28,608,715
39,655,601
41,803,920
42,682,573
12,422,832
627,412
715,107
1,316,372
1,155,416
1,490,472
-
-
-
-
-
Contract services revenue
Product sales
Loss before other income
(expense)
Net loss
Net loss per common share -
basic and diluted
Total assets
Long-term obligations (1)
Cash dividend declared per
common share
(1) Includes current portion of long-term obligations.
22
Table of Contents
ITEM 7 .
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, future orders to be received from our customers,
sales of products from inventory, future financial results, liquidity and the continued growth of the electric-powered vehicle industry. Important Risk Factors that
could cause actual results to differ from those contained in the forward-looking statements are listed above in Part I, Item 1A. Risk Factors.
Introduction
We generate revenue from two principal activities: 1) the sale of motors, generators and electronic controls; and 2) research, development and application
engineering services that are paid for by our customers. 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.
Our electric propulsion systems are powering a large fleet of all-electric Audi A1 e-tron development vehicles, dozens of which are being tested on the streets of
Munich, Germany. Audi has logged over 50,000 kilometers in its first phase of testing with the A1 e-tron extended-range electric vehicles and has expanded
testing of the vehicle in the NPE (National Platform of Electrification) in Germany in 2013. In addition to these programs, we are supplying our electric propulsion
systems and generators to several other international automakers and entrepreneurial automobile developers as part of their HEV, PHEV, EV and FCEV vehicle
development programs.
We supply electric propulsion systems to Proterra, a developer and manufacturer of all-electric composite transit buses and Boulder EV a developer and
manufacturer of all-electric delivery trucks and work utility trucks under multi-year supply agreements. We also supply electric propulsion systems to Electric
Vehicles International (“EVI”), a developer and manufacturer of all-electric medium-duty delivery trucks. EVI is currently fulfilling an order from UPS for 100 all-
electric delivery vans powered by our electric propulsion systems. As a result, EVI accounted for $1,494,024 or 21 percent of our consolidated total revenue for
the fiscal year ended March 31, 2013. We are also supplying an automotive qualified DC-to-DC converter to Eaton Corporation, which is used onboard medium
and heavy-duty hybrid trucks sold by Freightliner, International and Paccar.
We have also signed a Memorandum of Understanding with a major Chinese company for the development and marketing of UQM® electric propulsion systems
for New Energy Vehicles (“NEVs”) in China. This agreement expands the global reach of UQM, and represents the initial step in our strategy to penetrate the
Chinese market with our leading electric propulsion products. Under the agreement, UQM and its China-based partner will work collaboratively to introduce
UQM products into the Chinese market for use in New Energy Vehicles. The China State Council published its New Energy Vehicles plan in July, 2012, setting a
goal of 500,000 energy-efficient and clean vehicles on the road in China by 2015, and five million vehicles by 2020. We are also in discussion s with several other
potential Chinese partners for both all-electric and hybrid-electric vehicles.
The marine market is forecast ed to be a growing segment of electrified vehicles. During the year we saw increased activity and interest within the marine
segment. Regen Nautics has three UQM based outboard motors, the E100, E180 and E300 along with several combinations of full electric and hybrid inboard
combinations utilizing both the PowerPhase Pro and PowerPhase HD propulsion systems. They have prominently displayed our product at several International
Boat shows including Dusseldorf , Monaco and Miami, and in a variety of boats including the all-electric Mylne Bolt 18 yacht tender, the Bruce Runabout all-
electric motorboat, the Goldfish 23 e-Fusion, Alibi Catamarans, Rhea Marine, Bering Yachts and Grand Banks.
23
In 2010, we entered into a ten year Supply Agreement with CODA Automotive (“CODA”) to supply UQM PowerPhase Pro ? 100 kW electric propulsion systems
for CODA’s all-electric four-door sedan. Shortly after our production launch in 2011, CODA experienced delays in the commercial launch of their vehicle and
subsequently ceased production operations due to funding constraints. As a result of substantial uncertainty regarding CODA’s ability to honor their obligations to
us under the Supply Agreement, during the third quarter of fiscal year 2013, we recorded an allowance for doubtful accounts for all trade accounts receivable from
CODA and booked a charge to earnings of $3.8 million. On May 1, 2013 , CODA filed for reorganization under the U.S. Bankruptcy Code. We will file claims
against the CODA Bankruptcy Estat e , however we expect to ultimately recover only a small percentage of the amount claimed. During the fourth quarter of fiscal
year 2013 , we recorded an additional charge of $1 .1 million representing our estimated cost of settling outstanding purchase obligations arising from the CODA
program. The settlement of any such obligations is subject to future negotiation and the timing and amount of any such payments to such suppliers is not currently
determinable, although we expect to settle these potential obligations within a one year period. As of March 31, 2013, we believe we have recorded all
impairments and liabilities that have or could arise as a result of the CODA Bankruptcy.
We have a $45.1 million Grant from the DOE under the American Recovery and Reinvestment Act to accelerate the manufacturing and deployment of electric
vehicles, batteries and components in the United States. The Grant provides for a 50 percent cost-share by the Company. At present, the total amount available
under the Grant is limited to $ 32 million, but will be increased to the extend we can demonstrate qualified project costs and firm commitments to fund our 50
percent share of the total estimated costs of the project above the $32.0 million of matching funds for which we have previously received credit. Capital
expenditures for facilities, tooling and manufacturing equipment and the qualification and testing of products associated with the launch of volume production for
customers are eligible for reimbursement under the DOE program. We recorded reimbursements of $9.2 million under the DOE Grant through March 31, 2013 for
capital assets acquired, which were recorded as a reduction in the cost basis of the assets acquired. We also recorded reimbursements of product qualification and
testing costs under the Grant through March 31, 2013 of $12.0 million. In April 2012, we amended this contract to extend the period of performance by two years
to January 12, 2015 and to extend the date for demonstrating our ability to provide additional cost-sharing funds until July 12, 2013. These amendments will allow
us additional time to automotive qualify and commercialize additional products and the next generation of our existing products for the expanding markets for
clean vehicles.
We are also pursuing an advanced motor technology that eliminates rare-earth elements. The technology incorporates permanent magnets of an alternate chemistry,
arranged in a unique way that maintains performance benefits. A patent application has been submitted to protect this innovation. UQM was also selected and
awarded $3 million by the DOE in a competitive solicitation to pursue this technology. This 2011 award is a three-year technology development program.
In May 2013, we entered into an agreement to sell our former facility located in Frederick, Colorado for a sale price of $1,650,000. The carrying value of the
facility was $1,621,257 and the sale transaction is estimated to generate cash proceeds , net of selling costs of approximately $1,525,000. As a result of the sale
transaction subsequent to the end of the fiscal year , we reduced the carrying value of the facility at March 31, 2013 to its realizable value.
We expect demand for our electric propulsion system and generator products to be strong for the foreseeable future as vehicle makers continue to focus on the
development and introduction of electric and hybrid electric vehicles as part of the evolution of the global automotive industry to provide a broader selection of
highly fuel efficient vehicles to consumers. This demand is due, in part, to an expansion in the number of all-electric and hybrid electric vehicle platforms being
developed for potential introduction in the passenger automobile market, the amount of government grants and loans available to encourage the development and
introduction of clean vehicles, tax incentives to purchasers of these vehicles, progressively more challenging CAFE and global carbon dioxide emission
regulations, and a desire on the part of the global automotive industry to provide a broader selection of highly fuel efficient vehicles.
Net loss for the fiscal year ended March 31, 2013 increased to $10,688,312, or $0.29 per common share on consolidated total revenue of $7,178,709, versus a net
loss of $4,928,520, or $0.14 per common share on consolidated total revenue of $ 10,143,456 for the previous fiscal year. Revenue for the year declined primarily
due to a reduction in revenue from CODA. R evenue from CODA this fiscal year was $ 191,983 versus $4,313,728 last fiscal year. Total revenue from customers
other than CODA increased 20 % to $6,9 86,726 versus $5,829,728 last year. Net loss for the fiscal year ended March 31, 2013 included CODA related charges
for uncollectible accounts receivable, duties, purchase obligations and impairments of invent ory totaling $4,883,860.
24
Our liquidity throughout the fiscal year was sufficient to meet our operating requirements. At March 31, 2013, we had cash and short-term investments totaling
$4,527,899. Net cash used in operating activities for the fiscal year was $7,259,552 versus $11,414,137 last fiscal year due primarily to decreased inventory
purchases this fiscal year. Capital expenditures, net of reimbursements from the DOE for the fiscal year were $353,637 versus $645,603 last fiscal year.
Financial Condition
Cash and cash equivalents and short-term investments at March 31, 2013 were $4,527,899 and working capital (the excess of current assets over current liabilities)
was $16,011,344 compared with $12,120,849 and $25,025,51 7 , respectively, at March 31, 2012. The decrease in cash and short-term investments is primarily
attributable to operating losses, higher levels of inventories, capital expenditures and lower levels of accounts payable and other current liabilities. The decrease in
working capital is primarily attributable to operating losses and capital expenditures on property and equipment.
Accounts receivable decreased $2,716,722 to $2,212,395 at March 31, 2013 from $4,929,117 at March 31, 2012. The decrease is primarily due to increasing the
allowance for uncollectible account for all amounts due from CODA totaling $3,838,092, partially offset by higher levels of billings outstanding under our DOE
Grant as of March 31, 2013. Many of our other customers are large well-established companies of high credit quality. Our sales are conducted through acceptance
of customer purchase orders or in some cases through supply agreements. For credit qualified customers our standard terms are net 30 days. For international
customers and customers without an adequate credit rating, our typical terms are irrevocable letter of credit or cash payment in advance of delivery. At March 31,
2013 and 2012, we had an allowance for uncollectible accounts of $3,838,092 and $127,697, respectively
Costs and estimated earnings on uncompleted contracts increased to $178,264 at March 31, 2013 versus $78,376 at March 31, 2012. The increase is due to less
favorable billing terms on certain contracts in process at March 31, 2013 versus March 31, 2012. Estimated earnings on contracts in process increased to $515,299,
or 38.1 percent of contracts in process of $1,353,545 at March 31, 2013, compared to estimated earnings on contracts in process of $380,713 or 24.0 percent of
contracts in process of $1,587,499 at March 31, 2012. The increase in estimated earnings is attributable to higher expected margin on certain contracts in process at
March 31, 2013.
Inventories increased $434,313 to $10,998,461 at March 31, 2013 compared to $10,564,148 at March 31, 2012 principally due to increased levels of raw materials
and finished goods inventories. Raw materials inventory increased $907,412 primarily reflecting inventory purchases to support the EVI, BEV and Proterra
production programs. Work-in-process and finished goods inventories decreased $353,907 and $119,192, respectively, reflecting decreased levels of low volume
propulsion system builds in process at March 31, 2013.
Subsequent to the end of the fiscal year, we entered into a contract for the sale of our former facility for $1,650,000. Net cash proceeds from the sale are expected
to be approximately $1,525,000. Accordingly, at March 31, 2013 we reduced the carrying value of the facility to its net realizable value.
Prepaid expenses and other current assets decreased to $309,957 at March 31, 2013 from $556,592 at March 31, 2012, primarily due to lower levels of
prepayments on raw material inventories outstanding at the end of the current fiscal year versus the prior fiscal year end.
We invested $561,669 for the acquisition of property and equipment during the fiscal year before reimbursements from the DOE Grant versus $2,132,593 during
the fiscal year ended March 31, 2012. The decrease is primarily attributable to reduced renovation costs on our facility and decreased acquisitions of equipment this
year compared to the prior fiscal year.
Patent costs decreased to $206,287 at March 31, 2013 compared to $222,836 at March 31, 2012 due to systematic amortization of patent issuance costs and the
impairment of a patent application during the year, partially offset by the costs associated with the filing and pursuit of new patent applications.
Trademark costs decreased to $110,528 at March 31, 2013 compared to $113,844 at March 31, 2012 due to systematic amortization of trademark issuance costs.
Other assets decreased to $76,731 at March 31, 2013 from $90,105 at March 31, 2012 due to lower levels of prepayments on capital equipment purchases
outstanding at the end of the current fiscal year versus the prior fiscal year end.
25
Accounts payable decreased $1,739,316 to $617,197 at March 31, 2013 from $2,356,513 at March 31, 2012, primarily due to decreased raw material purchases for
CODA.
Other current liabilities increased $270,334 to $2,599,435 at March 31, 2013 from $2,329,101 at March 31, 2012. The increase is primarily attributable to higher
levels of accrued vendor settlement costs and accrued import duties offset by lower levels of unearned revenue and accrued employee benefit expenses at March
31, 2013.
Short-term deferred compensation under executive employment agreements increased $371,993 to $524,000 at March 31, 2013 versus $152,007 at March 31, 2012
reflecting the reclassification of a retirement payment obligation from long-term, partially offset by a severance payment made during the first quarter this fiscal
year. Long-term deferred compensation under executive employment agreements decreased $459,688 to $103,412 at March 31, 2013 from $563,100 at March 31,
2012 reflecting the reclassification of a retirement obligation to short-term, partially offset by periodic accruals of future severance obligations under executive
employment agreements.
Billings in excess of costs and estimated earnings on uncompleted contracts decreased to zero at March 31, 2013 from $7,201 at March 31, 2012 reflecting
decreased levels of billings on certain engineering contracts in process at the end of the fiscal year in advance of the performance of the associated work versus the
prior fiscal year.
Common stock and additional paid-in capital increased to $366,641 and $115,573,331, respectively, at March 31, 2013 compared to $363,562 and $114,371,106 at
March 31, 2012. The increase in common stock and additional paid-in capital was primarily attributable to the expensing of non-cash share-based payments
associated with equity grants under our stock bonus and equity incentive plans and share issuances under our employee stock purchase and bonus stock plans.
Results of Operations
Operations for the fiscal year ended March 31, 2013 resulted in a net loss of $10,688,312, or $0.29 per common share, including a charge of $4,883,860 or $0.13
per common share related to CODA, compared to a net loss of $4,928,520, or $0.14 per common share, and $1,992,358, or $0.06 per common share, for the fiscal
years ended March 31, 2012 and 2011, respectively. The increase in current year net loss is primarily attributable to impairment of amounts due from CODA under
the Supply Agreement, higher levels of business development, marketing, legal, recruiting and relocation costs partially offset by lower levels of net production
engineering expenses.
Revenue from contract services increased $483,488, or 61.6 percent, to $1,268,556 for the fiscal year ended March 31, 2013 versus $785,068 for the fiscal year
ended March 31, 2012. The increase is primarily attributable to the application of additional engineering resources on the DOE non-rare earth program and other
funded development programs. Revenue from contract services increased to $785,068 for the fiscal year ended March 31, 2012 compared to $608,204 for the fiscal
year ended March 31, 2011. The increase is primarily attributable to increased levels of customer funded engineering activities.
Product sales this fiscal year decreased 37 percent to $5,910,153 compared to $9,358,388 for the fiscal year ended March 31, 2012. The decrease is primarily due
to a reduction in product revenue from CODA. Product revenue from CODA this fiscal year was $21,762 versus $4, 262,909 last fiscal year. Product sales for the
fiscal year ended March 31, 2012 increased 11.2 percent to $9,358,388 compared to $8,413,098 for the fiscal year ended March 31, 2011. The increase is primarily
due to increased propulsion system shipments to CODA partially offset by decreased levels of prototype propulsion system sales.
Gross profit margins on contract services increased to 43.6 percent this fiscal year compared to 36.3 percent for the fiscal year ended March 31, 2012, primarily
due to higher expected margins on certain contracts in process at March 31, 2013. Gross profit margins on contract services for the fiscal year ended March 31,
2012 increased to 36.3 percent compared to 11.0 percent for the fiscal year ended March 31, 2011, primarily due to higher expected margins on certain contracts in
process at March 31, 2012. Gross profit margins on product sales this fiscal year decreased to 26.7 percent compared to 28.8 percent for fiscal 2012. The decrease
is primarily due to a less favorable product mix. Gross profit margins on product sales for the fiscal year ended March 31, 2012 increased to 28.8 percent
compared to 27.6 percent for fiscal 2011. The increase is primarily due to a more favorable product mix, improved overhead absorption and lower manufacturing
burden arising from a change in the method of allocating costs associated with excess facility capacity.
Research and development expenditures for the fiscal year ended March 31, 2013 were $96,905 compared to $37,128 and $292,865 for the fiscal years ended
March 31, 2012 and 2011, respectively. The increase in research and
26
development expenditures this fiscal year versus last fiscal year was primarily attributable to increased levels of cost-sharing on government research
programs. The decrease in research and development expenditures for the fiscal year ended March 31, 2012 compared to the prior fiscal year was primarily due to
reduced levels of internally funded and cost-sharing programs.
Production engineering costs were $4,921,970 for the fiscal year ended March 31, 2013 versus $6,014,868 and $3,536,287 for the prior two fiscal years,
respectively. The decrease for the current fiscal year is attributable to higher than normal product qualification and testing activities during the prior fiscal year
associated with the launch of volume production for CODA and the redeployment of certain engineering resources on funded development programs. The increase
for the fiscal year ended March 31, 2012 versus fiscal year 2011 is primarily attributable to increased utilization of engineering resources and the expansion of our
production engineering group and its activities in preparation for the launch of higher volume manufacturing operations for CODA, development of our next
generation PowerPhase Pro ® propulsion systems for the passenger automobile market and increased product qualification and testing activities on our PowerPhase
HD ® 220 system for the truck and bus markets
Reimbursement of costs under the DOE Grant were $4,205,678 versus $3,794,324 and $3,988,655 for each of the two prior fiscal years, respectively. For the
current fiscal year reimbursements under the grant were 85.4 percent of production engineering expenditures compared to 63.1 percent for the prior fiscal year,
reflecting an increase in the estimated reimbursable overhead costs under the Grant. During the fiscal year ended March 31, 2011, the Company satisfied various
conditions of the Grant allowing for the recognition and reimbursement of all product qualification and testing costs incurred between August 5, 2009 and
September 30, 2010. As a result, during the fiscal year ended March 31, 2011, we recorded reimbursements of $1,546,446 for product qualification and testing
costs incurred in the prior fiscal year. Excluding this amount, reimbursements for the fiscal year ended March 31, 2012 increased $1,352,115 versus fiscal 2011
reflecting increased levels of reimbursable product qualification and testing costs.
Selling, general and administrative expenses this fiscal year were $7,022,112 compared to $5,678,797 and $4,884,373 for the fiscal years ended March 31, 2012
and 2011, respectively. The increase this year is attributable to higher levels of business development, marketing, legal and recruiting and relocation costs versus
the prior fiscal year. The increase for fiscal 2012 versus 2011 is attributable to increases in salary and benefits expenses associated with an expansion in our
administrative staff and executive team, higher levels of accounting fees, the establishment of an allowance for bad debts related to the Saab bankruptcy filing and
increased recruiting and general insurance costs partially offset by decreases in non-cash equity based compensation and marketing expenses.
Interest income decreased to $15,743 for the current fiscal year compared to $22,805 and $91,342 for the fiscal years ended March 31, 2012 and 2011,
respectively. The decrease for fiscal 2013 compared to fiscal 2012 is attributable to lower yields and lower levels of invested cash balances. The decrease for
fiscal 2012 versus fiscal 2011 is attributable to lower invested balances and lower yields during the fiscal year ended March 31, 2012.
Other income for the fiscal year ended March 31, 2013 was $3,377 versus $2,011 and $265,474 for the fiscal years ended March 31, 2012 and 2011, respectively.
The decrease for fiscal year 2013 and fiscal year 2012 compared to fiscal 2011 is attributable to a recovery received from a bankruptcy proceeding during fiscal
year 2011.
Liquidity and Capital Resources
Our cash balances and liquidity throughout the fiscal year ended March 31, 2013 were adequate to meet operating needs. At March 31, 2013, we had cash and
short-term investments of $4,527,899 and working capital (the excess of current assets over current liabilities) of $16,011,344 compared to $12,120,849 and
$25,025,517 at March 31, 2012, respectively.
For the year ended March 31, 2013, net cash used in operating activities was $7,259,552 compared to net cash used in operating activities of $11,414,137 and
$2,284,396 for the years ended March 31, 2012 and 2011, respectively. The decrease in cash used in operating activities for the current fiscal year compared to
fiscal 2012 is associated with decreased levels of inventory purchases partially offset by decreased levels of accounts payable at March 31, 2013. The increase in
cash used in operating activities for the fiscal year ended March 31, 2012 is primarily attributable to increased levels of inventory and accounts receivable
principally associated with the launch of volume production for CODA and higher operating losses, partially offset by higher levels of accounts payable and other
current liabilities.
Net cash provided by investing activities for the fiscal year ended March 31, 2013 was $114,556 compared to cash provided by investing activities of $7,124,741
and $475,688 for the fiscal years ended March 31, 2012 and 2011, respectively. The decrease in cash provided in the fiscal year ended March 31, 2013 compared to
fiscal 2012 is due to
27
decreased net maturities of short-term investments, partially offset by a decrease in the amount of capital expenditures, net of reimbursements under our DOE
Grant. The increase in cash provided in the fiscal year ended March 31, 2012 compared to fiscal 2011 is due to increased net maturities of short-term investments
and a decrease in the amount of capital expenditures, net of reimbursements under our DOE Grant.
Net cash provided by financing activities was $34,955 for the fiscal year ended March 31, 2013 versus cash provided by financing activities of $48,584 and cash
used in financing activities of $52,140 for the fiscal years ended March 31, 2012 and 2011, respectively. The decrease in cash provided in fiscal 2013 versus fiscal
2012 is attributable to higher levels of treasury stock purchases in the current year. The increase in cash provided in fiscal 2012 versus fiscal 2011 is primarily
attributable decreased levels of treasury stock purchases partially offset by lower levels of cash receipts under our stock option and employee stock purchase plans.
We expect to fund our operations over the next year from existing cash and short-term investment balances, from proceeds received from the sale of our former
facility, when the sale is completed, the reduction of inventories and from available bank financing, if any. Although we expect to manage our operations and
working capital requirements to minimize the future level of operating losses and working capital usage, our working capital requirements may increase in the
future. If customer demand accelerates substantially, our working capital requirements may also increase substantially. In addition, our $45.1 million DOE Grant
requires us to provide matching funds of 50 percent on all qualifying expenditures under the Grant. As of March 31, 2013, we have received credit from the DOE
for matching funds of $32 million, and we have an obligation under our DOE Grant to demonstrate our ability to provide additional matching funds of $13.1
million on or before July 12, 2013, unless extended. We do not currently have sufficient funds to meet this potential future funding requirement. If we do not
extend or modify this requirement or secure such funds, we must submit by such date, a funding plan to obtain the remainder of such funds which is acceptable to
the DOE or the Grant may be terminated.
If our existing financial resources are not sufficient to execute our business plan, including meeting future funding requirements under the DOE Grant, we may
issue equity or debt securities in the future, although we cannot assure that we will be able to secure additional capital should it be required to implement our
current business plan. In the event financing or equity capital to fund future growth is not available on terms acceptable to us, or at all, we will modify our strategy
to align our operations with then available financial resources. Based on our current level of operations, we believe we have sufficient cash and short-term
investments to fund our operations for at least the next two years .
Contractual Obligations
The following table presents information about our contractual obligations and commitments as of March 31, 2013:
Purchase obligations
Executive employment agreements (1)
Total
Payments due by Period
Total
560,661
627,412
1,188,073
$
$
Less Than
1 Year
560,661
524,000
1,084,661
2 - 3 Years
4 - 5 Years
-
-
-
More than
5 Years
-
-
-
-
103,412
103,412
(1) Includes severance pay obligations under executive employment agreements contingently payable upon six months’ notice by executive officers of the Company, but not annual cash compensation
under the agreements.
28
Off-Balance Sheet Arrangements
None.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America
requires management to make judgments, assumptions and estimates that affect the dollar values reported in the consolidated financial statements and
accompanying notes. Note 1 to the consolidated financial statements 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 uncollectible 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 collectability 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 historically established a reserve for potentially uncollectible
trade accounts receivable . However, during the fiscal year ended March 31, 2012 , we established an allowance for bad debts of $127,697, principally due to the
bankruptcy filing of Saab and we further increased the allowance by $ 3,710,395 in the third quarter of fiscal year 2013 due to uncertainty regarding CODA’s
ability to meet its financial obligations to us. On May 1, 2013, CODA filed for reorganization under the U.S. Bankruptcy Code. In light of current economic
conditions we may need to maintain an allowance for bad debts in the future. It is also reasonably possible, that futu re 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. At March 31, 2013, we
had $8,291,423 of inventory originally purchased or manufactured for CODA that is now available for sale to other customers. The actual realizable value of this
inventory and our inventories generally, may differ materially from these estimates based on future occurrences. It is reasonably possible that future events or
changes in circumsta nces could cause the realizable value of our inventories to decline materially, resulting in additional material impairment losses. During the
f iscal years ended March 31, 2013, 2012 and 2011 , we recorded inventory impairments of $8,928, $10,169 and $10,160, respectively.
Percenta ge 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. Estimated costs for each project
are developed by our engineering staff based upon a progression of technical tasks required to attain the project's objectives. These estimates typically include the
number of hours of work required by each category of personnel, the cost of subcontracts, materials and components, as well as costs for consultants and project
relate d travel. These estimated costs are reviewed throughout the project and revised quarterly, if necessary, to accurately reflect our best estimate of the remaining
costs necessary to complete the project . 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 , changes in actual overhead costs versus estimated overhead costs and a variety of other factors that
may cause unforeseen delays and additional costs. It is reasonably likely that estimated project costs to complete the projects in process at Ma rch 31, 2013 could
29
change materially in the future, and any modification of management’s current 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. The determination of fair value for those assets that do not have quoted prices in active markets is highly judgmental. 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.
Table of Contents
ITEM 7A.
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. One component of
interest rate risk involves the short term investment of excess cash in short term, investment grade interest-bearing securities. If there are changes in interest rates,
those changes would affect the investment income we earn on these investments and, therefore, impact our cash flows and results of operations. 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.
30
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31
Table of Contents
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
UQM Technologies, Inc.
We have audited the accompanying consolidated balance sheets of UQM Technologies, Inc. (a Colorado corporation) and subsidiaries (the
“Company”) as of March 31, 2013 and 2012, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of
the three years in the period ended March 31, 2013. These financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of UQM
Technologies, Inc. and subsidiaries as of March 31, 2013 and 2012, and the results of their operations and their cash flows for each of the three years
in the period ended March 31, 2013 in conformity with accounting principles generally accepted in the United States of America.
/s/ GRANT THORNTON LLP
Denver, Colorado
May 23, 2013
32
Table of Contents
Assets
Current assets:
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 2013
March 31, 2012
Cash and cash equivalents
Short-term investments
Accounts receivable, net
Costs and estimated earnings in excess of billings on
uncompleted contracts
Inventories
Facility held for sale
Prepaid expenses and other current assets
Total current assets
Property and equipment, at cost:
Land
Building
Machinery and equipment
Less accumulated depreciation
Net property and equipment
Patent costs, net of accumulated amortization of $845,795 and $816,259
Trademark costs, net of accumulated amortization of $64,230 and $59,743
Other assets
Total assets
See accompanying notes to consolidated financial statements.
33
$
$
4,527,899
-
2,212,395
178,264
10,998,461
1,525,000
309,957
19,751,976
1,683,330
4,516,301
7,771,363
13,970,994
(5,507,801)
8,463,193
206,287
110,528
76,731
28,608,715
11,637,940
482,909
4,929,117
78,376
10,564,148
1,621,257
556,592
29,870,339
1,683,330
4,484,493
7,868,481
14,036,304
(4,677,827)
9,358,477
222,836
113,844
90,105
39,655,601
Table of Contents
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
Other current liabilities
Short-term deferred compensation under executive employment
agreements
Billings in excess of costs and estimated earnings on
uncompleted contracts
Total current liabilities
March 31, 2013
March 31, 2012
$
617,197
2,599,435
2,356,513
2,329,101
524,000
152,007
-
3,740,632
7,201
4,844,822
Long-term deferred compensation under executive employment agreements
103,412
563,100
Total liabilities
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.01 par value, 50,000,000 shares
authorized; 36,664,097 and 36,356,177 shares
issued and outstanding
Additional paid-in capital
Accumulated deficit
Total stockholders’ equity
3,844,044
5,407,922
366,641
115,573,331
(91,175,301)
24,764,671
363,562
114,371,106
(80,486,989)
34,247,679
Total liabilities and stockholders’ equity
$
28,608,715
39,655,601
See accompanying notes to consolidated financial statements.
34
Table of Contents
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
Reimbursement of costs under DOE grant
Selling, general and administrative
Impairment of assets
Loss (gain) on disposal of long-lived asset
Year Ended
March 31, 2013
Year Ended
March 31, 2012
Year Ended
March 31, 2011
$
1,268,556
5,910,153
7,178,709
715,225
4,333,005
96,905
4,921,970
(4,205,678)
7,022,112
4,980,117
22,485
17,886,141
785,068
9,358,388
10,143,456
499,813
6,663,648
37,128
6,014,868
(3,794,324)
5,678,797
-
(3,138)
15,096,792
608,204
8,413,098
9,021,302
541,214
6,087,385
292,865
3,536,287
(3,988,655)
4,884,373
-
17,007
11,370,476
Loss before other income
(10,707,432)
(4,953,336)
(2,349,174)
Other income:
Interest income
Other
Net loss
Net loss per common share - basic and diluted
Weighted average number of shares
of common stock outstanding -
basic and diluted
See accompanying notes to consolidated financial statements.
$
$
35
15,743
3,377
19,120
22,805
2,011
24,816
91,342
265,474
356,816
(10,688,312)
(4,928,520)
(1,992,358)
(0.29)
(0.14)
(0.06)
36,564,952
36,301,642
36,070,364
Table of Contents
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity
Number of
common
shares
issued
Common
stock
Additional
paid-in
capital
Accumulated
deficit
Balances at April 1, 2010
35,946,738 $
359,467
112,211,227
(73,566,111)
Issuance of common stock under
employee stock purchase plan
Purchase of treasury stock
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
Net loss
Balances at March 31, 2011
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
Net loss
Balances at March 31, 2012
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
Net loss
Balances at March 31, 2013
9,828
(55,045)
31,966
98
(550)
320
22,397
(143,201)
68,796
279,806
2,798
334,375
-
-
897,455
-
-
-
-
-
-
36,213,293 $
-
362,133
-
113,391,049
(1,992,358)
(75,558,469)
41,158
(6,191)
412
(62)
60,548
(12,314)
107,917
1,079
167,545
-
-
764,278
-
-
-
-
-
36,356,177 $
-
363,562
-
114,371,106
(4,928,520)
(80,486,989)
85,550
855
74,530
(41,321)
(413)
(40,017)
263,691
2,637
145,115
-
-
1,022,597
-
-
-
-
-
-
36,664,097 $
-
366,641
-
115,573,331
(10,688,312)
(91,175,301)
Total
stockholders’
equity
39,004,583
22,495
(143,751)
69,116
337,173
897,455
(1,992,358)
38,194,713
60,960
(12,376)
168,624
764,278
(4,928,520)
34,247,679
75,385
(40,430)
147,752
1,022,597
(10,688,312)
24,764,671
See accompanying notes to consolidated financial statements.
36
Table of Contents
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
Non-cash equity based compensation
Impairment of assets
Loss (gain) on disposal of long-lived assets
Impairment of long-lived assets
Impairment of inventories
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
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:
Purchases of short-term investments
Maturities of short-term investments
Increase (decrease) in other long-term assets
Acquisition of property and equipment
Property and equipment reimbursements received from DOE
under grant
Increase in patent and trademark costs
Cash proceeds from the sale of equipment
Net cash provided by investing activities
See accompanying notes to consolidated financial statements.
Year Ended
Year Ended
Year Ended
March 31, 2013
March 31, 2012
March 31, 2011
$
(10,688,312)
(4,928,520)
(1,992,358)
1,252,834
1,170,349
4,980,117
22,485
-
8,928
(1,199,701)
(1,796,309)
135,758
(1,050,805)
1,178,958
932,902
-
(3,138)
27,845
10,169
(1,978,510)
(8,360,876)
(189,438)
2,506,261
864,572
1,234,628
-
17,007
-
10,160
(1,139,033)
(932,275)
(226,869)
(245,358)
(7,201)
(8,525)
(35,826)
(87,695)
(7,259,552)
(601,265)
(11,414,137)
160,956
(2,284,396)
(245,950)
728,859
(583)
(561,669)
208,032
(14,158)
25
114,556
(7,369,698)
15,219,312
(61,855)
(2,132,593)
1,486,990
(21,240)
3,825
7,124,741
(20,435,612)
24,570,973
1,412
(7,388,288)
3,735,719
(9,520)
1,004
475,688
37
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
Year Ended
Year Ended
Year Ended
March 31, 2013
March 31, 2012
March 31, 2011
Cash flows from financing activities:
Issuance of common stock upon exercise of employee stock options
-
-
69,116
Issuance of common stock under employee stock purchase plan
Purchase of treasury stock
Net cash provided by (used in) financing activities
Decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
75,385
(40,430)
34,955
(7,110,041)
11,637,940
4,527,899
60,960
(12,376)
48,584
(4,240,812)
15,878,752
11,637,940
22,495
(143,751)
(52,140)
(1,860,848)
17,739,600
15,878,752
$
Non-cash investing and financing transactions:
During the year ended March 31, 2012 , we reclassified a facility with a gross value of $2,645,793 and accumulated depreciation of $1,024,536
to facility held for sale.
See accompanying notes to consolidated financial statements.
38
Table of Contents
( 1) Summary of Significant Accounting Policies
(a) Description of Business
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
UQM Technologies, Inc. and our wholly-owned subsidiaries 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 Longmont, Colorado. Our revenue is derived primarily from product sales to customers
in the automotive, commercial truck, bus, marine and military 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.
We limit our cash and cash equivalents and investments to high quality financial institutions in order to minimize our credit risk. We maintain cash and cash
equivalent balances with financial institutions that exceed federally insured limits. We have not experienced any losses related to these balances and
management believes our credit risk to be minimal.
(d) 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 and corporate bonds are held in our name at three major
financial institutions that hold custody of the investments. All of our investments are held-to-maturity investments as we have the positive intent and ability
to hold until maturity. These securities are recorded at amortized cost.
The amortized cost and unrealized gain or loss of our investments at March 31 , 201 3 and March 31, 201 2 were:
Short-term investments:
Commercial paper, corporate and foreign bonds
Long-term investments:
Certificates of deposit (included in other assets)
March 31, 2013
March 31, 2012
Amortized Cost Gain (Loss) Amortized Cost Gain (Loss)
$
$
-
-
62,436
62,436
39
-
-
-
-
482,909
482,909
11,626
11,626
61,855
544,764
-
11,626
The time to maturity of held-to-maturity securities were:
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements , Continued
Three to six months
Six months to one year
Over one year
(e) Accounts Receivables
March 31, 2013
March 31, 2012
$
$
-
-
62,436
62,436
432,985
49,924
61,855
544,764
We extend unsecured credit to most of our customers following a review of the customers’ financial condition and credit history. Our sales are conducted
through acceptance of customer purchase orders or in some cases through supply agreements. For credit qualified customers our standard terms are net 30
days. For international customers without an adequate credit rating, our typical terms are irrevocable letter of credit or cash payment in advance of delivery.
We establish an allowance for uncollectable accounts based upon a number of factors including the length of time trade receivables are past due, the
customer’s ability to pay its obligation to us, the condition of the general economy, estimates of credit risk, historical trends and other information. We write
off accounts receivable when they become uncollectible against our allowance for uncollectible accounts receivable. At March 31, 2013 and 2012, we had an
allowance for uncollectible accounts receivable of $ 3 ,8 38 , 092 and $ 127,697 , respectively. Accounts receivable are deemed to be past due when they
have not been paid by their contractual due dates.
(f) Inventories
Inventories are stated at the lower of cost or market. Cost is determined by the first-in, first-out method. We charge directly to expense slow moving or
obsolete inventory items during the period we assess the value of such inventory to be impaired. For the fiscal years ended March 31, 2013, 2012 and 2011,
we impaired inventory of $ 8,928 , $ 10,169 and $ 10,160 , respectively.
(g) Property and Equipment
Property and equipment are stated at cost, unless the asset was acquired, in part, with DOE Grant funds, in which case it is stated at cost net of DOE
reimbursements. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range from three to five years,
except for buildings, which are depreciated over 27.5 years. Maintenance and repairs are charged to expense as incurred. Depreciation expense for the fiscal
years ended March 31, 2013, 2012 and 2011 was $ 1,218,812 , $ 1,139,821 and $ 817,033 , respectively , and was reported in operating costs and expenses
on the Consolidated Statement s of Operations.
(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 1 3 years for
patents, and 40 years for trademarks. Amortization expense for the fiscal years ended March 31, 2013, 2012 and 2011 was $ 34,022 , $ 39,137 , and $
47,539 , 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.
40
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements , Continued
(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 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) Government Grants
The Company recognizes government grants when it is probable that the Company will comply with the conditions attached to the grant arrangement and
the grant will be received. Government grants are recognized in the consolidated statements of operations on a systematic basis over the periods in which the
Company recognizes the related costs for which the government grant is intended to compensate. Specifically, when government grants are related to
reimbursements for cost of revenues or operating expenses, the government grants are recognized as a reduction of the related expense in the consolidated
statements of operations. For government grants related to reimbursements of capital expenditures, the government grants are recognized as a reduction of
the basis of the asset and recognized in the consolidated statements of operations over the estimated useful life of the depreciable asset as reduced
depreciation expense.
The Company records government grants receivable in the consolidated balance sheets in accounts receivable.
(m) Income Taxes
The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and
operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be recovered or settled. The valuation of deferred tax assets may be reduced if future
realization is not assured. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income tax expense or benefit in the period
that includes the enactment date. The Company has unexpired net operating losses and research and development credits carrying forward into current years
that date from the tax year 199 9 and 2001, respectively. As such, all federal tax returns from 199 9 to the present are subject to audit.
(n) Research and Development
Costs of researching and developing new technology, or significantly altering existing technology, are expensed as incurred.
41
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements , Continued
(o) 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, 2013, 2012 and 2011, 358,855 and
167,680 and 62,199 shares of common stock issued but not yet earned, respectively under the S tock Bonus P lan were being held by the Company. For fi
scal years 2013, 2012 and 2011, 18,036 , zero and 8,794 shares were potentially includable 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, 2013, 2012 and 2011, options to purchase 4,282,001 , 3,254,905
and 2,971,251 shares of common stock, respectively, were outstanding. For the fiscal years ended March 31, 2013, 2012 and 2011, options for 2,872,257 ,
3,201,569 and 1,032,297 shares were not included in the computation of diluted loss per share because the option exercise price was greater than the average
market price of the common stock. In-the-money options determined under the treasury stock method to acquire 109,628 , 2,834 and 363,356 shares of
common stock for the fiscal years ended March 31, 2013, 2012 and 2011, respectively, were potentially includable in the calculation of diluted loss per share
but were not, because to do so would be antidilutive.
(p) 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.
( 2 ) Stock-Based Compensation
Stock Option Plans
As of March 31, 201 3 , we had 1,100,000 shares of common stock authorized and 14,354 shares of common stock available for future grant to employees,
consultants and key suppliers under our 2012 Equity Incentive Plan (“2012 Plan”). The term of the 2012 Plan is ten years. Under the 2012 Plan, the exercise
price of each option is set at the fair value of the common stock on the date of grant and the maximum term of the option is ten years from the date of grant.
Options granted to employees generally vest ratably over a three -year period. The maximum number of underlying shares that may be granted to an employee
under the Plan in any calendar year is 500,000 . Forfeitures under the Plan are available for re-issuance at any time prior to expiration of the Plan in 2022.
Options granted under the Plan to employees require the option holder to abide by certain Company policies, which restrict their ability to sell the underlying
common stock. Prior to the adoption of the 2012 Plan, we issued stock options under our 2002 Equity Incentive Plan. Forfeitures under the 2002 Equity Incentive
Plan may not be re-issued.
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, 2013, we had 1,000,000 shares of common stock authorized
and 217,900 shares of common stock available for future grant under the Directors’ Plan. Option terms range from three to ten years from the date of grant.
Option exercise prices are equal to the fair value of the common shares on the date of grant. Options granted under the plan generally vest immediately.
Forfeitures under the Directors’ Plan are available for re-issuance at a future date.
42
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements , Continued
Stock Purchase Plan
We have established a Stock Purchase Plan under which eligible employees may contribute up to ten percent of their compensation to purchase shares of our
common stock at 85 percent of the fair market value at specified dates. At March 31, 2013 , we had 700,000 shares of common stock authorized and 370,071
shares of common stock available for issuance under the Stock Purchase Plan. During the years ended March 31, 2013, 2012 and 2010, respectively, 85,550 ,
41,158 and 9,828 shares of common stock were issued under the Stock Purchase Plan. Cash received by us upon the purchase of shares under the Stock Purchase
Plan for the years ended March 31, 201 3, 2012 and 2011, was $ 75,385, $ 60,960 and $ 22,495 , respectively.
Stock Bonus Plan
We have a Stock Bonus Plan administered by the Board of Directors. As of March 31, 2013 , we had 1,954,994 shares of common stock authorized and there
were 495, 504 shares of common stock available for future grant under the Stock Bonus Plan. Under the Stock Bonus 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 Bonus Plan, if any, are determined by the Board of Directors at the time of grant. There were 454,866 , 213,398 and 243,076 shares granted
under the Stock Bonus Plan during the years ended March 31, 2013, 2012 and 2011, 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 MKT) 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:
Costs of contract services
Costs of product sales
Research and development
Production engineering
Selling, general and administrative
Year Ended
March 31, 2013
Year Ended
March 31, 2012
Year Ended
March 31, 2011
$
$
19,898
42,313
2,998
146,317
958,823
1,170,349
21,592
98,807
1,110
193,474
617,919
932,902
90,189
105,714
15,892
100,802
922,031
1,234,628
Share-based compensation capitalized in inventories was insignificant as of March 31 , 2013, 2012 and 2011.
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, 201 3, 2012 and 2011 was insignificant.
All options/shares granted under the Directors’ Plan are fully vested on the date of grant.
43
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements , Continued
A summary of the status of non-vested shares under the 2012 Plan and its predecessor plan as of March 31, 201 3, 2012 and 2011 , and changes during the years
ended March 31, 201 3, 2012 and 2011 are presented below:
Year Ended
March 31, 2013
Shares
Under
Option
Weighted-
Average
Grant Date
Fair Value
Year Ended
March 31, 2012
Shares
Under
Option
Weighted-
Average
Grant Date
Fair Value
Year Ended
March 31, 2011
Shares
Under
Option
Weighted-
Average
Grant Date
Fair Value
668,722 $
25,000 $
- $
(2,518) $
691,204 $
1,075,000 $
(543,557) $
(16,985) $
1,205,662 $
- $
(25,740) $
(19,307) $
1,160,615 $
- $
- $
(7,787) $
1,152,828 $
1.69
0.71
-
1.61
1.65
0.89
1.32
1.89
0.88
-
2.38
0.89
0.84
-
-
1.65
0.84
475,934 $
- $
- $
(3,610) $
472,324 $
389,588 $
(149,126) $
(931) $
711,855 $
25,000 $
(64,435) $
(1,985) $
670,435 $
- $
- $
(1,713) $
668,722 $
1.73
-
-
1.79
1.73
1.68
1.41
1.61
1.77
1.12
2.38
1.61
1.69
-
-
1.61
1.69
338,747 $
- $
- $
(1,832) $
336,915 $
510,132 $
(297,594) $
- $
549,453 $
- $
(64,435) $
(7,119) $
477,899 $
- $
- $
(1,965) $
475,934 $
1.93
-
-
1.61
1.94
1.37
1.21
-
1.80
-
2.38
1.58
1.73
-
-
1.45
1.73
Non-vested at April 1
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, 201 3 , there was $ 636,178 of total unrecognized compensation costs related to stock options granted under the 2012 Plan and its predecessor
plan. The unrecognized compensation cost is expected to be recognized over a weighted-average period of 24 months. The total fair value of stock options that
vested during the years ended March 31, 201 3, 2012 and 2011 wa s $ 781,116, $ 363,238 and $ 512,720 , respectively.
44
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, 201 3, 2012 and 2011 and changes during the years ended March 31, 201 3,
2012 and 2011 are presented below:
Year Ended
March 31, 2013
Year Ended
March 31, 2012
Year Ended
March 31, 2011
Shares
Weighted-
Average
Shares
Weighted-
Average
Shares
Weighted-
Average
Under
Contract
Grant Date
Fair Value
Under
Contract
Grant Date
Fair Value
Under
Contract
Grant Date
Fair Value
167,680 $
- $
(47,004) $
- $
120,676 $
440,934 $
(202,755) $
- $
358,855 $
13,932 $
(13,932) $
- $
358,855 $
- $
- $
- $
358,855 $
2.44
-
2.49
-
2.42
0.87
1.17
-
1.22
0.88
0.88
-
1.22
-
-
-
1.22
62,199 $
- $
- $
- $
62,199 $
213,398 $
(107,917) $
- $
167,680 $
- $
- $
- $
167,680 $
- $
- $
- $
167,680 $
2.50
-
-
-
2.50
2.34
2.28
-
2.44
-
-
-
2.44
-
-
-
2.44
98,929 $
- $
- $
- $
98,929 $
235,173 $
(139,767) $
- $
194,335 $
7,903 $
(140,039) $
- $
62,199 $
- $
- $
- $
62,199 $
2.97
-
-
-
2.97
2.51
2.57
-
2.70
1.92
2.74
-
2.50
-
-
-
2.50
Non-vested at April 1
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, 201 3 , there was $ 291,493 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 24 months. The total fair value of common stock granted under
the Stock Bonus Plan that vested during the years ended March 31, 2013, 2012 and 2011 was $ 367,230, $245,745 and $ 743,454 , respectively.
During the years ended March 31, 2013, 2012, and 2011 options to acquire 1,418,792 , 569,710 and 629,965 shares of common stock, respectively, were
granted under our 2012 Plan, 2002 Equity Incentive Plan and Directors’ Plan. 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, 2013, 2012 and 2011, 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
$
2013
0.87 per option
6.3 years
1.30 %
72.80 %
0.00 %
Year Ended Ma r ch 31,
2012
$
2.29 per option
$
5.8 years
2.59 %
73.96 %
0.00 %
2011
1.33 per option
4.1 years
1.56 %
73.46 %
0.00 %
Expected volatility is based on historical volatility. The expected life of options granted is based on historical experience.
45
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, 2013 under our 2012 Plan and its predecessor plan is as follows:
Outstanding at April 1, 2012
Granted
Exercised
Forfeited
Outstanding at June 30, 2012
Granted
Exercised
Forfeited
Outstanding at September 30, 2012
Granted
Exercised
Forfeited
Outstanding at December 31, 2012
Granted
Exercised
Forfeited
Outstanding at March 31, 2013
Exercisable at March 31, 2013
Vested and expected to vest at March 31, 2013
Shares
Under
Option
2,782,456
25,000
-
(2,518)
2,804,938
1,075,000
-
(16,985)
3,862,953
-
-
(81,892)
3,781,061
-
-
(211,943)
3,569,118
2,416,291
3,512,109
Weighted-
Average
Exercise
Price
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
2.81
1.03
-
2.40
2.80
0.89
-
2.73
2.27
-
-
3.43
2.24
-
-
2.74
2.21
2.69
2.23
46
Weighted-
Average
Remaining
Contractual
Life
4.0 years
3.8 years
5.2 years
5.0 years
5.0 years
3.2 years
4.9 years
Aggregate
Intrinsic
Value
-
-
-
-
293,500
-
-
-
-
-
-
$
$
$
$
$
$
$
$
$
$
$
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, 2012 under our 20 12 Plan is as follows:
Outstanding at April 1, 2011
Granted
Exercised
Forfeited
Outstanding at June 30, 2011
Granted
Exercised
Forfeited
Outstanding at September 30, 2011
Granted
Exercised
Forfeited
Outstanding at December 31, 2011
Granted
Exercised
Forfeited
Outstanding at March 31, 2012
Exercisable at March 31, 2012
Vested and expected to vest at March 31, 2012
47
Shares
Under
Option
2,630,491
-
-
(6,309)
2,624,182
389,588
-
(35,931)
2,977,839
25,000
-
(1,985)
3,000,854
-
-
(218,398)
2,782,456
2,113,734
2,755,229
Weighted-
Average
Exercise
Price
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
3.00
-
-
3.08
3.00
2.40
-
3.54
2.92
2.10
-
2.40
2.91
-
-
4.14
2.81
2.87
2.82
Weighted-
Average
Remaining
Contractual
Life
3.7 years
3.5 years
4.1 years
3.9 years
4.0 years
2.7 years
3.9 years
Aggregate
Intrinsic
Value
959,001
-
39,661
-
-
-
-
-
-
-
-
$
$
$
$
$
$
$
$
$
$
$
Additional information with respect to stock option activity during the year ended March 31, 2011 under our 2012 Plan is as follows:
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements , Continued
Outstanding at April 1, 2010
Granted
Exercised
Forfeited
Outstanding at June 30, 2010
Granted
Exercised
Forfeited
Outstanding at September 30, 2010
Granted
Exercised
Forfeited
Outstanding at December 31, 2010
Granted
Exercised
Forfeited
Outstanding at March 31, 2011
Exercisable at March 31, 2011
Vested and expected to vest at March 31, 2011
Weighted-
Average
Remaining
Contractual
Life
3.9 years
3.7 years
4.0 years
3.7 years
3.7 years
3.2 years
3.7 years
Aggregate
Intrinsic
Value
2,509,155
600
1,264,435
-
328,687
-
74,736
35,590
959,001
759,243
950,395
$
$
$
$
$
$
$
$
$
$
$
Shares
Under
Option
2,377,075
-
(1,000)
(3,166)
2,372,909
510,132
-
(6,334)
2,876,707
-
-
(7,119)
2,869,588
-
(30,966)
(208,131)
2,630,491
2,154,557
2,612,913
Weighted-
Average
Exercise
Price
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
3.45
-
3.57
3.57
3.45
2.52
-
3.59
3.28
-
-
2.37
3.29
-
2.12
7.07
3.00
2.99
3.00
48
Additional information with respect to stock option activity during the year ended March 31, 2013 under our Directors’ Plan is as follows:
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements , Continued
Outstanding at April 1, 2012
Granted
Exercised
Forfeited
Outstanding at June 30, 2012
Granted
Exercised
Forfeited
Outstanding at September 30, 2012
Granted
Exercised
Forfeited
Outstanding at December 31, 2012
Granted
Exercised
Forfeited
Outstanding at March 31, 2013
Exercisable at March 31, 2013
Vested and expected to vest at March 31, 2013
Weighted-
Average
Exercise
Price
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
2.59
-
-
-
2.59
0.79
-
2.18
1.87
0.88
-
3.40
1.76
-
-
1.95
1.76
1.76
1.76
Shares
Under
Option
445,754
-
-
-
445,754
282,051
-
(51,949)
675,856
36,741
-
(23,076)
689,521
-
-
(6,944)
682,577
682,577
682,577
49
Weighted-
Average
Remaining
Contractual
Life
3.3 years
3.1 years
3.5 years
3.5 years
3.2 years
3.2 years
3.2 years
Aggregate
Intrinsic
Value
-
-
-
-
104,359
-
-
-
-
-
-
$
$
$
$
$
$
$
$
$
$
$
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, 2012 under our Directors’ Plan is as follows:
Outstanding at April 1, 2011
Granted
Exercised
Forfeited
Outstanding at June 30, 2011
Granted
Exercised
Forfeited
Outstanding at September 30, 2011
Granted
Exercised
Forfeited
Outstanding at December 31, 2011
Granted
Exercised
Forfeited
Outstanding at March 31, 2012
Exercisable at March 31, 2012
Vested and expected to vest at March 31, 2012
Shares
Under
Option
329,786
-
-
-
329,786
155,122
-
(25,996)
458,912
-
-
(13,158)
445,754
-
-
-
445,754
445,754
445,754
Weighted-
Average
Exercise
Price
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
2.86
-
-
-
2.86
2.04
-
2.33
2.61
-
-
3.40
2.59
-
-
-
2.59
2.59
2.59
50
Weighted-
Average
Remaining
Contractual
Life
3.1 years
2.9 years
3.7 years
3.6 years
3.3 years
3.3 years
3.3 years
Aggregate
Intrinsic
Value
129,642
-
9,734
-
-
-
-
-
-
-
-
$
$
$
$
$
$
$
$
$
$
$
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, 201 1 under our Directors’ Plan is as follows:
Outstanding at April 1, 2010
Granted
Exercised
Forfeited
Outstanding at June 30, 2010
Granted
Exercised
Forfeited
Outstanding at September 30, 2010
Granted
Exercised
Forfeited
Outstanding at December 31, 2010
Granted
Exercised
Forfeited
Outstanding at March 31, 2011
Exercisable at March 31, 2011
Vested and expected to vest at March 31, 2011
Shares
Under
Option
256,653
-
-
(977)
255,676
100,136
-
(24,039)
331,773
19,697
-
(21,684)
329,786
-
-
-
329,786
329,786
329,786
Weighted-
Average
Exercise
Price
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
3.15
-
-
7.63
3.13
2.63
-
3.57
2.96
1.92
-
3.40
2.86
-
-
-
2.86
2.86
2.86
Weighted-
Average
Remaining
Contractual
Life
2.6 years
2.4 years
3.3 years
3.4 years
3.1 years
3.1 years
3.1 years
Aggregate
Intrinsic
Value
303,651
-
143,003
-
45,771
-
14,384
-
129,642
129,642
129,642
$
$
$
$
$
$
$
$
$
$
$
Cash received by us upon the exercise of stock options for the years ended March 31, 2013, 2012 and 2011 was zero , zero and $ 69,116 , respectively. The
source of shares of common stock issuable upon the exercise of stock options is from authorized and previously unissued common shares.
51
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 , 201 3 and March 31, 2012, the estimated period to complete contracts in process ranged from one to twenty-one months and one to ten months,
respectively. We expect to collect all related accounts receivable arising there from 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, 2013
March 31, 2012
$
$
$
$
838,246
515,299
1,353,545
(1,175,281)
178,264
178,264
-
178,264
1,206,786
380,713
1,587,499
(1,516,324)
71,175
78,376
(7,201)
71,175
March 31, 2013
March 31, 2012
$
$
8,097,342
356,696
2,544,423
10,998,461
7,189,930
710,603
2,663,615
10,564,148
Our raw material inventory is subject to obsolescence and potential impairment due to bulk purchases in excess of customers’ requirements. We periodically
assess our inventories for recovery of carrying value based on available information, expectations and estimates, and adjust inventory carrying values to the
lower of cost or market for estimated declines in the realizable value.
(5) Government Grants
We have a $ 45,145,534 grant (the “Grant”) with the U.S. Department of Energy (“DOE”) under the American Recovery and Reinvestment Act. The Grant
provides funds to facilitate the manufacture and deployment of electric drive vehicles, batteries and electric drive vehicle components in the United States.
Pursuant to the terms of the Agreement, the DOE will reimburse us for 50 percent of qualifying costs for the purchase of facilities, tooling and manufacturing
equipment, and for engineering related to product qualification and testing of our electric propulsion systems and other products. The period of the Grant is
through January 12, 2015. We recognize government grants when it is probable that the Company will comply with the conditions attached to the grant
arrangement and the grant will be received.
Funding for qualifying project costs incurred is initially limited to $ 32.0 million until we provide the DOE with an updated total estimated cost of the project
along with evidence of firm commitments for our 50 percent share of the total estimated cost of the project no later than July 12, 2013. If all such funds have not
been secured, we must
52
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements , Continued
submit, by such date, a funding plan to obtain the remainder of such funds, which is acceptable to the DOE. In the event we do not satisfy the foregoing
contingency, the Grant may be terminated. In addition, the Grant may be terminated at any time at the convenience of the government.
The Grant is also subject to our compliance with certain reporting requirements. The American Recovery and Reinvestment Act imposes minimum construction
wages and labor standards for projects funded by the Grant. If we dispose of assets acquired using Grant funding, we may be required to reimburse the DOE
upon such sale date if the fair value of the asset on the date of disposition exceeds $ 5,000 . The amount of any such reimbursement shall be equal to 50 percent
of the fair value of the asset on the date of disposition.
While UQM has exclusive patent ownership rights for any technology developed with Grant funds, we are required to grant the DOE a non-exclusive, non-
transferable, paid-up license to use such technology.
At March 31, 2013, we had received reimbursements from the DOE under the Grant totaling approximately $ 19.6 million and had grant funds receivable of
approximately $ 1.6 million.
The application of grant funds to eligible capital asset purchases under the Grant as of March 31, 2013 and March 31, 2012 are as follows:
Land
Building
Machinery and equipment
Land
Building
Machinery and equipment
Purchase Cost
Grant Funding
Recorded Value
March 31, 2013
$
$
$
$
896,388
9,906,736
7,581,408
18,384,532
448,194
4,953,368
3,790,704
9,192,266
March 31, 2012
448,194
4,953,368
3,790,704
9,192,266
Purchase Cost
Grant Funding
Recorded Value
896,388
9,865,371
7,163,597
17,925,356
448,194
4,932,685
3,581,799
8,962,678
448,194
4,932,686
3,581,798
8,962,678
( 6) Impairment of Long-Lived Assets
During the fiscal year ended March 31, 201 3 , 201 2 and 201 1 , we recorded total impairment charges of zero , $ 27,845 and zero , respectively for the
impairment of long-lived assets.
Impairments for the fiscal year ended March 31, 2012 consist solely of capitalized costs, principally legal fees, associated with the preparation and filing of
patent applications that were subsequently abandoned. Because no patents were issued, none of these patent application costs were amortized prior to their
impairment.
(7) Patents and Trademarks
Patents owned by the Company, had a gross carrying amount of $ 1,052,082 and $ 1,039,095 , accumulated amortization of $ 845,795 and $ 816,259 , and a net
carrying amount of $ 206,287 and $ 222,836 , at March 31, 2013 and 2012, respectively . Trademarks owned by the Company had a gross carrying amount of $
174,758 and $ 173,587 , accumulated amortization of $ 64,230 and $ 59,743 , and a net carrying value of $ 110,528 and $ 113,844 at March 31, 2013 and 2012,
respectively. Patents and trademarks are amortized on a straight-line basis over the estimated useful life of the asset. The weighted-average period of
amortization is 13 years for patents, and 40 years for trademarks.
53
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements , Continued
Estimated future amortization of these intangible assets by fiscal year is as follows:
Patents
Trademarks
2014
2015
2016
2017
2018
Thereafter
$
$
33,593
22,290
17,823
17,823
17,385
97,373
206,287
( 8 ) Other Current Liabilities
Other current liabilities consist of:
Accrued payroll and employee benefits
Accrued personal property and real estate taxes
Accrued warranty costs
Unearned revenue
Accrued royalties
Accrued import duties
Accrued vendor settlements
Other
( 9) Income Taxes
4,487
4,487
4,487
4,487
4,487
88,093
110,528
March 31, 2013
March 31, 2012
$
$
174,135
264,814
77,393
71,442
48,336
813,740
1,050,000
99,575
2,599,435
206,919
229,470
154,978
1,705,715
31,493
-
-
526
2,329,101
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
Increase (decrease) in valuation allowance for
net deferred tax assets
Other, net
Income tax benefit
Year Ended
March 31, 2013
$
(3,634,026)
Year Ended
March 31, 2012
(1,675,697)
1,364,055
2,295,702
(25,731)
$
-
54
382,741
1,222,257
70,699
-
Year Ended
March 31, 2011
(677,402)
1,035,833
(530,092)
171,661
-
The tax effects of temporary difference that give rise to significant portion s of the net deferred tax asset are presented below:
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements , Continued
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
March 31, 2013
March 31, 2012
$
$
4,073
22,998,447
242,840
297,144
64,994
847,069
757,382
25,211,949
4,073
21,182,834
275,156
294,626
55,067
722,039
382,452
22,916,247
Less valuation allowance
(25,211,949)
(22,916,247)
Net deferred tax assets, net of valuation allowance
$
-
-
As of March 31, 2013 and March 31, 2012, respectively, we had net operating loss (“NOL”) carry-forwards of approximately $ 67.3 million and $ 62.4 million
for U.S. income tax purposes that expire in varying amounts through 2033. Approxim ately $ 5.3 millio n 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 $ 25.2 million and $ 22.9 million at March 31, 2013 and 2012, 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.
We have not recorded any potential liability for uncertain tax positions taken on our tax returns.
We may, from time to time, be assessed interest or penalties by major tax jurisdictions, although any such assessments historically have been minimal and
immaterial to our financial results. Penalties are recorded in selling, general and administrative expenses and interest paid or received is recorded in interest
expense or interest income, respectively, in the consolidated statements of operations.
(1 0 ) Significant Customers
We have historically derived significant revenue from a few key customers. Revenue from Electric Vehicles International totaled $ 1,494,024 , $ 41,388 , and
$269,022 for the fiscal years ended March 31 2013, 2012 and 2011, respectively, which was 21 percent, 1 percent and 3 percent of our consolidated total
revenue, respectively.
Trade accounts receivable from Electric Vehicle International were 3 percent and nil of consolidated total accounts receivable as of March 31, 2013 and 2012,
respectively. I nventories consisting of raw materials, work-in-progress and finished goods for this customer totaled $ 152,987 and zero at March 31, 3013 and
2012, respectively.
Revenue from Meggitt (Addison), Inc. totaled $ 816,779 , $ 747,924 and $626,966 for the fiscal years ended March 31, 2013, 2012 and 2011, respectively, which
was 11 perce nt, 7 percent and 7 percent of our consolidated total revenue, respectively.
55
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements , Continued
Trade accounts receivable from Meggitt (Addison), Inc. were 5 percent and 3 percent of consolidated total accounts receivable as of March 31, 2013 and 2012,
respectively. I nventories consisting of raw materials, work-in-progress and finished goods for this customer totaled $ 191,176 and $ 185,007 at March 31, 2013
and 2012, respectively.
Revenue from Audi totaled $ 728,000, $455,000 and zero for the fiscal years ended March 31, 2103, 2012 and 2011 , respectively, which was 10 percent , 4
percent and nil of our consolidated total revenue, respectively. I nventories consisting of raw materials, work-in-progress and finished goods for this customer
totaled zero and $105,246 at March 31, 2013 and 2012, respectively.
Revenue from CODA Automotive totaled $213,745, $4,313,728 and $1,301,224 for the fiscal years ended March 31, 2013, 2012 and 2011, respectively, which
was 3 percent, 43 percent and 14 percent of our consolidated total revenue, respectively.
Trade accounts receivable from CODA were nil and 61 percent of consolidated total accounts receivable as of March 31, 2013 and 2012,
respectively Inventories consisting of raw materials and finished goods originally designated for CODA but transferred to general inventory at March 31, 2013
were $ 8,291,423 . Inventories for CODA were $ 8,048,999 at March 31, 2012.
Revenue derived from contracts with agencies of the U.S. Government and from subcontracts with U.S. Government prime contractors totaled $ 1,078,930 , $
684,489 and $ 1,112,307 for the fiscal years ended March 31, 2013, 2012 and 2011, respectively, which was 15 percen t, 7 percent and 12 percent of our
consolidated total revenue , respectively. Accounts receivable from government-funded contracts represented 77 and 9 percent of total accounts receivable as
of March 31, 2013 and 2012, respectively.
( 1 1 ) Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the short maturity of these
instruments. The carrying value of investments is the amortized cost of the investments which approximates fair value. See Note 1(d) .
(1 2 ) Fair Value Measurements
Liabilities measured at fair value on a recurring basis as of March 31, 2013 are summarized below:
Deferred compensation under
executive employment agreements (1)
Fair Value at Reporting Date Using
Quoted Prices
In Active
Markets
For Identical
Liabilities
(Level
1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
$ 627,412
-
-
627,412
Note (1) $524,000 included in current liabilities and $103,412 included in long term liabilities on our consolidated balance sheet as of March 31, 2013.
56
Liabilities measured at fair value on a recurring basis as of March 31, 2012 are summarized below:
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements , Continued
Fair Value at Reporting Date Using
Quoted
Prices
In Active
Markets
For
Identical
Liabilities
(Level
1)
Significant
Other
(Level 2)
Observable
Significant
Inputs
Inputs
(Level 3)
Unobservable
Total
Deferred compensation under
executive employment agreements (1)
$ 715,107
-
-
715,107
Note (1) $152,007 included in current liabilities and $563,100 included in long term liabilities on our consolidated balance sheet as of March 31, 2012.
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 using a discounted cash
flow model with a discount rate of 14 percent based on the expected cost of capital for the Company.
A summary of the liability measured at fair value on a recurring basis using significant unobservable inputs (Level 3) follows:
Balance at beginning of period
Transfers into Level 3
Transfers out of Level 3
Total gains or losses (realized and unrealized):
Included in earnings
Included in other comprehensive income
Settlements
Balance at the end of period
Loss for the period included in earnings
attributable to the Level 3 liability still
held at the end of the period
(1 3 ) 401(k) Employee Benefit Plan
Fair Value Measurements Using Significant
Unobservable Inputs (Level 3) for the
Fiscal Year Ended
March 31, 2013
Deferred
Compensation
On Executive
Employment
Agreements
March 31, 2012
Deferred
Compensation
On Executive
Employment
Agreements
$
$
$
715,107
-
-
64,312
-
(152,007)
627,412
64,312
$
$
$
1,316,372
-
-
137,935
-
(739,200)
715,107
137,935
We have established a 401(k) Savings Plan (“401K Plan ”) under which eligible employees may contribute up to 15 percent of their compensation. Employees
over the age of 18 are eligible immediately upon hire to participate in the 401K Plan. At the direction of the participants, contributions are invested in several
investment options offered by the 401K Plan. We currently match 33 percent of participants’ contributions, subject to certain limitations. These matching
contributions vest ratably over a three -year period . Matching contributions to the 401K Plan were $ 149,311 , $ 135,825 , and $ 96,074 , for the years ended
March 31, 201 3 , 201 2 , and 201 1 , respectively.
57
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements , Continued
(14) Segments
Effective April 1, 2011, the Company merged its wholly-owned subsidiary UQM Power Products, Inc. into UQM Technologies, Inc. As a result of this merger,
the operations of each of these entities are no longer managed or reported upon to management separately, and accordingly, the Company is no longer presenting
segment information in its financial statements.
During the fiscal year ended March 31, 2011, we had two reportable segments: technology and power products. These reportable segments were strategic
business units that offered different products and services. They were managed separately because each business required different business strategies. The
technology segment encompassed 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 encompassed the manufacture and sale of motors and
electronic controllers. Salaries of the executive officers and corporate general and administrative expense were allocated to each segment annually based on
factors established at the beginning of the fiscal year. The percentages allocated to the technology segment and power products segment for the fiscal year ended
March 31, 2011 were 76 percent and 24 percent .
Intersegment sales or transfers, which were eliminated upon consolidation, were $ 767,935 for the year ended March 31, 2011.
The Company leased office, production and laboratory space in a building owned by a wholly-owned subsidiary of the Company. During the fiscal year ended
March 31, 2011, this wholly-owned subsidiary’s operations were included as part of the former Power Products segment. Intercompany lease payments were
based on a negotiated rate for the square footage occupied and were $298,593 for the year ended March 31, 2011, 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, 2011:
Revenue
Interest income
Interest expense
Depreciation and amortization
Impairment of inventories
Segment loss
Total assets
Expenditures for long-lived segment assets
Technology
Power Products
Total
$
$
$
$
$
$
$
$
5,884,486
89,343
-
(462,312)
(3,924)
(1,015,085)
29,474,989
(1,297,816)
58
3,136,816
1,999
-
(402,260)
(6,236)
(977,273)
12,328,931
(6,099,992)
9,021,302
91,342
-
(864,572)
(10,160)
(1,992,358)
41,803,920
(7,397,808)
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements , Continued
(1 5 ) Commitments and Contingencies
Employment Agreements
The Company has entered into employment agreements with all of its officers. Subsequent to the end of the fiscal year, the Company entered into an employment
agreement with David Rosenthal, the Company’s newly appointed Treasurer, Secretary and Chief Financial Officer , who succeeded Mr. French who is
retiring. Messrs. Ridenour, Rosenthal, Lutz, Schaffer and Mitchell have agreed to serve in their present capacity for a term expiring on August 31, 2015. The
aggregate future base salary payable to the executive officers, excluding Mr. French, over their remaining terms is $ 2,3 18 , 333 . In addition, we have recorded
a liability of $ 627,412 and $ 715,107 at March 31, 2013 and March 31, 2012, respectively, representing the potential future compensation payable under the
retirement and voluntary termination provisions of the employment agreements of the Company’s current officers.
The employment agreements provide for severance payments under the conditions and for the amounts specified in the agreements.
Under the terms of Mr. French’s employment agreement, he will receive a retirement payment of $ 524,000 thirty days after his retirement date.
Lease Commitments
At March 31, 2013 , there were no operating leases.
Rental expense for the years ended March 31, 2013, 2012 and 2011, respectively, was zero , zero and $ 30,938 .
Litigation
We are involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, and based on current available
information, the ultimate disposition of these matters is not expected to have a material adverse effect on our financial position, results of operations or cash
flow.
59
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements , Continued
(1 6) Interim Financial Data (Unaudited)
Fiscal year 2013
Sales
Gross profit
Net loss
June 30
September 30 December 31 March 31
Quarters Ended
$
$
$
2,396,428
930,489
(1,287,434)
1,196,104
463,891
(2,563,548)
1,928,070
276,594
(4,555,033)
1,658,107
459,505
(2,282,297)
Net loss per common share basic and diluted:
$
(0.04)
(0.07)
(0.12)
(0.06)
Fiscal year 2012
Sales
Gross profit
Net loss
June 30
September 30 December 31 March 31
Quarters Ended
$
$
$
1,315,060
587,895
(1,043,543)
2,334,223
1,020,541
(1,586,185)
2,719,323
578,529
(846,416)
3,774,850
793,030
(1,452,376)
Net loss per common share basic and diluted:
$
(0.03)
(0.04)
(0.03)
(0.04)
Fiscal year 2011
Sales
Gross profit
Net loss
June 30
September 30 December 31 March 31
Quarters Ended
$
$
$
2,555,324
964,072
(486,870)
2,027,558
226,609
(377,793)
2,090,474
439,834
(932,520)
2,347,946
762,188
(195,175)
Net loss per common share basic and diluted:
$
(0.01)
(0.01)
(0.03)
(0.01)
(1 7 ) Valuation and Qualifying Accounts
Year ended March 31,2013
Accrued warranty cost
Allowance for doubtful accounts- deducted
from accounts receivable
Year ended March 31,2012
Accrued warranty cost
Allowance for doubtful accounts- deducted
from accounts receivable
Year ended March 31,2011
Accrued warranty cost
Balance at
Beginning
of Year
Additions
Charged to
Costs and
Expenses
Charged to
Other
Accounts
$
$
154,978
58,676
127,697
3,838,092
-
-
Balance at
End of Year
Deductions
136,261 (A)
127,697
3,838,092
$
89,463
196,815
-
131,300 (A)
$
-
127,697
-
-
-
$
75,903
142,598
-
129,038 (A)
Note (A) Represents actual warranty payments for units returned under warranty
60
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements , Continued
(18) Subsequent Event
The Company has listed its former facility in Frederick, Colorado for sale with a commercial real estate broker. The facility has been reclassified as a current
asset and the Company has discontinued deprecia ting the asset pending its sale.
In May 2013, the Company entered into an agreement to sell the facility held for sale for a sale price of $ 1,650,000 . The carrying value of the facility was
$1,621,257 and the sale transaction is estimated to generate cash proceeds, net of selling costs of approximately $ 1,525,000 . As a result of the pending sale
transaction, the Company reduced the carrying value of the facility to $ 1,525,000 at March 31, 2013.
61
Table of Contents
ITEM 9.
ACCOUNTING AND FINANCIAL DISCLOSURE
CHANGE IN AND DISAGREEMENTS WITH INDEPENDENT ACCOUNTANTS ON
None.
ITEM 9A .
Controls Evaluation
CONTROLS AND PROCEDURES
We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2013 under the supervision and
with the participation of management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”).
Based on their evaluation as of March 31, 2013, our CEO and CFO have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended) were effective to ensure that the information required to be disclosed by our management in the
reports that it files or submits under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the
SEC’s rules and forms, and (ii) accumulated and communicated to our management, including our CEO and CFO, to allow timely decisions regarding required
disclosure.
Management Report on Internal Control Over Financial Reporting
Our management is responsible for all aspects of the business, including the preparation of the consolidated financial statements in this annual report. Management
prepared the consolidated financial statements using accounting principles generally accepted in the United States. Management has also prepared the other
information in this annual report and is responsible for its accuracy and consistency with the consolidated financial statements.
Management is responsible for establishing and maintaining an adequate system of internal control over financial reporting, including safeguarding of assets against
unauthorized acquisition, use or disposition. This system is designed to provide reasonable assurance to management and the board of directors regarding preparation
of reliable published financial statements and safeguarding of our assets. This system is supported with written policies and procedures and contains self-monitoring
mechanisms. Appropriate actions are taken by management to correct deficiencies as they are identified. All internal control systems have inherent limitations,
including the possibility of circumvention and overriding of controls, and, therefore, can provide only reasonable assurance as to the reliability of financial statement
preparation and such asset safeguarding.
Management has assessed the effectiveness of our internal control over financial reporting as of March 31, 2013. In making this assessment, it used the criteria
described in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this
assessment, management has concluded that, as of March 31, 2013, our internal control over financial reporting is effective. Management reviewed the results of its
assessment with the Audit Committee of our Board of Directors who oversees the financial reporting process.
The consolidated financial statements have been audited by the independent registered public accounting firm, Grant Thornton LLP .
Changes in Internal Control Over Financial Reporting
There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the
fiscal year ended March 31, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
May 2 1 , 2013
Eric R. Ridenour
President and Chief Executive Officer
David I. Rosenthal
Treasurer, Secretary and
Chief Financial Officer
62
Table of Contents
ITEM 9B .
OTHER INFORMATION
Compensatory Arrangements of Certain Officers
On May 21, 2013 , the compensation and benefits committee of the Company’s Board of Directors completed its annual review of the Company’s executive
compensation. The Company’s Board of Directors reviewed the committee’s recommendations, and approved the following changes in base salary for each of the
following named executive officers:
Amendment to the Employment Agreement of Eric R. Ridenour - The Company’s President and Chief Executive Officer, Eric R. Ridenour, is a party to an
employment agreement with the Company, incorporated by reference from the Company’s Current Report on Form 8-K filed May 1, 2013 as Exhibit 10.2 . The Board
of Directors approved an increase in Mr. Riden our's annual base salary to $447,000 effective May 16, 2013 . Mr. Ridenour, will continue to receive an auto allowance
of $9,720 per year.
Amendment to Employment Agreement of Jon Lutz - The Company’s Vice President of Engineering, Jon Lutz, is a party to an employment agreement with the
Company, incorporated by reference from the Company’s Current Report on Form 8-K filed May 1, 2013 as Exhibit 10.3. The Board of Directors approved an
increase in Mr. L utz’s annual base salary to $209,000 effective May 16, 20 13 . Mr. Lutz, will continue to receive an auto allowance of $9,720 per year.
Employment Agreement with Adrian Schaffer - The Company’s Vice President of Sales and Business Development, Adrian Schaffer, is a party to an employment
agreement with the Company, incorporated by reference from the Company’s Current Report on Form 8-K dated May 1, 2013 as Exhibit 10.4 . The Board of Directors
approved an increase in Mr. Schaf fer’s annual base salary to $208,000 effective May 16, 2013 . Mr. Schaffer, will continue to receive an auto allowance of $9,720 per
year.
Employmen t Agreement with Joe Mitchell - The Company’s Vice President of Operations , Joe Mitchell , is a party to an employment agreement with the Company,
incorporated by reference from the Company’s Current Report on Form 8-K dated May 1, 2013 as Exhibit 10.5 . The Board of Directors a pproved an increase in Mr.
Mitchell’s annual base salary to $205,000 effective May 16, 2013. Mr. Mitchell , will continue to receive an auto allowance of $9,720 per year.
Employmen t Agreement with David Rosenthal - The Company’s Treasurer, Secretary and Chief Financial Officer , David Rosenthal , is a party to an employment
agreement with the Company, incorporated by reference from the Company’s Current Report on Form 8-K dated May 1, 2013 as Exhibit 10.1 . The Board of Directors
a pproved an annual base salary of $235,000 for Mr. Rosenthal effective on his initial hire date of May 1, 2013. Mr. Rosenthal will also receive an auto allowance of
$9,720 per year.
63
Table of Contents
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
PART III
Additional information required by Item 10 is incorporated by reference from and contained under the headings “Election of Directors”, “Management” “Section 16
(a) Beneficial Ownership Reporting Compliance” and “Code of Ethics” in our Definitive Proxy Statement for the Annual Meeting of Shareholders’ to be held
August 7 , 201 3 .
ITEM 11.
EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference from and contained under the headings “Executive Compensation”, “Option Grants during Fiscal
Year 201 3 ,” “Aggregate Option Exercises During Fiscal Year 201 3 ,” “Option Values at the End of Fiscal Year 201 3 ,” “Director
Compensation,” “Compensation discussion and Analysis,” “Compensation and Benefits Committee Report,” and “Compensation Committee Interlocks” in our
definitive Proxy Statement for the Annual Meeting of Shareholders’ to be held August 7 , 201 3 .
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
The information required by Item 12 is incorporated by reference from and contained under the heading “Security Ownership of Certain Owners and Management”
and “Equity Compensation Plan Information” in our definitive Proxy Statement for the Annual Meeting of Shareholders’ to be held August 7 , 201 3 .
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required by Item 13 is incorporated by reference from and contained under the headings “Certain Relationships and Related Transactions” in our
definitive Proxy Statement for the Annual Meeting of Shareholders’ to be held August 7 , 201 3 .
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The information required by Item 14 is incorporated by reference from and contained under the heading “Ratification of Selection of Independent Auditors” in our
definitive Proxy Statement for the annual meeting of shareholders to be held August 7 , 201 3 .
64
Table of Contents
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
PART IV
(a)
1.
Financial Statements
UQM Technologies, Inc. (included in Part II):
Report of Independent Registered Public Accounting Firm.
Consolidated Balance Sheets, March 31, 2013 and March 31, 2012.
Consolidated Statements of Operations for the Years Ended March 31, 2013, 2012, and 2011.
Consolidated Statements of Stockholders’ Equity for the Years Ended March 31, 2013, 2012, and
2011.
Consolidated Statements of Cash Flows for the Years Ended March 31, 2013, 2012, and 2011.
Notes to Consolidated Financial Statements.
2.
Financial Statement Schedules:
Valuation and Qualifying Accounts. See note 1 7 to the Consolidated Financial Statements above.
3.
Exhibits :
Restated Articles of Incorporation. Reference is made to Exhibit 3.2 of our Annual Report on Form
10-K for the year ended October 31, 1993 (No. 1-10869), which is incorporated herein by reference.
Bylaws. Reference is made to Exhibit 3.1 of our Annual Report on Form 10-K for the year ended
March 31, 2005 (No. 1-10869)), which is incorporated herein by reference.
Amendment to the Bylaws. Reference is made to Exhibit 3.1 of our current report on Form 8-K filed
February 14, 2011 (No. 1-10869) , which is incorporated herein by reference.
Specimen Stock Certificate. Reference is made to Exhibit 3.1 of our Registration Statement on Form
10 dated February 27, 1980 (No. 1-10869), which is incorporated herein by reference.
Assistance Agreement between the Company and the U.S. DOE/NETL. Reference is made to Exhibit
10.1 of our Current Report on Form 8-K filed on January 20, 2011 (No. 1-10869), which is
incorporated herein by reference.
Modification Number One to the Assistance Agreement between the Company and the U.S.
DOE/NETL. Reference is made to Exhibit 10.1 of our Current Report on Form 8-K, filed on May 17,
2011 (No. 1-10869), which is incorporated herein by reference.
Modification Number Two to the Assistance Agreement between the Company and the U.S.
DOE/NETL. Reference is made to Exhibit 10.1 of our current report on Form 8-K, filed on June 28,
2010 (No. 1-10869), which is incorporated herein by reference.
Modification Number Three to the Assistance Agreement between the Company and the U.S.
DOE/NETL. Reference is made to Exhibit 10.1 of our current report on Form 8-K, filed August 26,
2010 (No. 1-10869), which is incorporated herein by reference.
Modification Number Four to the Assistance Agreement between the Company and the U.S.
DOE/NETL. Reference is made to Exhibit 10.1 of our current report on Form 8-K, filed September 9,
2010 (No. 1-10869), which is incorporated herein by reference.
3.1
3.2
3.3
4.1
10.1
10.2
10.3
10.4
10.5
65
10. 6
10. 7
10.8
Modification Number Six to the Assistance Agreement between the Company and the U.S.
DOE/NETL. Reference is made to Exhibit 10.1 of our current report on Form 8-K, filed June 29,
2011 (No. 1-10869), which is incorporated herein by reference.
Modification Number Seven to the Assistance Agreement between the Company and the U.S.
DOE/NETL. Reference is made to Exhibit 10.1 of our current report on Form 8-K, filed April 17,
2012 (No. 1-10869), which is incorporated herein by reference.
Supply Agreement with CODA Automotive. Reference is made to Exhibit 99.1 of our Quarterly
Report on Form 10-Q, filed October 28, 2010 (No. 1-10869), which is incorporated herein by
reference.
10.9
Amendment to the Supply Agreement with CODA Automotive*. Reference is made to Exhibit 10.1
of our Form 10-Q, filed October 27, 2011, which is incorporated herein by reference.
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
UQM Technologies, Inc. Employee Stock Purchase Plan. ** Reference is made to Exhibit 4.1 to the
Company’s Registration Statement on Form S-8 (No. 333-164705) filed on February 5, 2011, which
is incorporated herein by reference.
Stock Bonus Plan. ** Reference is made to Exhibit 10.2 of our Current Report on Form 8-K filed on
August 12, 2005 (No. 1-10869), which is incorporated herein by reference.
Amendment to UQM Technologies, Inc. Stock Bonus Plan dated May 9, 2012. ** Reference is made
to Exhibit 10.22 of our F orm 10-K filed May 24, 2012, which is incorporated herein by reference.
UQM Technologies, Inc. Outside Director Stock Option Plan amended November 2, 2011. **
Reference is made to Exhibit 10.21 of our F orm 10-K filed May 24, 2012, which is incorporated
herein by reference.
UQM Technologies, Inc. 2012 Equity Incentive Plan adopted April 11, 2012.** Reference is made to
Exhibit 10.19 of our Form 10-K filed May 24, 2012, which is incorporated herein by reference.
Form of Incentive Stock Option Agreement. ** Reference is made to Exhibit 10.6 of our Annual
Report on Form 10-K, filed on May 22, 2009 (No. 1-10869), which is incorporated herein by
reference.
Form of Non-Qualified Stock Option Agreement. ** Reference is made to Exhibit 10.7 of our Annual
Report on Form 10-K, filed on May 22, 2009 (No. 1-10869), which is incorporated herein by
reference.
Form of Restricted Stock Agreement, amended May 9, 2012. Reference is made to Exhibit 10.20 of
our Form 10-K filed May 24, 2012, which is incorporated herein by reference.
Amended employment agreement with Eric. R Ridenour dated April 30, 2013.** Reference is made
to Exhibit 10.2 of our current report on Form 8-K, filed May 1, 2013 (No. 1-10869), which is
incorporated herein by reference.
Amended Restricted Stock Agreement with Mr. Ridenour dated October 20, 2010.** Reference is
made to Exhibit 10.1 to our current report on Form 8-K filed October 22, 2010 (No. 1-10869), which
is incorporated herein by reference.
Amended E mployment A greement with Donald A. French dated August 13, 2010.** Reference is
made to Exhibit 10.1 to our current report on Form 8-K, filed on August 18, 2011 (No. 1-10869),
which is incorporated herein by reference.
Employment agreement with David I. Rosenthal. ** Reference is made to Exhibit 10.1 to our current
report on Form 8-K, filed on May 1, 2013 (No. 1-10869), which is incorporated herein by reference.
Amended employment agreement with Jon Lutz dated April 30, 2013.** Reference is made to
Exhibit 10.3 to our current report on Form 8-K, filed on May 1, 2013 (No. 1-10869), which is
incorporated herein by reference.
66
10.23
10.24
10.25
Amended employment agreement with Adrian Schaffer dated April 30, 2013.** Reference is made to
Exhibit 10.4 of our current report on Form 8-K, filed May 1, 2013 (No. 1-10869), which is
incorporated herein by reference.
Amended Employment Agreement with Joseph Mitchell dated April 30, 2013.** Reference is made
to Exhibit 10.1 of our current report on Form 8-K, filed May 1, 2 01 3 (No. 1-10869), which is
incorporated herein by reference.
Separation Agreement and R elease with Ron Burton dated May 2, 2012. Reference is made to
Exhibit 10.2 3 of our F orm 10-K filed May 24, 2012, which is incorporated herein by reference.
21.1
Subsidiaries of the Company. Reference is made to Exhibit 21.1 of our Form 10-K filed May 24,
2012, which is incorporated herein by reference.
23.1
31.1
31.2
32.1
Consent of Grant Thornton LLP.
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-
Oxley Act 2002.
*confidential treatment request has been granted.
** management contract or compensation plan.
67
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, UQM Technologies, Inc. has duly caused this Annual Report on Form
10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in Longmont, Colorado on the 21 st day of May, 201 3 .
SIGNATURES
UQM TECHNOLOGIES, INC.,
a Colorado Corporation
By:
/s/ E RIC R . R IDENOUR
Eric R. Ridenour
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of
UQM Technologies, Inc., in the capacities indicated and on the date indicated.
Signature
Title
/s/ W ILLIAM G . R ANKIN
William G. Rankin
Chairman of the Board of
Directors
Date
May 21 , 2013
/s/ E RIC R . R IDENOUR
Eric R. Ridenour
President and Chief Executive
Officer
May 21 , 2013
/s/ D AVID I . R OSENTHAL
Davi d I . Rosenthal
Treasurer and Secretary (Principal
Financial and Accounting Officer)
May 21 , 2013
Director
May 21 , 2013
Director
May 21 , 2013
May 21 , 2013
May 21 , 2013
May 21 , 2013
/s/ D ONALD A . FRENCH
Donal d A. French
/s/ S TEPHEN J . R OY
Stephen J. Roy
s/ J OSEPH P . S ELLINGER
Joseph P. Sellinger
/s/ J OHN E . S ZTYKIEL
John E. Sztykiel
Director
Director
/s/ DONALD W. VANLANDINGHAM
Donald W. Vanlandingham
Director
68
69
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Exhibit 23.1
We have issued our report dated May 23 , 2013, with respect to the financial statements included in the
Annual Report of UQM Technologies, Inc. on Form 10-K for the year ended March 31, 2013. We hereby
consent to the incorporation by reference of said report in Registration Statements of UQM Technologies, Inc.
on Form S-3 (File No. 333-160913) and on Forms S-8 (File No. 033-34612, File No. 033-81430, File No.
033-92288, File No. 333-101371, File No. 333-129251, File No. 333-164705, File No. 333-168999, File No.
333-169000, File No. 333-183786, File No. 333-183788, and File No. 333-183796).
/s/ GRANT THORNTON LLP
Denver, Colorado
May 23 , 2013
Certification
Exhibit 31.1
I, Eric R. Ridenour , certify that:
1. I have reviewed this Annual Report on Form 10- K of UQM Technologies, Inc.:
2. Based on my knowledge, this Report does not contain any untrue statement of material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered
by this Report;
3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Report;
4. The regist rant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)
and 15d-15(f)) for the registrant and we have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this Report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such
evaluation; and
d. Disclosed in this Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The regist rant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent
functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal controls over financial reporting.
Date: May 2 1 , 201 3
/s/ E RIC R R IDENOUR
Eric R. Ridenour
President and Chief Executive Officer
Certification
Exhibit 31.2
I, D avid I . Rosenthal , certify that:
1. I have reviewed this Annual Report on Form 10-K of UQM Technologies, Inc.:
2. Based on my knowledge, this Report does not contain any untrue statement of material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered
by this Report;
3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Report;
4. The regist rant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)
and 15d-15(f)) for the registrant and we have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this Report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such
evaluation; and
d. Disclosed in this Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The regist rant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent
functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal controls over financial reporting.
Date: May 2 1 , 201 3
/s/ D AVID I . R OSENTHAL
D avi d I . Rosenthal
Treasurer, Secretary and
Chief Financial Officer
CERTIFICATE PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of UQM Technologies, Inc. (the “Company”) on Form 10- K for the annual period ended March 31 , 2 01
3 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned Chief Executive Officer and Chief
Financial Officer of the Company hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 that: 1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and 2) the
information contained in the R eport fairly presents, in all material respects, the financial condition and results of operations of the Company as
of and for the periods covered in the report .
Exhibit 32.1
/s/ E RIC R R IDENOUR
Eric R. Ridenour
President and Chief Executive Officer
/s/ D AVID I . R OSENTHAL
Davi d I . Rosenthal
Treasurer, Secretary and Chief Financial Officer
Date: May 2 1 , 201 3