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, 201 4
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
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, 201 3 , based
on the closing price of the Common Stock as reported by the NYSE MKT on such date was approximately $ 65 , 867,660 . As of May 2 7 ,
201 4 , there were 40 , 434 , 638 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 13 ,
201 4 .
Parts Into Which Incorporated
Part III
Table of Contents
PART I ………………………………………………………………………………………………… .
……………
Item 1. Business ……………………………………………………………………………………… … ……
… …
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 ………………………………………………………… .. …………… ..
………….
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 .. ……………………………… … … …….
……………………………………….
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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Report of Independent Registered Public Accounting Firm ……………………… …
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Consolidated Bal ance Sheets as of March 31, 201 4 and March 31, 201 3 ………… …
……………………
Consolidated Statements of Operations for the Fiscal Years ended March 31, 201 4 , 201 3
and 201 2 ………………………………………………………………………………………… …
… ..
Consolidated Statements of Stockholders’ Equity for the Fiscal Years
ended March 31, 201 4 , 201 3 and 201 2
……………………………………………………………… ..
Consolidated Statements of Cash Flows for the Fiscal Years ended March 31, 201 4 , 201 3
and 201 2 ……………………………………………………………………………………………
….
Notes to Consolidated Financial Statements ……………………………………………………………
…
Item 9. Change In and Disagreements with Independent Accountants on Accountin g and Financial
Disclosure..
Item 9A. Controls and Procedures ………………………………………………………………………………
….
Item 9B. Other Information ……………………………………………………………………………………
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PART III …………………………………………………………………………………………………………
…
Item 10. Directors, Executive Officers and Corporate Governance ……………………………………………
….
Item 11. Executive Compensation ………………………………………………………………………………
…
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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters …………………………………………………………………………………………… ...
…
Item 13. Certain Relationships and Related Transactions and Director Independence ……………………… …
…
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
PART I
ITEM 1.
BUSINESS
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 could be 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, new product developments, 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”, “Company”, “we”, “our”, or “us”) develops, manufactures and sells power dense, high efficiency electric
motors, generators and power electronic controllers for the commercial truck, bus, automobile, marine and military markets. Our primary focus is
incorporating our advanced technology as propulsion systems for electric, hybrid electric, plug-in hybrid electric and fuel cell electric vehicles,
delivering the heart of the electric vehicle.
We believe our proprietary permanent magnet propulsion motor and motor control technology delivers exceptional performance at a competitive
cost. Our principal products include propulsion motors and gene rators with power ratings from 5 0 kilowatts to 250 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), design and manufacture of integrated motor/controller systems,
and superior energy efficiency with full system ratings as high as 95% .
We have assembled a management team with significant experience in the automotive and electric propulsion market segments with critical
experience in state of the art design and high quality production. We obtained ISO/ TS 16949 certification in March 2014, the highest level of
quality certification in the automotive supplier industry and are pursuing ISO 14000 certification (environmental management and systems
performance) . We have an approximately 130,000 sq uare f oo t combined headquarters and manufacturing facility located in Longmont,
Colorado. We were incorporated in 1967 as a Colorado corporation.
The Market
The electrified vehicle market is an emerging market with high growth potential being driven by several factors. In the commercial truck and bus
market, the drivers for growth include the demand for zero tailpipe emissions from full electric vehicles or during the electric only range for
hybrids, improved operating costs due to a more efficient power train on a gas equivalent basis and reduced maintenance costs for the powertrain
system and other systems , such as improved brake life. Moreover, there is community support for cleaner buses and trucks operating in
congested areas, along with government incentives and requirements to purchase electric and hybrid vehicles. In the automotive market, these
same growth drivers exist , as well as tremendous consumer acceptance of electric vehicles due to their excellent performance, quiet operation,
zero or reduced tailpipe emissions and improved operating cost. In addition, significant Corporate Average Fuel Economy (“CAFÉ”) standards in
the United States are expected to accelerate further electrification of the fleet . The major impediment to electrification of vehicles has been total
vehicle cost, of which a substantial part is due to the cost of batteries. Battery cost has decreased considerably and is projected to continue to
improve. Government incentives have helped to offset these early additional costs and generate the volume and momentum that should further
reduce these incremental costs through scale economies.
Many studies have been conducted indicating the potential for electric vehicles to capture significant market share over the next several
years. For example, in 2013, The International Energy Agency forecasted that 6 million electric vehicles will be on the road by 2020, as shown
in the chart below:
1
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.
Governments around the world have implemented financial incentives to promote the sales of electric vehicles. For example, the U.S. federal
government currently offers a $7,500 federal tax credit for the purchase of an electric passenger vehicle, and there are additional tax credits and
other benefits such as HOV lane access in various states for purchasers of qualifying vehicles. In China, the country’s National Development and
Reform Commission and three other ministries jointly announced in September 2013, a new round of New Energy Vehicle supportive policies
for the years 2013 - 2015. Various levels of government subsidies for electric vehicles were announced, including subsidies for pure electric
buses of RMB 500,000 each (approximately $80,000), electric trucks of RMB 150,000 each (approximately $24,000) and plug-in electric and
fuel cell passenger vehicles of RMB 60,000 each (approximately $9,600). In Europe, a majority of European Union member states provide tax
incentives for electrically chargeable vehicles . The government of India announced in January 2013 plans for financial incentives of up to
approximately $2,500 per electric automobile.
We believe that the major drivers increasing the electrification of the vehicle fleet coupled with the government subsidies offered world-wide
provide a substantial opportunity for the broad commercial application of our products.
Business Strategy
We are focused primarily on the transportation markets, with a strong emphasis on the commercial truck and bus space, followed by automotive
and then marine, military and other. We have developed two basic frame size propulsion systems: the PowerPhase Pro for passenger car, light
commercial applications, light duty marine and other lighter duty applications and the PowerPhase HD lineup of products for heavier commer
cial bus and truck applications and heavier duty marine and other HD applications. We also utilize these products, customized versions of these
products and all new custom solutions in these markets to meet various customer requirements. We provide motor and controller systems for
full-electric, hybrid electric, plug-in hybrid and fuel cell applications. We also provide units for auxiliary systems, including motor and
controller systems for the aircraft and fuel cell air compressor markets.
®
®
We sell to the following markets:
• Commercial Trucks, Vans and Shuttles - In 2012, according to ACT research, an estimated 425,000 medium and heavy-duty on-road
trucks were sold in the United States, and this market is expected to grow. We supply propulsion systems to Boulder EV, a developer
and manufacturer of all-electric delivery trucks and work utility vehicles , under a multi-year supply agreement. We also supply electric
propulsion systems to Electric Vehicles International (“EVI”), a developer and manufacturer of all-electric medium-duty delivery
trucks , under a multi-year supply agreement. EVI is also developing a range extended electric vehicle
2
(“REEV”) for PG&E to convert their truck fleet from gasoline engines to electric. During fiscal year 2014, we announced that Zenith
Motors, LLC selected UQM as the sole supplier of powertrain systems for their shuttle vans.
• Passenger Buses – Electric and hybrid passenger buses can have large positive impacts on the environment and many municipalities
around the world are demanding more of these vehicles on the road. For example, we supply electric propulsion systems to Proterra,
Inc., a developer and manufacturer of all-electric composite transit buses , under a three-year supply agreement. We also provide
electric propulsion systems for Hino Bus, a subsidiary of Toyota Motor Corporation, for their electric city-buses. In January 2014, we
announced that PT Sarimas Ahmadi Pratama of Jakarta, Indonesia is using our motors and controllers for their all-electric 17-passenger
bus. We have signed a Memorandum of Understanding with one major Chinese company for the development and marketing of UQM
electric propulsion systems for New Energy Vehicles in China. In addition, we are in discussions with other potential Chinese
customers to supply our products for both all-electric and hybrid-electric vehicles, and we have shipped a small number of electric motor
and controller systems into China for prototype testing in buses.
?
• Automobiles – Government mandates for fuel economy and clean air emissions are accelerating the demand for electric passenger
cars. In the United States, for example, CAFÉ 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. We have provided electric
propulsion systems to many original equipment manufacturers (“OEMs”) over time, including Saab, Audi, Rolls Royce and others , for
testing and product development .
• Marine – The marine market is a new and growing market for the Company . In January 2014, Research and Markets announced that
marine electric vehicles are now a rapidly growing market due to new capability, affordability and legislation banning or restricting
internal combustion engines. Their research found that the market for electric water craft, including those on and under water, is
expected to increase rapidly from $2.6 billion to $6.3 billion in 2023. In addition, there is a market for electric outboard motors that will
more than triple in value as high power pure electric versions become increasingly viable. We are seeing demand for electric solutions
for both the clean and quiet operation afforded by full electric and hybrid electric solutions. We supply Re G en Nautic with UQM
motors and controllers used in a variety of applications and for a variety of customers. Re G en Nautic has several versions of electric
outboard motors utilizing our propulsion systems and also full electric and hybrid inboard solutions utilizing our propulsion
systems. We believe the marine market will be a growing segment of electrified vehicles.
• Military - 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. We have in the past worked with a number of military contractors and
vehicle makers on prototype hybrid electric vehicles, high export power generators, and electric auxiliaries. There are a number of
initiatives to reduce the carbon footprint of military bases that may drive additional efforts in this area. Although this market has not yet
emerged, we believe that it may, 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.
• Other – We supply an automotive qualified DC-to-DC converter to Eaton, which is used in medium and heavy-duty hybrid trucks . We
sell electric mo tors for fuel cell compressors to Roush for various applications. We also provide small motors and controllers for
aircraft HVAC usage to AirComm.
Our business strategy is also comprised of the following:
• Highly qualified and experienced management – We have a management team with significant experience in the automotive industry
and the requirements for high quality production programs and very deep technical knowledge of the motor and controller business.
• State of the art manufacturing facility – Our headquarters and manufacturing plant are located in a n approximate ly 1 30,000 square
foot facility with fifteen adjacent acres for future expansion. We have designed, installed and qualified volume production lines for our
motors and their related electronic controllers.
3
• Manufacturing capacity – We currently have the capacity to build 56,000 motor/controller systems annually, which is sufficient to meet
demands of our current and future customers for the foreseeable future.
• Highest production quality standards – Our Company was recently certified under the ISO / TS 16949 standards, the highest level of
automotive quality standards in the industry.
• Leading edge 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. We continue to launch next generation products to achieve improved performance and efficiency, smaller
package sizes and lower production costs.
Products
We offer a full range motors and controllers for electric, hybrid electric, plug-in hybrid electric and fuel cell electric commercial trucks, vans,
buses and automobiles. Our current core electric propulsion products are:
• PowerPhase HD 220 : Designed for medium and heavy duty trucks and buses.
®
• PowerPhase HD 250 : This product is designed for trucks and buses.
®
• PowerPhase HD
®
950T : Also designed for heavy duty trucks and buses, this product delivers especially high torque performance
compared to the PowerPhase HD 220 and 250.
®
• PowerPhase Pro 100 : Designed for smaller passenger vehicles.
®
• PowerPhase Pro 135 : The PP 135 offers slightly higher performance for passenger vehicles than our PowerPhase Pro 100 .
®
®
• Auxiliary Motor Systems : Multiple products are offered for compressor, pump and fan applications, including a family of
motor/controller systems for fuel cell air compressors, a n integrated motor/controller for aircraft air conditioning compressors, and a n
integrated motor/controller for aircraft air conditioning condenser fans.
• We offer variations of the above motors in custom configurations as well as custom hybrid solutions to individual customer
specifications.
We also sell four types of DC to DC converters at 1.6 kW and 2.2 kW levels, each available at two different voltage output ranges.
Product Development Activities
We continue to develop new variations of our product lineup to meet the expanding customer requirements and work on custom solutions for
new prospective customers meeting their precise specifications. We are also developing 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 substantial size reduction of the motor controller. Adopting new generation
components and control strategies are also elements of this development. Target applications include automotive and l ight commercial truck and
bus markets.
®
®
We are also pursuing an advanced motor design technology that eliminates the need for rare-earth elements in the magnets. 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 have a $4.0 million program with the Department of Energy (“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 program and the Company
is providing $1.0 million of cost-share contribution. This award was announced in August 2011 and is a multi-year technology development
program.
4
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 believe our competitors are large automotive OEMs, Tier 1 suppliers to OEMs, Chinese
electric motor manufacturers offering lower cost options, and numerous other competitors in nearly every region of the world
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, volume manufacturing operations and access to governmental incentive programs.
Customers and Suppliers
We derive our revenue from two principal sources: 1) the sale of products designed, engineered and manufactured by us primarily to OEMs, Tier
1 suppliers of OEMs, and vehicle integrators; 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.
Our business is subject to revenue fluctuation based on the buying cycles of our customers. Specific customers that reach 10% or more of
revenues in any given fiscal quarter or year will also vary depending on these buying cycles. In fiscal year ending March 31, 2014, EVI
accounted for 10% of our total revenues , and contracts with the U.S. Government accounted for 12% of our total revenues . Any loss of
business with th e s e customer s could have a material adverse effect on our business, financial condition and results of operation.
Principal raw materials and components purchased by us include iron, steel, electronic components, rare-earth 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.
We can experience significant price fluctuation in the cost of magnets used in our motors, which contain the rare-earth elements neodymium and
dysprosium and are primarily sourced from China. 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.
Financial Information about Geographic Areas
The following summarizes total revenue by geographic area:
United States
Foreign Countries
Fiscal Year Ended March 31,
2014
2013
2012
$
$
5,694,144
1,352,056
7,046,200
$
$
5,695,623
1,483,086
7,178,709
$
$
7,774,946
2,368,510
10,143,456
Classification of geographic area is determined based upon the country where the purchase transaction originated.
U.S. Government Contracts
We have a Grant from the DOE under the American Recovery and Reinvestment Act for reimbursements up to a maximum of $32.4
million. The Grant provides funds to facilitate the manufacture and deployment of electric drive vehicles, batteries and electric drive vehicle
components in the United States. Under the terms of our Grant
5
Agreement, the DOE will reimburse us 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 DOE conducted a thorough audit of our Grant program during fiscal year 2014. They concluded that we were in compliance with the
requirements of the grant award and they are continuing to fund the program. The period of the Grant is through January 12, 2015. The Grant
may be terminated at any time at the convenience of the DOE.
As of March 31, 2014, we had received cumulative reimbursements from the DOE of $24.4 million and had funds receivable of $0.6
million. The continuation of the funding from this Grant through the duration of the program is essential to our cash flow needs.
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, 2014, we had received reimbursements from the DOE under this program of $ 1.0 million.
Backlog
Our order backlog for products at April 30, 2014 was approximately $ 2.3 million versus $ 2.8 million at April 30, 2013. Certain orders are
blanket purchase orders which are subject to the issuance of subsequent release orders directing the number and timing of actual deliveries. We
had backlog of service contracts from customers, which will provide future revenue upon completion, totaling approximately $ 0.4 million at
April 30, 2014 versus $1.0 million at April 30, 2013. Substantially all of the backlog amounts at April 30, 2014 and 2013 are subject to
amendment, modification or cancellation. We expect to ship motor and controller backlog products over the next twelve months and complete all
service contracts in backlog over the next twenty-one months.
Intellectual Property
We have numerous patents in the United States and in other countries to protect our intellectual property.
We determine if our intellectual property should be handled as a trade secret or submitted to the patent application process by deciding whether a
technology successfully passes through three evaluation gates. The first gate is an assessment of whether the expected breadth of the patent
would offer a high level of protection or whether it will serve as an educational tool for competitors. Based upon a patent and literature search, if
the expected coverage is broad, the evaluation moves to the second gate, which is an assessment of infringement detection. This is a review of
whether or not it will be possible to detect patent infringement if a competitor were to adopt the technology. Difficulty in detection reduces the
value of a patent and will lead us to handle the technology as a trade secret rather than a patent. The last gate is an assessment of whether the
technology will have value for many years or whether the technology is a stepping stone to a different technology. The patent process is a multi-
year endeavor from the initial disclosure to the granted patent, which leads to the importance of this gate. A technology that is expected to have
value for five or more years will pass the final gate and the patent application process will then commence.
We also implement measures to protect our intellectual property, including the guarding of source code, nondisclosure of control techniques, and
protection of product design details, drawings and documentation.
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 .
6
Employee and Labor Relations
As of April 30, 2014, we had 60 total employees, of whom 59 are full-time employees. We have entered into employment agreements with our
five officers. The 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 Fiscal Year 2014 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 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.
7
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 o f 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
2013
2014
Net loss
$
2,773,244
$
10,688,312
$
4,928,520
As of March 31, 201 4 , we had an accumulated deficit of $9 3, 948,545 .
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 for the foreseeable future .
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, 2014 was $2, 773,244 versus a net loss for the fiscal years ended March 31, 2013 and 2012 of
$10,688,312 and $4,928,520, respectively. At March 31, 2014, our cash and short-term investments totaled $10,310,141. We expect our losses to
continue for the foreseeable future . Our existing cash resources, funding expected from our DOE Grant through early 2015 , 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 several 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 .
Our business depends, in part, on the expansion of the market for all-electric and hybrid 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
vehicles. 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 vehicles, 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
8
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 commercial truck, bus and automobile 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 sales cycle is inherently long .
We must go through lengthy processes to achieve supply contracts with our customers. Our products must conform to the technical
specifications of the customer and meet design requirements of the electric vehicle. Typically prototype testing is required to ensure consistent
system performance on an ongoing basis. These steps can often take many months to multiple years until decisions are made on whether or not
to take a vehicle to production. We may spend considerable financial and human resources over an extended period of time and not end up with
a completed supply contract. Failure to secure volume production levels within a reasonable period of time could have an adverse effect on our
results of operations and our liquidity.
CODA Automotive filed for bankruptcy protection on May 1, 2013 and it is unlikely we will be able to recover more than insignificant
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, 2014 totaled $3,838,092, all of which had been written off 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 carry a large inventory balance originally acquired for CODA and may not be able to sell this inventory .
At March 31, 2014, we had aged inventory of $7.9 million of PowerPhase Pro systems on our books originally acquired for now-bankrupt
CODA. We believe the PowerPhase Pro system is right sized for many medium-duty truck, marine, passenger vehicle and stationary power
applications, and this inventory is now for sale to other customers. While we believe that there continues to be a strong market for these
products, a change in market conditions or technology advancements could make this inventory obsolete, causing a material adverse effect on our
results of operations.
®
®
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 as of March 31, 2014 of $774,974 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. This liability is lower than the original
amount we recorded of $1,050,000 as of March 31, 2013 as a result of negotiations and settlements we reached with some vendors during fiscal
year 2014. 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.
If we do not satisfy the terms of our DOE Grant, we may not receive the remaining $8.0 million under the grant we were awarded.
We have a $32.4 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 $24.4 million under this Grant as of March 31, 2014.
This Grant is subject to terms and conditions specified in the agreement between us and the DOE. We are required to spend on a dollar-for-dollar
matching basis in order to receive funds under this Grant. If we are unable to match the total amount of the $32.4 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 award may be terminated at any time at the convenience of the government.
9
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 .
All funding from our DOE Grant will cease as of January 12, 2015 when the Grant expires.
We believe that we have adequate cash resources for at least the next two years. However, if anticipated revenues are not realized and other cash
resources are unavailable, the loss of the DOE Grant funding could significantly impact our ability to sustain operations.
The reduction or elimination of government subsidies and economic incentives for alternative energy technologies, including our electric
vehicle motor technology , could reduce demand for our products and services, lead to a reduction in our revenues and adversely impact
our operating results.
We believe that the near-term growth of alternative energy technologies, including our electric vehicle motor technology, relies on the
availability and size of government and economic incentives both in the United States and in other countries. Many of these government
incentives expire, phase out over time, exhaust the allocated funding, require renewal by the applicable authority, and/or could be reduced or
discontinued for other reasons. The reduction, elimination, or expiration of government subsidies and economic incentives may result in the
diminished demand from our customers and could materially and adversely affect our future operating results.
We are subject to risks inherent in international operations.
Since we market our products both inside and outside the United States, our success depends in part, on our ability to secure international
customers and our ability to manufacture products that meet foreign regulatory and commercial requirements in target markets. In addition, we
are subject to tariff regulations and requirements for export licenses. We can face numerous challenges in our international growth plans,
including unexpected changes in regulatory requirements, potential conflicts or disputes that countries may have to deal with, fluctuations in
currency exchange rates, longer accounts receivable requirements and collections, difficulties in managing international operations, potentially
adverse tax consequences, restrictions on repatriation of earnings and the burdens of complying with a wide variety of international laws. Any of
these factors could adversely affect our results of operations and financial condition.
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, 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 and dysprosium, rare-earth minerals, are key elements used in the production of magnets that are components of our electric
propulsion systems. We currently source our magnets from China, and China has indicated
10
its intent to retain more of this mineral for China use, rather than exporting it. During calendar year 2011, we experienced significant price
escalation in the cost of magnets used in our motors. This price escalation was primarily due to rare-earth government policy in China. Rare-earth
prices have decreased substantially since peaking in the summer of 2011, and are now approaching the baseline prices (defined as the beginning
of calendar year 2011). We have implemented a magnet surcharge process to recover these additional costs in the event of another price
escalation. Although rare-earth magnets are available from other sources, these alternative sources are currently more costly. Reduced availability
of neodymium and dysprosium 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 product costs, thereby reducing or eliminating our profit margin on electric propulsion systems if we are unable to pass the
increase 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 .
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 .
11
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 . Finally, patents may not deter third parties from attempting to reverse engineer our products and discovering
our intellectual property.
We rely, in part, on contractual provisions to protect our trade secrets and proprietary knowledge, the adequacy of which may not be
sufficient.
Confidentiality agreements to which we are party may be breached, and we may not have adequate remedies for any breach. Our trade secrets
may also be known without breach of such agreements or may be independently developed by competitors. Our inability to maintain the
proprietary nature of our technology and processes could allow our competitors to limit or eliminate any competitive advantages we may have.
Use of our motors in vehicles could subject us to product liability claims or product recalls, and product liability insurance claims could
cause an increase in our insurance rates or could exceed our insurance limits, which could impair our financial condition, results of
operations and liquidity .
The automotive industry experiences significant product liability claims. As a supplier of electric propulsion systems or other products to vehicle
OEMs, we face an inherent business risk of exposure to product liability claims in the event that our products, or the equipment into which our
products are incorporated, malfunction and result in personal injury or death. We may be named in product liability claims even if there is no
evidence that our systems or components caused an accident. Product liability claims could result in significant losses as a result of expenses
incurred in defending claims or the award of damages. The sale of systems and components for the transportation industry entails a high risk of
these claims, which may increase as our production and sales increase. In addition, we may be required to participate in recalls involving these
systems if any of our systems prove to be defective, or we may voluntarily initiate a recall or make payments related to such claims as a result of
various industry or business practices or the need to maintain good customer relationships.
We carry product liability insurance of $10 million covering most of our products. If we were to experience a large insured loss, it might exceed
our coverage limits, or our insurance carriers could decline to further cover us or raise our insurance rates to unacceptable levels, any of which
could impair our financial position and results of operations. Any product liability claim brought against us also could have a material adverse
effect on our reputation .
We may be subject to warranty claims, and our provision for warranty costs may not be sufficient .
We may be subject to warranty claims for defects or alleged defects in our products, and the risk of such claims arising will increase as our
production and sales increase. In addition, in response to consumer demand, vehicle manufacturers have been providing, and may continue to
provide, increasingly longer warranty periods for their products. As a consequence, these manufacturers may require their suppliers, such as us,
to provide correspondingly longer product warranties. As a result, we could incur substantially greater warranty claims in the future .
Our future success will depend on our ability to attract and retain qualified management and technical personnel.
12
Our future success is substantially dependent on the continued services and on the performance of our executive officers and other key
management, engineering, manufacturing and operating personnel. The loss of the services of any executive officer, or other key management,
engineering, manufacturing and operating personnel, could materially adversely affect our business. Our ability to achieve our growth plans will
also depend on our ability to attract and retain additional qualified management and technical personnel, and we do not know whether we will be
able to be successful in these regards. Our inability to attract and retain additional qualified management and technical personnel, or the departure
of key employees, could materially and adversely affect our growth plans and, therefore, our business prospects, results of operations and
financial condition.
Our stock price has been and could remain volatile.
The market price for our common stock has been and may continue to be volatile and subject to extreme price and volume fluctuations in
response to market and other factors, including the following, some of which are beyond our control:
failure to meet growth expectations;
•
• variations in our quarterly operating results from the expectations of investors;
• downward changes in general market conditions;
• announcements of new products or services by our competitors;
• announcements by our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
• additions or departures of key personnel;
•
•
• demand for our common stock; and
• general technological or economic trends.
investor perception of our industry or our prospects;
insider selling or buying;
In the past, following periods of volatility in the market price of their stock, many companies have been the subjects of securities class action
litigation. If we became involved in securities class action litigation in the future, it could result in substantial costs and diversion of
management’s attention and resources and could harm our stock price, business prospects, results of operations and financial condition.
The maintenance and security of our information systems are critical to our operations.
We rely on our information systems to be functioning at all times, and that the data in those systems is protected and secure from viruses, illegal
access and any other form of unauthorized use. Should our information systems be compromised in any way, our business operations could be
severely impacted.
13
Table of Contents
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
PROPERTIES
We own our offices and manufacturing facilit y and believe the facilit y to be well maintained, adequately insured and suitable for its present and
intended uses. Information concerning our facilit y as of March 31, 201 4 is set forth in the table below:
Location
Longmont, Colorado
Square Feet
129,304
Ownership or
Expiration Date of Lease
Own
Use
Manufacturing, laboratories and offices
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 .
14
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 and Chicago Stock Exchange 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:
2014
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
2013
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
High
$ 3.45
$ 2.49
$ 2.20
$ 1.55
High
$ 0.85
$ 1.44
$ 1.80
$ 1.59
Low
$ 1.56
$ 1.40
$ 1.00
$ 0.68
Low
$ 0.69
$ 0.68
$ 0.73
$ 0.70
On May 27 , 201 4 the closing price of our common stock, as reported on the NYSE MKT , was $ 2.29 per share and there were 568 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 our Board of Directors based upon consideration of our
earnings, capital needs and other factors then relevant.
15
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 March 31, 2009 through March 31, 201 4 :
PERFORMANCE GRAPH
UQM Technologies, Inc.
S&P 500
S&P Electrical Components & Equipment
3/09
3/10
3/11
3/12
3/13
3/14
100.00
100.00
100.00
256.71
149.77
178.35
181.71
173.20
234.11
90.24
187.99
221.82
45.12
214.24
262.24
160.98
261.06
328.22
*$100 invested on 3/31/09 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.
16
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
2014
2013
2012
2011
2010
Years Ended March 31,
6,136,305
909,895
$
$
5,910,153
1,268,556
$
$
9,358,388
785,068
$
$
8,413,098
608,204
$
$
7,307,354
1,384,599
(2,782,503)
$
(10,707,432)
$
(4,953,336)
$
(2,349,174)
$
(4,201,091)
(2,773,244)
$
(10,688,312)
$
(4,928,520)
$
(1,992,358)
$
(4,140,872)
(0.07)
$
(0.29)
$
(0.14)
$
(0.06)
$
(0.13)
29,835,133
$
28,608,715
$
39,655,601
$
41,803,920
$
42,682,573
182,100
$
627,412
$
715,107
$
1,316,372
$
1,155,416
-
-
-
-
-
Product sales
Contract services revenue
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.
17
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 could be 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, new product developments, 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
UQM Technologies, Inc., (“UQM”, “Company”, “we”, “our”, or “us”) is a developer and manufacturer of power dense, high efficiency electric
motors, generators and power electronic controllers for the commercial truck, bus, automotive, marine and military markets. We generate revenue
from two principal activities: 1) the sale of motors, generators and electronic controls; and 2) research, development and application engineering
contract services. Our product sales consist of annually recurring volume production, prototype low volume sales, and revenues derived from the
sale of refurbished and serviced products. 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.
We have invested considerable financial and human resources into the development of our technology and manufacturing operations. We have
developed and production-validated a full range of products for use in full-electric, hybrid electric, plug-in-hybrid and fuel cell applications for
the commercial bus and truck, automotive, marine and military markets. These products are all highly efficient permanent magnet designs and
feature outstanding performance, package size and weight valued by our customers. Our production capabilities and capacity are sufficient to
meet the demands of our current and future customers for the foreseeable future. We have recently been certified as an ISO/TS 16949 quality
supplier , which is the highest level of quality standards in the automotive industry. We have a management team with significant experience in
the automotive industry and the requirements for high quality production programs and very deep technical knowledge of the motor and
controller business. This team has the ability and background to grow the business to significantly higher levels, and we believe we have
adequate cash balances to fund our operations for at least the next two years.
Our most important strategic initiative going forward is to develop customer relationships that lead to longer-term supply contracts. Volume
production is the key to our ongoing operations. We are driving business development in the following ways:
• We have created a well-defined, structured process to target potential customers of vehicle electric motor technology in the commercial
truck/van and shuttles, passenger buses, automotive, marine, military and other targeted markets both domestically and internationally.
• We have developed a customer pipeline where identified potential customers are synergistic and strategic in nature for longer-term
growth potential.
• We are building long term quantifiable and sustainable relationships within the identified target markets.
• We provide service and support to our customers from pilot and test activities through commissioning processes and then ultimately to
volume production operations.
• We improve our purchasing and manufacturing processes to develop competitive costs to ensure that our pricing to customers is market
competitive.
• We provide customized solutions to meet specification requirements that some customers require.
• We participate in trade show events globally to demonstrate our products and engage with users of electric motor technology.
18
• We actively involve all functional groups within the Company to support the requests of our customers.
We believe that the successful execution of these activities will lead us to secure volume production commitments from customers, so that our
operations will become cash flow positive and ultimately profitable.
The Department of Energy grant that was awarded to us in 2010 will expire on January 12, 2015. Since the beginning of the grant program, we
have billed a total of $25.0 million and been reimbursed a total of $24.4 million in matching funds through March 31, 2014. These cumulative
reimbursements have allowed us to achieve many milestones to support our business development efforts that we believe will lead to volume
production opportunities. First, we were able to relocate our headquarters and production operations to an approximate 130,000 square foot
facility with fifteen adjacent acres of land for future expansion. Within this modern facility, we were able to develop and install manufacturing
capacity and infrastructure to build and test our state-of-the-art traction motors and controllers, with current capacity to produce up to 56,000
systems annually, and ultimately to achieve the capacity targets defined in our agreement with the DOE. Throughout the program, the DOE
grant supported product validation and release activities for both passenger vehicle and heavy duty truck and bus platforms. In addition, the grant
assisted us in implementing all of the required processes and systems to certify our facility to the ISO/TS 16949 quality standard that is a
requirement to be a supplier to the automotive industry.
The funding from the DOE grant has brought us to a position of strength with regards to product validation and manufacturing capabilities. This,
in addition to the business development activities in place and the cash reserves we have to fund the operations for at least the next two years,
makes us optimistic about the future of the Company.
In February 2014, we closed a $5.3 million offering of stock and stock purchase warrants with net proceeds of $4.9 million. While we believed
that our pre-financing cash balances at that time were sufficient to fund the Company’s operations for approximately two years, we decided to
raise additional capital in anticipation of future working capital needs. Specifically, a future supply contract with a customer in China could
require us to establish a joint venture relationship and/or invest in a local manufacturing presence. Should we secure a production agreement with
a large customer, there will be ramp-up costs required to meet the needs of higher volume operations. We, therefore, believed it was prudent to
raise additional capital in advance of these types of growth scenarios , at a time when capital was available at reasonable costs to the Company .
Financial Condition
Cash and cash equivalents and short-term investments at March 31, 2014 were $10,310,141 and working capital was $20,052,18 7 compared with
$4,527,899 and $16,011,344, respectively, at March 31, 2013. The increase in cash and short-term investments is primarily attributable to the
proceeds from a follow-on offering of our common stock and warrants , which resulted in net proceeds of $4.9 million , and lower levels of
accounts receivable and inventories, offset by operating losses, capital expenditures and lower levels of accounts payable and other current
liabilities. The increase in working capital is primarily attributable to proceeds from the follow-on offering of our common stock, partially offset
by operating losses and capital expenditures on property and equipment.
Accounts receivable decreased $1,251,976 to $960,419 at March 31, 2014 from $2,212,395 at March 31, 2013. The decrease is primarily due to
cash receipts from the DOE under the Grant. Our sales are conducted through acceptance of customer purchase orders or in some cases through
supply agreements. For credit qualified customers , our standard terms are net 30 days. For international customers and customers without an
adequate credit rating or history, our typical terms are irrevocable letter of credit or cash payment in advance of delivery. At March 31, 2014 and
2013, we had an allowance for uncollectible accounts of zero and $3,838,092, respectively.
Costs and estimated earnings on uncompleted contracts increased to $341,255 at March 31, 2014 versus $178,264 at March 31, 2013. The
increase is due to timing of billings on certain contracts in process at March 31, 2014 versus March 31, 2013. Estimated earnings on contracts in
process increased to $670,596, or 30 percent of contracts in process of $2,219,909 at March 31, 201 4 , compared to estimated earnings on
contracts in process of $515,299 or 38 percent of contracts in process of $1,353,545 at March 31, 2013. The increase in estimated earnings is
attributable to higher levels of funded engineering contracts in process, partially offset by lower expected margin on certain contracts in process
at March 31, 2014.
Inventories decreased $944,039 to $10,054,422 at March 31, 2014 compared to $10,998,461 at March 31, 2013, reflecting increased shipments of
PowerPhase Pro and PowerPhase HD propulsion systems.
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19
Prepaid expenses and other current assets decreased to $263,988 at March 31, 2014 from $309,957 at March 31, 2013, primarily due to lower
levels of prepayments on software licenses outstanding at the end of the current fiscal year versus the prior fiscal year end.
We invested $ 377,224 for the acquisition of property and equipment during the fiscal year ended March 31, 2014 before reimbursements from
the DOE Grant versus $561,669 during the fiscal year ended March 31, 2013. The de crease in capital expenditures is primarily attributable to
decreased levels of investments in production equipment during the current fiscal year. Cash reimbursements for capital assets under the Grant
during the fiscal years ended March 31, 2014 and March 31, 2013 were $ 215,754 and $208,032, respectively.
Patent costs increased to $227,015 at March 31, 2014 compared to $206,287 at March 31, 2013 primarily due to capitalized costs associated with
a new patent application partially offset by the amortization of patent issuance costs.
Trademark costs decreased to $107,123 at March 31, 2014 compared to $110,528 at March 31, 2013 due to the amortization of trademark
issuance costs.
Other assets decreased to $2,997 at March 31, 2014 from $76,731 at March 31, 2013 due to lower levels of long-term investments at the end of
the current fiscal year versus the prior fiscal year end.
Accounts payable decreased $230,90 4 to $386,29 3 at March 31, 2014 from $617,197 at March 31, 2013, primarily due to the timing of vendor
payments.
Other current liabilities decreased $1,107,690 to $ 1,491,745 at March 31, 2014 from $2,599,435 at March 31, 2013. The decrease is primarily
attributable to reduced levels of accrued import duties, accrued vendor settlements, customer deposits and accrued payroll and employee benefits,
partially offset by higher levels of accrued warranty costs at March 31, 2014.
Short-term deferred compensation under executive employment agreements was zero at March 31, 201 4 versus $524,000 at March 31, 2013,
reflecting a retirement payment to a former officer made in December 2013. Long-term deferred compensation under executive employment
agreements was $1 82,100 at March 31, 201 4 versus $103,412 at March 31, 2013, reflecting periodic accruals of future severance obligations
under executive employment agreements.
Common stock and additional paid-in capital increased to $397,778 and $121,325,762, respectively, at March 31, 2014 compared to $366,641
and $115,573,331 at March 31, 2013. The increases in common stock and additional paid-in capital were primarily attributable to shares issued
under a follow-on offering in February, 2014 , shares issued under the Employee Stock Purchase Plan and the Stock Bonus Plan, and the periodic
expensing of non-cash share-based payments associated with grants under our Equity Incentive Plan and Stock Bonus Plan.
Results of Operations
Revenue
Total revenue for the fiscal year ended March 31, 2014 was $7,046,200 compared to $7,178,709 and $10,143,456 for the fiscal years ended
March 31, 2013 and 2012, respectively.
Product sales this fiscal year increased 4 percent to $6,136,305 compared to $5,910,153 for the fiscal year ended March 31, 2013. The increase is
primarily due to increased shipments of PowerPhase HD and PowerPhase Pro propulsion systems, partially offset by decreased levels of
PowerPhase Select propulsion systems. Product sales for the fiscal year ended March 31, 2013 decreased 37 percent to $5,910,153 compared
to $9,358,388 for the fiscal year ended March 31, 2012. The decrease was primarily due to a reduction in product revenue from CODA. Product
revenue from CODA for the fiscal year ended March 31, 2013 was $21,762 versus $4,262,909 for the fiscal year ended March 31, 2012.
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Revenue from contract services decreased $358,661, or 28 percent, to $909,895 for the fiscal year ended March 31, 2014 versus $1,268,556 for
the fiscal year ended March 31, 2013. This was driven by a change in mix of contracts in process during the current fiscal year and by a change in
our cumulative estimate of reimbursable rates under a cost-reimbursement type contract which resulted in a decrease in contract services revenue
recognized during the fiscal year ended March 31, 2014 of $79,400. Revenue from contract services increased $483,488, or 6 2 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.
20
Gross Profit Margin
®
Gross profit margins on product sales this fiscal year increased to 41 percent compared to 27 percent for fiscal 2013. The in crease is primarily
due to favorable changes in product mix and ramp-up costs during the prior fiscal year associated with the launch of our PowerPhase HD
. Gross profit margins on product sales for the fiscal year ended March 31, 2013 decreased to 27 percent compared to 2 9 percent for fiscal
2012. The decrease is primarily due to a less favorable product mix and ramp-up costs associated with the launch of our PowerPhase HD . Gross
profit margins on contract services decreased to 18 percent this fiscal year compared to 4 4 percent for the fiscal year ended March 31, 2013,
reflecting a change in the mix of contracts in process in the current fiscal year and the change in our cumulative estimate of reimbursable rates
noted above. Gross profit margins on contract services for the fiscal year ended March 31, 2013 increased to 4 4 percent this fiscal year compared
to 36 percent for the fiscal year ended March 31, 2012, primarily due to higher expected margins on certain contracts in process at March 31,
2013.
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Costs and Expenses
Research and development expenditures for the fiscal year ended March 31, 2014 were $219,887 compared to $96,905 and $37,128 for the fiscal
years ended March 31, 2013 and 2012, respectively. The increase in research and development expenditures for the fiscal years ended March 31,
2014 and 2013 was primarily attributable to increased levels of cost-sharing on government research programs.
Production engineering costs were $ 4,644,646 for the fiscal year ended March 31, 2014 versus $4,921,970 and $6,014,868 for the prior two
fiscal years, respectively. The decrease for the current fiscal year is attributable to decreased levels of product qualification and testing activities
during the current fiscal year. The decrease for the fiscal year ended March 31, 2013 versus the fiscal year ended March 31, 2012 was
attributable to higher than normal product qualification and testing activities during fiscal year 2012 associated with the launch of volume
production for CODA and the redeployment of certain engineering resources on funded development programs.
Reimbursement of costs under the DOE Grant were $ 3,625,853 versus $4,205,678 and $3,794,324 for each of the two prior fiscal years,
respectively. During the current fiscal year, we changed our cumulative estimate of reimbursable rates under the Grant which resulted in an
increase in our reimbursement recorded for the year of $958,000. Excluding this adjustment, reimbursements recorded during the current fiscal
year were 5 7 percent of production engineering expenditures versus 85 percent for the fiscal year ended March 31, 2013, reflecting a decrease in
our estimated reimbursable overhead costs. For the fiscal year ended March 31, 2013, reimbursements under the grant were 85 percent of
production engineering expenditures compared to 63 percent for the fiscal year ended March 31, 2012, reflecting an increase in the estimated
reimbursable overhead costs under the Grant.
Selling, general and administrative expenses this fiscal year were $5,14 3,864 compared to $7,022,112 and $5,678,797 for the fiscal years ended
March 31, 2013 and 2012, respectively. The decrease this fiscal year is attributable to cost reduction efforts implemented in the fourth quarter of
fiscal year 2013. The increase for fiscal year 2013 versus 2012 is attributable to higher levels of business development, marketing, legal and
recruiting and relocation costs versus the prior fiscal year.
Other
Recovery of i mpair ed assets was $868,475 for the fiscal year ended March 31, 2014 compared to impairment of assets of $4,980,117 and zero
for the fiscal years ended March 31, 2013 and 2012, respectively. During the fiscal year ended March 31, 2014, we recorded a reduction to our
accrued import duties liability of $726,640 as a result of the ruling from the Department of Commerce that significantly reduced the amount of
duties owed , and we reduced the carrying value of the accrued vendor settlement liability by $141,835, due to settlements with certain vendors
during the year which were below the originally estimated amounts. D uring the fiscal year ended March 31, 2013 , we recorded a reserve for
impairments as a result of the CODA bankruptcy .
Interest income decreased to $1,787 for the current fiscal year compared to $15,743 and $22,805 for the fiscal years ended March 31, 2013 and
2012, respectively. The decrease this fiscal year versus fiscal year 2013 is attributable to lower levels of invested cash balances. The decrease
for fiscal 2013 compared to fiscal 2012 is attributable to lower yields and lower levels of invested cash balances.
Other income for the fiscal year ended March 31, 2014 was $7,472 versus $3,377 and $2,011 for the fiscal years ended March 31, 2013 and
2012, respectively. The increase for fiscal year 2014 compared to fiscal year 2013 and 2012 is attributable to a recovery received from a
bankruptcy proceeding during fiscal year 2014.
21
Net Loss
As a result, net loss for the fiscal year ended March 31, 2014 was $2, 773 , 244 , or $0.0 7 per common share, compared to a net loss of
$10,688,312, or $0.29 per common share, and $4,928,520 or $0.14 per common share, for the fiscal years ended March 31, 2013 and 2012,
respectively.
Liquidity and Capital Resources
Our cash balances and liquidity throughout the fiscal year ended March 31, 2014 were adequate to meet operating needs. In February, 2014, we
completed a follow-on offering consisting of 2,864,872 shares of our common stock, and common stock purchase warrants to purchase 1,432,436
shares of our common stock. The warrants have an exercise price of $2.1275 per whole share of common stock and are exercisable on or after
August 6, 2014 and on or before August 5, 2018. In addition, the placement agent was issued warrants to purchase 57,297 shares of common
stock, on substantially the same terms as the warrants issued to the purchasers. Cash proceeds, net of offering costs, were $4,911,933. At March
31, 2014, we had cash and short-term investments of $10,310,141 and working capital of $20,052,18 7 compared to $4,527,899 and $16,011,344
at March 31, 2013, respectively.
For the year ended March 31, 2014, net cash used in operating activities was $ 622,732 compared to net cash used in operating activities of
$7,259,552 and $11,414,137 for the years ended March 31, 2013 and 2012, respectively. The decrease in cash used in operating activities for the
current fiscal year versus fiscal 2013 is primarily due to decreased net losses, significantly driven by lower operating costs as a result of a
reduction in force and other strategic cost reductions, decreased levels of inventory purchases and decreased levels of accounts receivable,
partially offset by decreases in accounts payable and deferred compensation under executive employment agreements. The decrease in cash used
in operating activities for fiscal 2013 compared to fiscal 2012 is associated with decreased levels of inventory purchases partially offset by
decreased levels of accounts payable at March 31, 2013 .
Net cash provided by investing activities for the fiscal year ended March 31, 2014 was $ 1,348,248 compared to cash provided by investing
activities of $114,556 and $7,124,741 for the fiscal years ended March 31, 2013 and 2012, respectively. The increase for the current fiscal year
versus fiscal 2013 was primarily due to cash proceeds from the sale of our former Frederick, Colorado facility, partially offset by decreased
levels of net short-term investment maturities versus the prior fiscal year and increased levels of net capital expenditures. The decrease in cash
provided in the fiscal year ended March 31, 2013 compared to fiscal 2012 is due to 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 .
Net cash provided by financing activities was $4,993,697 for the fiscal year ended March 31, 2014 versus cash provided by financing activities of
$34,955 and $48,584 for the fiscal years ended March 31, 2013 and 2012, respectively. The increase in cash provided in the current fiscal year
was primarily attributable to the completion of a follow-on offering which resulted in net cash proceeds of $4.9 million. The decrease in cash
provided in fiscal 2013 versus fiscal 2012 is attributable to higher levels of treasury stock purchases during the fiscal year ended March 31, 2013.
We expect to fund our operations over the next year from existing cash and short-term investment balances, the reduction of inventories and from
bank financing, if a vailable . 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 $32.4 million DOE Grant requires us to provide
matching funds of 50 percent on all qualifying expenditures under the Grant. As of March 31, 2014, $25 million had been expended under the
Grant.
22
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, 201 4 :
Payments due by Period
Total
Less Than
1 Year
2 - 3 Years
4 - 5 Years
More than
5 Years
Purchase obligations
Executive employment agreements
Total
(1)
$
$
268,279
182,100
450,379
$
$
268,279
-
268,279
$
$
-
-
-
$
$
-
-
-
$
$
-
182,100
182,100
(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.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Critical Accounting Policies and Estimates
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 our 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.
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. On May 1, 2013, the date CODA filed for bankruptcy protection, we had approximately $8.2
million of PowerPhase Pro inventory originally purchased or manufactured for CODA. As of March 31, 2014, $7.9 million of PowerPhase Pro
inventory was still on hand. We believe the PowerPhase Pro system is right sized for many medium-duty truck, marine, passenger vehicle and
stationary power applications, and this inventory is now being sold to other customers . It is reasonably possible that future events or changes in
circumstances could cause the realizable value of our inventories to decline materially, resulting in additional material
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23
impairment losses. During the fiscal years ended March 31, 2014, 2013 and 2012, we recorded inventory impairments of $5,047, $8,928 and
$10,169, respectively.
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. D uring the fiscal year ended March 31, 2013, we established an allowance for bad debts of $3,838,092, principally due to the
bankruptcy filing of CODA. At March 31, 2014, the accounts receivable balance due from CODA and the associated allowance for bad debts
has been written off. 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 future events or changes in circumstances could cause the realizable value of our trade accounts receivable to decline
materially, resulting in material losses.
Percentage of Completion Revenue Recognition on Long-term Contracts: Costs and Estimated Earnings in Excess of Billings on
Uncompleted Contracts
We recognize revenue on development projects funded by our customers using the percentage-of-completion method. Under this method,
contract services revenue is based on the percentage that costs incurred to date bear to management’s best estimate of the total costs to be
incurred to complete the project. Many of these contracts involve the application of our technology to customers’ products and other applications
with demanding specifications. 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 related 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 March 31, 2014 could 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
24
affect the investment income we earn on these investments and, therefore, impact our cash flows and results of operations , although we expect
that the impact would be immaterial . We do not use financial instruments to any degree to manage these risks and do not hold or issue financial
instruments for trading pur poses. All of our product sales and related receivables are payable in U.S. dollars.
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26
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, 2014 and 2013, and the related consolidated statements of operations, stockholders’ equity, and cash flows
for each of the three years in the period ended March 31, 2014. 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. We were not engaged to perform an audit of the Company’s 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, 2014 and 2013, and the results of their operations and their cash flows for each
of the three years in the period ended March 31, 2014, in conformity with accounting principles generally accepted in the United States of
America.
/s/ GRANT THORNTON LLP
Denver, Colorado
May 29 , 2014
27
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
Table of Contents
Assets
Current assets:
Cash and cash equivalents
Short-term investments
Accounts receivable, net of allowance for doubtful accounts of zero and
$3,838,092 , respectively
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
March 31, 2014
March 31, 2013
$
10,247,112
$
4,527,899
63,029
-
960,419
2,212,395
341,255
10,054,422
-
263,988
21,930,225
1,683,330
4,516,301
7,706,066
13,905,697
(6,337,924)
7,567,773
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
Patent costs, net of accumulated amortization of $878,707 and $845,795 ,
respectively
227,015
206,287
Trademark costs, net of accumulated amortization of $68,718 and $64,230 ,
respectively
Other assets
Total assets
107,123
2,997
110,528
76,731
$
29,835,133
$
28,608,715
See accompanying notes to consolidated financial statements.
28
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
Total current liabilities
March 31, 2014
March 31, 2013
$
386,293
1,491,745
$
-
1,878,038
617,197
2,599,435
524,000
3,740,632
Long-term deferred compensation under executive employment agreements
182,100
103,412
Total liabilities
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.01 par value, 50,000,000 shares
authorized; 39,777,767 and 36,664,097 shares
issued and outstanding, respectively
Additional paid-in capital
Accumulated deficit
Total stockholders’ equity
2,060,138
3,844,044
397,778
121,325,762
(93,948,545)
27,774,995
366,641
115,573,331
(91,175,301)
24,764,671
Total liabilities and stockholders’ equity
$
29,835,133
$
28,608,715
See accompanying notes to consolidated financial statements.
29
Table of Contents
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Revenue:
Product sales
Contract services
Operating costs and expenses:
Costs of product sales
Costs of contract services
Research and development
Production engineering
Reimbursement of costs under DOE grant
Selling, general and administrative
(Recovery) impairment of assets
(Gain) loss on disposal of long-lived assets
Year Ended
March 31, 2014
Year Ended
March 31, 2013
Year Ended
March 31, 2012
$
$
6,136,305
909,895
7,046,200
$
5,910,153
1,268,556
7,178,709
3,609,028
743,068
219,887
4,644,646
(3,625,853)
5,143,864
(868,475)
(37,462)
9,828,703
4,333,005
715,225
96,905
4,921,970
(4,205,678)
7,022,112
4,980,117
22,485
17,886,141
9,358,388
785,068
10,143,456
6,663,648
499,813
37,128
6,014,868
(3,794,324)
5,678,797
-
(3,138)
15,096,792
Loss before other income
(2,782,503)
(10,707,432)
(4,953,336)
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
1,787
7,472
9,259
15,743
3,377
19,120
22,805
2,011
24,816
$
$
(2,773,244)
(0.07)
$
$
(10,688,312)
$
(4,928,520)
(0.29)
$
(0.14)
37,253,066
36,564,952
36,301,642
See accompanying notes to consolidated financial statements.
30
Table of Contents
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity
Balances at April 1, 2011
36,213,293
$
362,133
$
113,391,049
$
(75,558,469)
$
38,194,713
Number of
common
shares
issued
Common
stock
Additional
paid-in
capital
Accumulated
Total
stockholders’
deficit
equity
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
Issuance of common stock under
employee stock purchase plan
Issuance of common stock in follow-on
offering, net of offering costs
Issuance of common stock under
stock bonus plan
Issuance of common stock upon exercise
of employee options
Compensation expense from
employee and director stock
option and common stock grants
Net loss
Balances at March 31, 2014
41,158
(6,191)
412
(62)
60,548
(12,314)
107,917
1,079
167,545
-
-
-
-
60,960
(12,376)
168,624
764,278
-
-
-
-
764,278
-
(4,928,520)
(4,928,520)
36,356,177
$
363,562
$
114,371,106
$
(80,486,989)
$
34,247,679
85,550
(41,321)
263,691
-
-
855
(413)
2,637
-
-
74,530
(40,017)
145,115
1,022,597
-
-
-
-
75,385
(40,430)
147,752
1,022,597
-
(10,688,312)
(10,688,312)
36,664,097
$
366,641
$
115,573,331
$
(91,175,301)
$
24,764,671
62,421
624
60,065
2,864,872
28,649
4,883,284
166,231
20,146
1,663
201
34,836
20,874
-
-
753,372
-
-
-
-
-
60,689
4,911,933
36,499
21,075
753,372
-
39,777,767
$
-
397,778
$
-
121,325,762
$
(2,773,244)
(93,948,545)
$
(2,773,244)
27,774,995
See accompanying notes to consolidated financial statements.
31
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
(Recovery) impairment of assets
(Gain) loss 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 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 building and equipment
Net cash provided by investing activities
See accompanying notes to consolidated financial statements.
32
Year Ended
March 31, 2014
Year Ended
March 31, 2013
Year Ended
March 31, 2012
$
(2,773,244)
$
(10,688,312)
$
(4,928,520)
1,136,021
789,871
(868,475)
(37,462)
-
5,047
1,055,980
938,992
45,969
(470,119)
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
-
(7,201)
(8,525)
(445,312)
(622,732)
(87,695)
(7,259,552)
(601,265)
(11,414,137)
(593)
-
-
(377,224)
215,754
(54,721)
1,565,032
1,348,248
(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
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
Cash flows from financing activities:
Issuance of common stock upon exercise of employee stock options
Issuance of common stock under employee stock purchase plan
Issuance of common stock in follow-on offering,
net of offering costs
Purchase of treasury stock
Net cash provided by financing activities
Year Ended
March 31, 2014
Year Ended
March 31, 2013
Year Ended
March 31, 2012
21,075
60,689
4,911,933
-
4,993,697
-
75,385
-
(40,430)
34,955
-
60,960
-
(12,376)
48,584
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
5,719,213
4,527,899
10,247,112
$
(7,110,041)
11,637,940
4,527,899
$
(4,240,812)
15,878,752
11,637,940
$
See accompanying notes to consolidated financial statements.
33
Table of Contents
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
( 1) Summary of Significant Accounting Policies
(a) Description of Business
UQM Technologies, Inc. and our wholly-owned 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 commercial truck, bus, automotive, 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. Under
the policy, we may i nvest in marketable securities consist ing primarily of commercial paper, asset-backed and mortgage-backed notes and
bank certificates of deposits with original maturities beyond three months . All marketable securities are held in our name at t wo 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 4 and March 31, 201 3 were:
Short-term investments:
Certificate of deposit
Long-term investments:
Certificate of deposit (included in other assets)
March 31, 2014
March 31, 2013
Amortized Cost
Gain (Loss)
Amortized Cost
Gain (Loss)
$
63,029
63,029
-
63,029
$
$
$
34
$
-
-
-
-
$
$
-
-
62,436
62,436
$
-
-
-
-
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements , Continued
The time to maturity of held-to-maturity securities were:
Three to six months
Six months to one year
Over one year
(e) Accounts Receivables
March 31, 2014
March 31, 2013
$
$
-
63,029
-
63,029
$
$
-
-
62,436
62,436
We extend unsecured credit to m any of our customers following a review of the customers’ financial condition and credit history. Our
sales are conducted through acceptance of customer purchase orders or in some cases through supply agreements. For credit qualified
customers , our standard terms are net 30 days. For international customers without an adequate credit rating, our typical terms are
irrevocable letter of credit or cash payment in advance of delivery. We establish an allowance for uncollectable accounts based upon a
number of factors including the length of time trade receivables are past due, the customer’s ability to pay its obligation to us, the
condition of the general economy, estimates of credit risk, historical trends and other information. We write off accounts receivable when
they become uncollectible against our allowance for doubtful accounts receivable. At March 31, 201 4 and 201 3 , we had an allowance for
doubtful accounts receivable of zero and $ 3,838,092 , respectively. The following represents activity under our allowance for doubtful
accounts receivable for the fiscal years ended March 31, 2014, 2013 and 2012:
Year ended March 31, 2014
Allowance for doubtful accounts- deducted
from accounts receivable
Year ended March 31, 2013
Allowance for doubtful accounts- deducted
from accounts receivable
Year ended March 31, 2012
Allowance for doubtful accounts- deducted
from accounts receivable
(f) Inventories
Additions
Balance at
Beginning
of Year
Charged to
Costs and
Expenses
Charged to
Other
Accounts
Deductions
Balance at
End of Year
$
3,838,092
-
-
3,838,092
$
-
$
127,697
3,838,092
-
127,697
$
3,838,092
$
-
127,697
-
$
127,697
-
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, 201 4 , 201 3 and 201 2 , we impaired inventory of $ 5,047 , $ 8,928 and $ 10,16 9 , respectively.
(g) Property and Equipment
Property and equipment are stated at cost, unless the asset was acquired, in part, with U.S. Department of Energy (“ DOE ”) g rant 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, 201 4 , 201 3 and 201 2 was
35
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements , Continued
$ 1, 09 8 , 622 , $ 1, 218,812 and $ 1,139,821 , 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,
201 4 , 201 3 and 201 2 was $ 3 7,399 , $ 34,022 , and $ 39,137 , respectively.
(i) Impairment of Long-Lived Assets
We periodically evaluate whether circumstances or events have affected the recoverability of long-lived assets including intangible assets
with finite useful lives. The assessment of possible impairment is based on our ability to recover the carrying value of the asset or groups
of assets from expected future cash flows (undiscounted and without interest charges) estimated by management. If expected future cash
flows are less than the carrying value, an impairment loss is recognized to adjust the asset to fair value as determined by expected
discounted future cash flows.
(j) Product Warranties
Our warranty policy generally provides three months to three years of coverage depending on the product. We record a liability for
estimated warranty obligations at the date products are sold. The estimated cost of warranty coverage is based on our actual historical
experience with our current products or similar products. For new products, the required reserve is based on historical experience of
similar products until sufficient historical data has been collected on the new product. Adjustments are made as new information becomes
available. The following is a summary of warranty activity for the fiscal years ended March 31, 2014, 2013 and 2012:
Additions
Balance at
Beginning
of Year
Charged to
Costs and
Expenses
Charged to
Other
Accounts
Year ended March 31, 2014
Accrued warranty cost
Year ended March 31, 2013
Accrued warranty cost
$
77,393
164,567
$
154,978
58,676
Year ended March 31, 2012
Accrued warranty cost
Note (A) Represents actual warranty payments for units returned under warranty
89,463
$
196,815
-
-
-
Deductions
Balance at
End of Year
66,299 (A)
$
175,661
136,261 (A)
$
77,393
131,300 (A)
$
154,978
(k) Revenue and Cost Recognition
Revenue from sales of products is 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.
36
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements , Continued
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 revenue and cost reimbursements from government grants when it is probable that the Company will comply
with the conditions attached to the grant arrangement and the grant proceeds will be received. Government grants are recognized in the C
onsolidated S tatements of O perations 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 C onsolidated S tatements of O
perations . 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 C onsolidated S tatements of O perations over the estimated useful life of the depreciable
asset as reduced depreciation expense.
The Company records government grants receivable in the C onsolidated B alance S heets 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.
37
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements , Continued
(o) Loss Per Common Share
Basic loss per share is computed by dividing loss a ttribut able to common stockholders by the weighted average number of common
shares outstanding during the periods presented. Diluted los s per share is computed by dividing loss a ttribut able to common stockholders
by all outstanding and potentially dilutive shares during the periods presented, unless the effect is antidilutive. At March 31, 201 4 , 201 3
and 201 2 , 640,979 and 358,855 and 167 , 680 shares of common stock issued but not yet vested , respectively under the S tock Bonus
P lan , were being held by the Company. For fi scal years 201 4 , 201 3 and 201 2 , 267 , 911 , 32 , 681 and 16,487 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, 2014 , 201 3 and 201 2 , options to purchase 3,342,627 , 4,282,001 and 3,254,905 shares of common
stock, respectively, and warrants to purchase 1,489,733 , zero and zero shares of common stock, respectively, were outstanding. For the
fiscal years ended March 31, 201 4 , 201 3 and 201 2 , options and warrants for 3,371,161 , 2,872,257 and 3,201,569 shares were not
included in the computation of diluted loss per share because the option exercise price was greater than the average market price of the
common stock. In-the-money options and warrants determined under the treasury stock method to acquire 462 , 104 , zero and 2,834
shares of common stock for the fiscal years ended March 31, 201 4 , 201 3 and 201 2 , 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 ) 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, 2014 and March 31, 2013, the estimated period to complete contracts in process ranged from one to ten months and one to
twenty-one m onths, respectively. We expect to collect all accounts receivable arising from these contracts within sixty days of billing.
The following summarizes contracts in process:
Costs incurred on uncompleted contracts
Estimated earnings
Less billings to date
Costs and estimated earnings in excess of billings
on uncompleted contracts
March 31, 2014
March 31, 2013
$
1,549,313
670,596
2,219,909
(1,878,654)
838,246
515,299
1,353,545
(1,175,281)
341,255
$
178,264
$
$
( 3 ) Inventories
Inventories consist of:
Raw materials
Work-in-process
Finished products
March 31, 2014
March 31, 2013
7,537,189
84,178
2,433,055
10,054,422
$
$
8,097,342
356,696
2,544,423
10,998,461
$
$
38
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements , Continued
Our inventor ies are 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.
( 4 ) Impairment of Long-Lived Assets
During the fiscal year s ended March 31, 2014, 2013 and 2012, we recorded total impairment charges of zero , zero and 27,845 , respectively
for the impairment of long-lived assets.
Impairments for the fiscal year ended March 31, 201 2 consist solely of capitalized 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.
(5 ) Facility Held for Sale
We had listed our former facility in Frederick, Colorado for sale with a commercial real estate broker as of March 31, 2013. The facility was
reclassified as a current asset and we had discontinued depreciating the asset pending the sale of the building.
On June 6, 2013, we closed on the sale the building. The sales price was $1,650,000 and net proceeds were $1,565,032 .
(6 ) Patents and Trademarks
Patents owned by the Company had a gross carrying amount of $ 1,105,722 and $ 1,052,082 , accumulated amortization of $ 878,707 and $
845,795 , and a net carrying amount of $ 227,015 and $ 206,287 , at March 31, 2 014 and 2013, respectively. Trademarks owned by the
Company had a gross carrying amount of $ 175,841 and $ 174,758 , accumulated amortization of $ 68,718 and $ 64,230 , and a net carrying
value of $ 107,123 and $ 110,528 at March 31, 201 4 and 2013, 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.
Estimated future amortization of these intangible assets by fiscal year is as follows:
2015
2016
2017
2018
2019
Thereafter
(7 ) Government Grant
$
$
Patents
Trademarks
20,430
15,466
15,466
15,028
11,486
149,139
227,015
$
$
4,487
4,487
4,487
4,487
4,487
84,688
107,123
We have a grant (the “Grant”) with the DOE under the American Recovery and Reinvestment Act for reimbursements up to a maximum of
$32.4 million. 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. The period of the Grant is through January 12, 2015. We recognize government grant reimbursements when it is
probable that the Company will comply with the conditions attached to the grant arrangement and the grant proceeds will be received.
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
39
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements , Continued
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.
During the second quarter of the current fiscal year, we changed our cumulative estimate of reimbursable rates under the Grant which resulted
in an increase in our reimbursement of costs recorded for the fiscal year ended March 31, 2014 of $958,000 .
At March 31, 2014, we had received reimbursements from the DOE under the Grant totaling approximately $ 24.4 million and had grant funds
receivable of approximately $ 0.6 million.
The application of grant funds to the recorded value of eligible capital asset purchases under the Grant as of March 31, 2014 and March 31,
2013 are as follows:
Land
Building
Machinery and equipment
Land
Building
Machinery and equipment
(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 ) Commitments and Contingencies
Employment Agreements
March 31, 2014
Purchase Cost
Grant Funding
Recorded Value
$
896,388
9,906,736
7,946,910
$
448,194
4,953,368
3,973,455
18,750,034
$
9,375,017
$
448,194
4,953,368
3,973,455
9,375,017
March 31, 2013
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
$
$
$
$
March 31, 2014
March 31, 2013
164,334
227,022
175,661
5,416
48,336
87,100
774,974
8,902
1,491,745
$
$
174,135
264,814
77,393
71,442
48,336
813,740
1,050,000
99,575
2,599,435
$
$
40
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements , Continued
The Company has entered into employment agreements with all of its officers. 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 over their remaining terms is $1,608,250 . In addition, we have recorded a liability of $ 182,100 and $ 627,412 at March 31, 2014 and
March 31, 2013, 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.
Lease Commitments
At March 31, 2014, there were no operating leases and there was no rental expense during the years ended March 31, 2014, 2013 and 2012.
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.
(10 ) 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 1 ) Fair Value Measurements
Liabilities measured at fair value on a recurring basis as of March 31, 2014 are summarized below:
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
Deferred compensation under
executive employment agreements
(1)
$
182,100
-
-
$
182,100
Note (1) Included in current liabilities on our consolidated balance sheet as of March 31, 2014.
Liabilities measured at fair value on a recurring basis as of March 31, 2013 are summarized below:
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
Deferred compensation under
executive employment agreements
(1)
$
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.
41
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements , Continued
Deferred compensation under executive employment agreements represents the future compensation potentially payable under the retirement
and voluntary termination provisions of executive employment agreements. The value of the Level 3 liability in the foregoing table was
determined using a discounted cash flow model. The significant unobservable input used in the calculation is a discount rate of 14 percent,
which is based on the expected cost of capital for the Company. A 1 percent change in this discount rate would result in approximately a
$2,500 change in the recorded value of the liability as of March 31, 2014.
A summary of the liability measured at fair value on a recurring basis using significant unobservable inputs (Level 3) follows:
Fair Value Measurements Using Significant
Unobservable Inputs (Level 3) for the
Fiscal Year Ended March 31,
2014
Deferred
Compensation
On Executive
Employment
Agreements
2013
Deferred
Compensation
On Executive
Employment
Agreements
$
$
$
627,412
-
-
78,688
-
(524,000)
182,100
78,688
$
$
$
715,107
-
-
64,312
-
(152,007)
627,412
64,312
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
(12) Stockholders’ Equity
In February, 2014, we completed a follow-on offering consisting of 2,864,872 shares of our common stock, and common stock purchase
warrants to purchase 1,432,436 shares of our common stock. The warrants have an exercise price of $2.1275 per whole share of common stock
and are exercisable on or after August 6, 2014 and on or before August 5, 2018. In addition , the placement agent was issued warrants to
purchase 57,297 shares of common stock, on substantially the same terms as the warrants issued to the purchasers. Cash proceeds, net of
offering costs, were $4,911,933 . The fair value of the warrants at the time of issuance was $1,832,943 , and was recorded as additional paid-in
capital. This fair value was determined using the Black-Scholes option pricing model with the following assumptions: a term of four and a half
years, risk-free interest rate of 1.5% , volatility of 78.3% , and dividend yield of zero . Warrants to acquire 1,489,733 and zero shares of our
common stock were outstanding at March 31, 2014 and 2013, respectively.
(13) Stock-Based Compensation
Stock Option Plans
As of March 31, 2014, we had 1,100,000 shares of common stock authorized and 14,870 shares of common stock available for future grant to
employees and consultants under our 2012 Equity Incentive Plan (“Plan”). The term of the 2012 Plan is ten years. Under the 2012 Plan, the
exercise price of each option is set at the fair value of the common stock on the date of grant and the maximum term of the option is ten years
from the date of grant. Options granted to employees generally have a ten year term and vest ratably over a three -year period. The maximum
number of options that may be granted to an employee under the Plan in any calendar year is 500,000 options. Forfeitures under the Plan are
available for re-issuance at any time prior to expiration of the Plan in 2022. Options
42
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements , Continued
granted under the Plan to employees require the option holder to abide by certain Company policies, which restrict their ability to sell the
underlying common stock. Prior to the adoption of the 2012 Plan, we issued stock options under our 2002 Equity Incentive Plan. Forfeitures
under the 2002 Equity Incentive Plan may not be re-issued.
We also have a Stock Option Plan for Non-Employee Directors (“Directors Plan”) pursuant to which Directors may elect to receive stock
options in lieu of cash compensation for their services as directors. As of March 31, 2014, we had 1,000,000 shares of common stock
authorized and 224,173 shares of common stock available for future grant under the Directors Plan. Option terms range from three to ten years
from the date of grant. Option exercise prices are equal to the fair value of the common shares on the date of grant. Options granted under the
plan vest immediately. Forfeitures under the Directors Plan are available for re-issuance at a future date.
Stock Bonus Plan
We have a Stock Bonus Plan (“Stock Plan”) administered by the Board of Directors. As of March 31, 2014, we had 1,954,994 shares of
common stock authorized and there were 47,149 shares of common stock available for future grant under the Stock Plan. Under the Stock
Plan, shares of common stock may be granted to employees, key consultants, and directors who are not employees as additional compensation
for services rendered. Vesting requirements for grants under the Stock Plan, if any, are determined by the Board of Directors at the time of
grant.
Stock Purchase Plan
We have established a Stock Purchase Plan under which eligible employees may contribute up to 10 percent of their compensation to purchase
shares of our common stock at 85 percent of the fair market value at specified dates. At March 31, 2014, we had 700,000 shares of common
stock authorized and 307,650 shares of common stock available for issuance under the Stock Purchase Plan.
Share-Based Compensation Expense
We use the straight-line attribution method to recognize share-based compensation costs over the requisite service period of the award. The
exercise price of options is equal to the market price of our common stock (defined as the closing price reported by the NYSE MKT) on the
date of grant. We adjust share-based compensation on a quarterly basis for changes to the estimate of expected equity award forfeitures based
on actual forfeiture experience. The effect of adjusting the forfeiture rate for all expense amortization is recognized in the period the forfeiture
estimate is changed. The effect of forfeiture adjustments during the years ended March 31, 2014, 2013 and 2012 was insignificant.
We use the Black-Scholes-Merton option pricing model for estimating the fair value of stock option awards. The expected volatility and the
expected life of options granted are based on historical experience, and the risk free interest rate is obtained from the U.S. Department of the
Treasury daily yield curve rates. The weighted average estimated values of employee and director stock option grants, as well as the weighted
average assumptions that were used in calculating such values during the years ended March 31, 2014, 2013 and 2012, 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
2014
Year Ended March 31,
2013
2012
$
0.68 per option
$
0.56 per option
$
1.46 per option
4.8 years
2.30 %
73.91 %
0.00 %
43
6.3 years
1.30 %
72.80 %
0.00 %
5.8 years
2.59 %
73.96 %
0.00 %
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements , Continued
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
Stock Option Plans Activity
Year Ended March 31,
2014
2013
2012
$
$
18,738
40,559
8,981
140,811
580,782
789,871
$
$
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
Additional information with respect to stock option activity during the year ended March 31, 2014 under our Stock Option Plans is as follows:
Outstanding at April 1, 2013
Granted
Exercised
Forfeited
Outstanding at March 31, 2014
Exercisable at March 31, 2014
Weighted-
Average
Remaining
Contractual
Life
4.7 years
Shares
Under
Option
Weighted-
Average
Exercise
Price
4,251,695
89,340
(20,146)
(990,314)
$
$
$
$
2.14
1.11
1.05
2.62
3,330,575
$
1.98
4.8 years
2,634,589
$
2.21
3.9 years
Vested and expected to vest at March 31, 2014
3,306,339
$
1.98
4.8 years
Aggregate
Intrinsic
Value
-
27,462
2,931,885
1,848,784
2,891,654
$
$
$
$
$
Additional information with respect to stock option activity during the year ended March 31, 2013 under our Stock Option Plans is as follows:
Outstanding at April 1, 2012
Granted
Exercised
Forfeited
Weighted-
Average
Remaining
Contractual
Life
3.9 years
Shares
Under
Option
Weighted-
Average
Exercise
Price
3,228,210
1,418,792
-
(395,307)
$
$
$
$
2.78
0.87
-
2.83
Outstanding at March 31, 2013
4,251,695
$
2.14
4.7 years
Exercisable at March 31, 2013
3,098,868
$
2.48
3.2 years
Vested and expected to vest at March 31, 2013
4,194,686
$
2.15
4.7 years
44
Aggregate
Intrinsic
Value
-
-
-
-
-
$
$
$
$
$
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 Stock Option Plans is as follows:
Outstanding at April 1, 2011
Granted
Exercised
Forfeited
Weighted-
Average
Remaining
Contractual
Life
3.7 years
Shares
Under
Option
Weighted-
Average
Exercise
Price
2,960,277
569,710
-
(301,777)
$
$
$
$
2.99
2.29
-
3.84
Outstanding at March 31, 2012
3,228,210
$
2.78
3.9 years
Exercisable at March 31, 2012
2,559,488
$
2.82
2.8 years
Vested and expected to vest at March 31, 2012
3,200,983
$
2.78
3.8 years
Aggregate
Intrinsic
Value
1,109,521
-
-
-
-
$
$
$
$
$
The weighted-average grant date fair value of options granted during the years ended March 31, 2014, 2013 and 2012 was $0.68, $0.56 and
$1.46, respectively.
As of March 31, 2014, there was $271,804 of total unrecognized compensation costs related to stock options granted under our Stock Option
Plans. The unrecognized compensation cost is expected to be recognized over a weighted-average period of fourteen months. The total fair
value of stock options that vested during the years ended March 31, 2014, 2013 and 2012 was $493,271, $885,916 and $513,236, respectively.
Cash received by us upon the exercise of stock options for the years ended March 31, 2014, 2013 and 2012 was $21,075, zero and zero,
respectively. The source of shares of common stock issuable upon the exercise of stock options is from authorized and previously unissued
common shares.
45
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements , Continued
Stock Bonus Plan Activity
Activity with respect to non-vested shares under the Stock Bonus Plan as of March 31, 2014, 2013 and 2012 and changes during the years
ended March 31, 2014, 2013 and 2012 are presented below:
2014
Year Ended March 31,
2013
2012
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
358,855
452,195
(166,231)
(3,840)
640,979
$
$
$
$
$
1.22
1.18
1.34
1.25
1.17
167,680
454,866
(263,691)
-
358,855
$
$
$
$
$
2.44
0.87
1.39
-
1.22
62,199
213,398
(107,917)
-
167,680
$
$
$
$
$
2.50
2.34
2.28
-
2.44
Non-vested at April 1
Granted
Vested
Forfeited
Non-vested at March 31
As of March 31, 2014, there was $490,759 of total unrecognized compensation costs related to common stock granted under our Stock Bonus
Plan. The unrecognized compensation cost at March 31, 2014 is expected to be recognized over a weighted-average period of twenty-two
months.
Stock Purchase Plan Activity
During the years ended March 31, 2014, 2013 and 2012, we issued 62,421, 85,550 and 41,158 shares of common stock, respectively, under the
Stock Purchase Plan. Cash received by us upon the purchase of shares under the Stock Purchase Plan for the years ended March 31, 2014,
2013 and 2012 was $60,689, $75,385 and $60,960, respectively.
(1 4 ) Significant Customers
We have historically derived significant revenue from a few key customers. The following table summarizes revenue and percent of total
revenue from significant customers for the fiscal years ended March 31, 2014, 2013 and 2012:
Customer A
Customer B
Customer C
Customer D
Customer E
Fiscal Year Ended March 31,
2014
880,145
727,683
615,081
50,050
-
12 %
10 %
9 %
1 %
- %
$
$
$
$
$
2013
1,078,930
1,494,024
816,779
728,000
191,983
15 % $
21 % $
11 % $
10 % $
3 % $
$
$
$
$
$
2012
684,489
41,388
747,924
455,000
4,313,728
7 %
- %
7 %
4 %
43 %
The following table summarizes accounts receivable from significant customers as of March 31, 2014 and 2013:
March 31, 2014
March 31, 2013
Customer A
Customer B
Customer C
Customer D
Customer E
71 %
2 %
10 %
- %
- %
46
77 %
3 %
5 %
- %
- %
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements , Continued
(15 ) Income Taxes
Income tax benefit attributable to loss from operations differed from the amounts computed by applying the U.S. federal income tax rate of 34
percent as a result of the following:
Computed "expected" tax benefit
Increase (decrease) in taxes resulting from:
Adjustment of expiring net operating loss
carry-forwards
Increase (decrease) in valuation allowance for
net deferred tax assets
Other, net
Income tax benefit
Year Ended
March 31, 2014
Year Ended
March 31, 2013
Year Ended
March 31, 2012
$
(942,903)
$
(3,634,026)
$
(1,675,697)
-
1,364,055
382,741
875,016
67,887
2,295,702
(25,731)
1,222,257
70,699
$
-
$
-
$
-
The tax effects of temporary difference that give rise to significant portion s of the net deferred tax asset are presented below:
Deferred tax assets:
Research and development credit carry-forwards
Net operating loss carry-forwards
Deferred compensation
Property and equipment
Intangible assets
Stock Compensation
Other
Total deferred tax assets
Deferred tax liabilities:
Intangible assets
Total deferred tax liabilities
Net deferred tax assets
Less valuation allowance
$
March 31, 2014
March 31, 2013
$
4,073
24,328,101
75,384
108,314
-
952,978
666,505
26,135,355
48,390
48,390
4,073
22,998,447
242,840
297,144
64,994
847,069
757,382
25,211,949
-
-
26,086,965
25,211,949
(26,086,965)
(25,211,949)
Deferred tax assets, net of valuation allowance
$
-
$
-
As of March 31, 20 14 and March 31, 2013, respectively, we had net operating loss (“NOL”) carry-forwards of approximately $ 70.9 million
and $ 67.3 million for U.S. income tax purposes that expire in varying amounts through 2034 . 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 $ 26.1 million and $ 25.2 million at March 31, 2014 and 2013, respectively, relates
principally to the uncertainty of the utilization of deferred tax assets in various tax jurisdictions. The Company continually assesses both
positive and negative evidence to determine whether it is more-likely-than-
47
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements , Continued
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 6 ) 401(k) Employee Benefit Plan
We have established a 401(k) Savings Plan (“401K Plan ”) under which eligible employees may contribute up to 15 percent of their
compensation. Employees over the age of 18 are eligible immediately upon hire to participate in the 401K Plan. At the direction of the
participants, contributions are invested in several investment options offered by the 401K Plan. We currently match 33 percent of participants’
contributions, subject to certain limitations. These matching contributions vest ratably over a three -year period . Matching contributions to the
401K Plan were $ 132,471 , $ 149,311 , and $ 135,825 , for the years ended March 31, 201 4 , 201 3 , and 201 2 , respectively.
(1 7 ) Interim Financial Data (Unaudited)
Fiscal year 2014
Sales
Gross profit
Net loss
Net loss per common share basic and diluted:
Fiscal year 2013
Sales
Gross profit
Net loss
Net loss per common share basic and diluted:
June 30
September 30
December 31
March 31
Quarters Ended
1,948,511
662,242
(916,354)
$
$
$
2,041,958
848,563
(412,269)
$
$
$
2,040,249
832,886
(65,913)
$
$
$
1,015,482
350,413
(1,378,708)
(0.02)
$
(0.01)
$
0.00
$
(0.04)
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)
(0.04)
$
(0.07)
$
(0.12)
$
(0.06)
$
$
$
$
$
$
$
$
48
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, 201 4 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, 201 4 , 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, 201 4 . 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, 201 4 , 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.
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, 201 4 that have materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
May 29 , 201 4
Eric R. Ridenour
President and Chief Executive Officer
David I. Rosenthal
Treasurer, Secretary and
Chief Financial Officer
49
Table of Contents
ITEM 9B .
OTHER INFORMATION
None.
50
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 13 , 201 4 .
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 4 ,” “Aggregate Option Exercises During Fiscal Year 201 4 ,” “Option Values at the End of Fiscal Year 201 4 ,”
“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 13 , 201 4 .
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 13 , 201 4 .
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 13 , 201 4 .
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 13 , 201 4 .
51
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, 2014 and March 31, 2013.
Consolidated Statements of Operations for the Years Ended March 31, 2014, 2013, and 2012.
Consolidated Statements of Stockholders’ Equity for the Years Ended March 31, 2014, 2013, and
2012.
Consolidated Statements of Cash Flows for the Years Ended March 31, 2014, 2013, and 2012.
Notes to Consolidated Financial Statements.
2.
Financial Statement Schedules:
Valuation and Qualifying Accounts. See note 1 (e) to the Consolidated Financial Statements above.
3.
Exhibits :
Restated Articles of Incorporation.
Bylaws , as amended .
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.
Form of Common Stock Purchase Warrant. Reference is made to Exhibit 4.1 of our current report on
Form 8-K, filed February 5, 2014 (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
4.1
4.2
10.1
10.2
10.3
10.4
10.5
52
10.6
10.7
10. 8
10.9
10.10
10.11
10.12
10.13
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.
Modification N umb er Nine 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 December 6,
2013 (No. 1-10869), which is incorporated herein by reference.
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 Form 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 Form 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.
10.14
Form of Incentive Stock Option Agreement. ** Reference is made to Exhibit 10.6 of our Annual Report
on Form 10-K, filed on May 22, 2009 (No. 1-10869), which is incorporated herein by reference.
10.15
Form of Non-Qualified Stock Option Agreement. ** Reference is made to Exhibit 10.7 of our Annual
Report on Form 10-K, filed on May 22, 2009 (No. 1-10869), which is incorporated herein by reference.
10.16
Form of Restricted Stock Agreement, amended May 9, 2012. ** Reference is made to Exhibit 10.20 of
our Form 10-K filed May 24, 2012, which is incorporated herein by reference.
10.17
10.18
10.19
10.20
10.21
10.22
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 Employment Agreement 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.
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.
53
10.23
10.24
21.1
23.1
31.1
31.2
32.1
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, 2013 (No. 1-10869), which is
incorporated herein by reference.
At Market Issuance Sales Agreement between the Company and HC Wainright dated February 3,
2014. Reference is made to Exhibit 1.1 of our current report on Form 8-K, filed February 5, 2014
(No. 1-10869), which is incorporated herein by reference.
Subsidiaries of the Company.
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.
** management contract or compensation plan.
54
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, UQM Technologies, Inc. has duly caused this Annual
Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in Longmont, Colorado on the 29
day of May,
201 4 .
th
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/ DONALD W. VANLANDINGHAM
Donald W. Vanlandingham
Chairman of the Board of
Directors
Date
May 28 , 201 4
/s/ E RIC R . R IDENOUR
Eric R. Ridenour
President and Chief Executive
Officer
May 29 , 201 4
/s/ D AVID I . R OSENTHAL
David I. Rosenthal
Treasurer and Secretary (Principal
Financial and Accounting Officer)
May 29 , 201 4
/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
May 28 , 201 4
May 28 , 201 4
May 28 , 201 4
Director
Director
55
56
EXHIBIT 3.1
RESTATED
ARTICLES OF INCORPORATION
OF
UQM TECHNOLOGIES, INC.
(as further amended January 24, 2001)
The undersigned corporation, incorporated December 7, 1967 under the laws of Colorado, hereby adopts the
following restated articles of incorporation and certifies that such restated articles of incorporation only restate and
integrate and do not further amend the provisions of the corporation’s articles of incorporation as heretofore amended
or supplemented, that there is no discrepancy between such articles of incorporation with such amendments or
supplements and the provisions of the restated articles, and that the restated articles of incorporation supersede the
original articles of incorporation and all amendments and supplements thereto:
ARTICLE I
Name
The name of the corporation is UQM Technologies, Inc.
The corporation shall have perpetual existence.
ARTICLE II
ARTICLE III
The nature of the business of the corporation and the objects and purposes to be transacted, promoted and
carried on by it are:
1.
To own, design, manufacture and distribute fiberglass and fiberglass products and all related and non-
related businesses; to buy, sell, lease, or otherwise dispose of, and to operate, conduct, furnish, equip and manage
factories, wholesale and retail outlets, and generally to do and perform everything necessary for carrying out the
aforesaid purposes.
2.
To locate, purchase, lease or otherwise acquire patents and lands believed to be valuable for carrying out
the foregoing purposes, and to acquire leasehold, or other interest therein, and to develop and operate same; also to
purchase, lease, build, construct, remodel and operate manufacturing plants, distribution plants, ret ail and wholesal e
outlets, storage and warehouse facilities, and any and all other buildings, structures and works necessary or useful in
carrying on all or any part of the business of the corporation; and to acquire, own, hold, use and operate any other kind
of real property deemed necessary in and about its business.
3.
To purchase or otherwise acquire, own, hold, maintain and use any and all machinery, equipment,
appliances, tools, automotive equipment, automobiles, trucks and transportation facilities, as may be deemed necessary
or useful in carrying on the business of the corporation, or any part thereof.
4.
To make and enter into contracts with other persons, firms, associations or corporations, or with any
state, government or agency thereof, for any and all lawful purposes, in carrying on all or any part of the business of the
corporation.
5.
To borrow money and to make, issue, negotiate and deliver its promissory notes, debentures, bonds and
other securities or evidence of indebtedness, and to secure payment thereof by mortgage, pledge, or other encumbrance
upon all or any part of its property and assets.
6.
To purchase or otherwise acquire the properties and assets of any other person, firm or corporation and
the business and goodwill thereof, when such acquisition is deemed advisable, and to pay therefor in cash, or its stock,
notes, debentures or bonds; and in any such transaction to assume and undertake or guarantee payment of any part or
all of the indebtedness or other obligation of the person, firm or corporation whose properties and business are so
acquired.
7.
To purchase or otherwise acquire, and to invest in, hold, own and dispose of, the stock, bonds, notes,
debentures and other obligations or securities issued by any person, firm, association or corporation, and the bonds or
other evidences of the obligations of any government, state, territory or province, or of any city, county or other
governmental subdivision thereof; and to guarantee payment of dividends on, or of the principal of or interest on, any
stocks, bonds, notes, debentures or other securities or obligations of any person, firm, association or corporation in
which this corporation has an interest as stockholder, creditor or otherwise.
8.
To purchase or otherwise acquire shares of its own capital stock, and to hold, sell, exchange, pledge or
otherwise dispose of or retire the same; provided that this corporation shall not use any of its funds or property for the
purpose of its own shares when such use would cause any impairment of the capital of this corporation, and provided,
that the shares of its own stock belonging to this corporation shall not be voted directly or indirectly while so owned.
9.
To apply for , register and obtain patents, trademarks, trade names and copyrights and to purchase or
otherwise acquire rights and licenses under patents owned or held by others; and to grant licenses under, or to sell or
otherwise dispose of, patents and patent rights, trademarks or trade names obtained by this corporation.
10.
To carry on any other lawful business which may be deemed related or tributary to the business of this
corporation.
11.
To conduct business and to have offices and places of business, and to acquire, own and dispose of
property of all kinds in the State of Colorado and in other states and
2
territories, districts, dependencies or colonies of the United States, and in any foreign country, subject to compliance
with the laws thereof; and generally to have and exercise all the powers now or hereafter conferred by the general
corporation laws of the State of Colorado whether or not herein specifically mentioned.
The foregoing clauses shall be construed as both objects and powers, and the foregoing enumeration of powers
shall not be deemed to limit or restrict in any manner the general powers of this corporation; and the purposes, objects
and powers specified in each of the paragraphs of this Article III shall not be limited or restricted by reference to or
inference from the terms of any other paragraph, but each shall be regarded as independent objects and purposes.
The authorized capital stock of the corporation is 50,000,000 shares of common stock of the par value of $.01
per share. The capital stock, after the amount of the subscription price has been paid in, shall not be subject to
assessment to pay the debts of the corporation.
ARTICLE IV
Any stock of the corporation may be issued for money, property, services rendered, labor done, cash advances
for the company, or for any other assets of value in accordance with the action of the Board of Directors, whose
judgment as to value received in return therefor shall be conclusive and said stock when issued shall be fully paid and
non-assessable.
Cumulative voting in the election of directors shall not be permitted.
ARTICLE V
The governing Board of this corporation shall be known as Directors, and the number of Directors may from
time to time be increased or decreased in such manner as shall be provided by the By-Laws of this Corporation,
provided that the number of Directors shall not be reduced to less than three ( 3).
ARTICLE VI
In furtherance, and not in limitation of the powers conferred by statute, the Board of Directors is expressly
authorized:
To manage and govern the corporation by majority vote of members present at any regular or special meeting at
which such a quorum shall be present.
To make, alter or amend the By-Laws of the corporation at any regular or special meeting.
To fix the amount to be reserved as working capital over and above its capital stock paid in, to authorize and
cause to be executed mortgages and liens upon the real and personal property of this corporation.
To designate one or more committees, each committee to consist of two or more of the Directors of the
corporation, which, to the extent provided in the Resolution or in the By-Laws of
3
the Corporation, shall have and may exercise the powers of the Board of Directors in the management of the business
and affairs of the corporation. Such committee or committees shall have such name or names as may be stated in the
By-Laws of the corporation or as may be determined from time to time by resolution adopted by the Board of
Directors.
To provide for and carry into execution without action by the stockholders a plan for any and all of the
following purposes:
1.
The issue and sale, or purchase and sale, of its capital stock whether authorized or hereafter authorized,
to any of its employees, including officers and directors and those actively engaged in the conduct of the business of
such corporation or of any subsidiary thereof, or of any corporation or association in which, or in the welfare of which,
such corporation shall have an interest or to a trustee for their benefit, upon such terms and conditions as may be
determined by the Board of Directors and incorporated in such plan, including, but without limiting the generality of
the foregoing, the payment for such stock in installments or at one time, with or without the right to vote thereo n
pending payment therefore in full, and for aiding or assisting any such employees and said other persons in paying for
such stock by contributions, compensations for services, or otherwise.
2.
The participation by all or any of its employees, including officers and directors and those actively
engaged in the conduct of its business, in the profits of the corporate enterprise or of any branch or division thereof, or
in any plan for pension or retirement privileges, wholly or in part at the expense of such corporation, on such terms and
conditions as may be determined by the Board of Directors and incorporated in such plan.
3.
The furnishing to all or any of its employees, including officers and directors and those actively engaged
in the conduct of its business, w holly or in part at the expense of such corporation, of medical service, life, disability,
or unemployment insurance, education, housing, social and recreation service or other similar aids and services on such
terms and conditions as may be determined by the Board of Directors.
If any such plan is financed in part at the expense of any employee or other said persons, then, such employee
or other persons shall have the right to elect whether or not to become a member of such plan and all sums expended by
the corporation in the formulation, adoption and carrying out of any such plan or plans pursuant to subparagraphs 1, 2
or 3 above, shall be regarded as part of the corporation’s legitimate expenses.
The Board of Directors shall have the power and authority to sell, lease or exchange in part, and less than all,
the property and assets of the corporation upon such terms and conditions as the Board of Directors deem expedient
and for the best interests of the corporation without vote or consent of the stockholders.
The Board of Directors shall have power and authority at any meeting to sell, lease or exchange all of the
property and assets of the corporation, including its goodwill and its corporate franchises, upon such terms and
conditions as its Board of Directors deem expedient and for the best interests of the corporation, provided such sale
shall be authorized or ratified by the affirmative vote of stockholders holding stock entitling them to exercise at least
two-thirds of
4
the voting power at a stockholders’ meeting called for that purpose, or when authorized or ratified by the written
consent of the holders of at least two-thirds of the voting stock issued and outstanding.
The Board of Directors may adopt such By-Laws as they deem advisable to indemnify officers and directors of
the corporation to the extent permitted by the Colorado Statutes.
Meetings of stockholders may be held at such time and place as the By-Laws shall provide. At all meetings of
shareholders, one-third (1/3) of all shares entitled to vote shall constitute a quorum.
ARTICLE VII
No stockholder in the corporation shall have the preemptive right to subscribe to any or all additional issues of
stock and/or other securities of any or all classes of this corporation or securities convertible into stock or carrying
stock purchase warrants, options or privileges.
ARTICLE VIII
ARTICLE IX
To the fullest extent permitted by the Colorado Corporation Code, as the same exists or may hereafter be
amended, a director of the corporation shall not be liable to the corporation or its shareholders for monetary damages
for breach of fiduciary duty as a director. Any repeal or modification of this Article by the shareholders of the
corporation shall be prospective only and shall not adversely affect any right or protection of a director of the
corporation existing at the time of such repeal or modification.
5
EXHIBIT 3.2
BYLAWS
OF
UQM TECHNOLOGIES, INC .
Adopted March 18, 1993
Amended May 25, 2005
Further Amended February 10, 2011
INDEX TO BYLAWS
OF
UQM TECHNOLOGIES, INC .
ARTICLE I - Offices
Section 1.01 Business Offices ..................................................................................... 1
Section 1.02 Registered Office ................................................................................... 1
ARTICLE II - Shareholders
Section 2.01 Annual Meeting... ................................................................................... 1
Section 2.02 Special Meetings. ................................................................................... 1
Section 2.03 Place of Meetings ................................................................................... 2
Section 2.04 Notice of Meetings ................................................................................. 2
Section 2.05 Waiver of Notice ................................................................................... 2
Section 2.06 Closing of Transfer Books or Fixing of Record Date. ................................... 3
Section 2.07 Voting List ............................................................................................. 3
Section 2.08 Proxies ................................................................................................. 4
Section 2.09 Quorum and Manner of Acting ................................................................... 4
Section 2.10 Extraordinary Matters ............................................................................. 4
Section 2.11 Voting of Shares. ..................................................................................... 5
Section 2.12 Voting of Shares by Certain Holders ........................................................... 5
Section 2.13 Action Without a Meeting ......................................................................... 6
ARTICLE III - Board of Directors
Section 3.01 General Powers ... ................................................................................... 7
Section 3.02 Number, Tenure and Qualifications. ........................................................... 7
Section 3.03 Resignation ........................................................................................... 7
Section 3.04 Removal ............................................................................................... 7
Section 3.05 Vacancies ............................................................................................. 8
Section 3.06 Regular Meetings ................................................................................... 8
Section 3.07 Special Meetings ................................................................................... 8
Section 3.08 Meetings by Telephone ........................................................................... 8
Section 3.09 Notice of Meetings ................................................................................. 9
Section 3.10 Waiver of Notice ................................................................................... 9
Section 3.11 Presumption of Assent ............................................................................. 9
Section 3.12 Quorum and Manner of Acting ................................................................... 9
Section 3.13 Action Without a Meeting ..................................................................... 10
Section 3.14 Executive and Other Committees ........................................................... 10
Section 3.15 Compensation ..................................................................................... 11
1
ARTICLE IV - Officers
Section 4.01 Number and Qualifications ..................................................................... 11
Section 4.02 Election and Term of Office ................................................................... 11
Section 4.03 Compensation ..................................................................................... 12
Section 4.04 Resignation ......................................................................................... 12
Section 4.05 Removal ........................................................................................... 12
Section 4.06 Vacancies ........................................................................................... 12
Section 4.07 Authority and Duties ............................................................................. 12
Section 4.08 Surety Bonds ....................................................................................... 14
ARTICLE V - Stock
Section 5.01 Issuance of Shares ............................................................................... 14
Section 5.02 Stock Certificates; Uncertificated Shares ................................................. 14
Section 5.03 Consideration for Shares ....................................................................... 15
Section 5.04 Lost Certificates ................................................................................. 15
Section 5.05 Transfer of Shares ............................................................................... 15
Section 5.06 Holders of Record ............................................................................... 16
Section 5.07 Shares Held for Account of Another ....................................................... 16
Section 5.08 Transfer Agents, Registrars and Paying Agents ......................................... 16
ARTICLE VI - Indemnification
Section 6.01 Definitions ......................................................................................... 16
Section 6.02 Right to Indemnification17
Section 6.03 Advancement of Expenses ..................................................................... 17
Section 6.04 Burden of Proof ................................................................................... 18
Section 6.05 Notification and Defense of Claim ......................................................... 18
Section 6.06 Enforcement ....................................................................................... 19
Section 6.07 Proceedings by a Party ......................................................................... 19
Section 6.08 Subrogation ....................................................................................... 20
Section 6.09 Other Payments ................................................................................... 20
Section 6.10 Insurance ........................................................................................... 20
Section 6.11 Other Rights and Remedies ................................................................... 20
Section 6.12 Applicability; Effect ............................................................................. 21
Section 6.13 Severability ....................................................................................... 21
ARTICLE VII - Miscellaneous
Section 7.01 Voting of Securities by the Corporation ................................................... 21
Section 7.02 Seal ................................................................................................... 22
Section 7.03 Fiscal Year ......................................................................................... 22
Section 7.04 Amendments ..................................................................................... 22
2
BYLAWS
OF
UQM TECHNOLOGIES, INC.
ARTICLE I
Offices
Business Offices . The corporation may have such offices, either within or outside
Colorado , as the board of directors may from time to time determine or as the business of the corporation may require.
Section 1.01
Section 1.02
Registered Office . The registered office of the corporation required by the
Colorado Corporation Code to be maintained in Colorado shall be as set forth in the articles of incorporation, unless
changed as provided by law.
ARTICLE II
Shareholders
Section 2.01
Annual Meeting . An annual meeting of the shareholders shall be held on such date
as may be determined by the board of directors for the purpose of electing directors and for the transaction of such
other business as may come before the meeting. Failure to hold an annual meeting as required by these bylaws shall
not invalidate any action taken by the board of directors or officers of the corporation.
Section 2.02
Special Meetings . Special meetings of the shareholders, for any purpose or
purposes, unless otherwise prescribed by statute, may be called by the chairman of the board, the chief executive
officer or the board of directors, and shall be called by the president at the request of the holders of not less than one-
tenth of all the outstanding shares of the corporation entitled to vote at the meeting.
Section 2.03
Place of Meetings . Each meeting of the shareholders shall be held at such place,
either within or outside Colorado, as may be designated in the notice of meeting, or, if no place is designated in the
notice, at the principal office of the corporation if in Colorado, or if the principal office is not located in Colorado, at
the registered office of the corporation in Colorado.
1
Section 2.04
Notice of Meetings . Except as otherwise required by law, written notice of each
meeting of the shareholders stating the place, day and hour of the meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called shall be given, either personally (including delivery by private
courier), by electronic transmission or by first class mail, to each shareholder of record entitled to notice of such
meeting, not less than ten nor more than 60 days before the date of the meeting, except that if the authorized shares of
the corporation are to be increased, at least 30 days notice shall be given, and if the sale, lease, exchange or other
disposition of all or substantially all of the property and assets of the corporation not in the usual and regular course of
business is to be voted on, at least 20 days notice shall be given. Such notice shall be deemed to be given, if personally
delivered, when delivered to the shareholder, if by electronic transmission, when given in accordance with applicable
law, and if mailed, when deposited in the United States mail, addressed to the shareholder at his address as it appears
on the stock transfer books of the corporation, with postage thereon prepaid, but if three successive notices mailed to
the last-known address of any shareholder of record are returned as undeliverable no further notices to such shareholder
shall be necessary until another address for such shareholder is made known to the corporation. If a meeting is
adjourned to another time or place, notice need not be given if the time and place thereof are announced at the meeting,
unless the adjournment is for more than 30 days or if after the adjournment a new record date is fixed, in either of
which case notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting
in accordance with the foregoing provisions of this Section 2.04.
Section 2.05
Waiver of Notice . Whenever notice is required by law, the articles of
incorporation or these bylaws to be given to any shareholder, a waiver thereof in writing signed by the shareholder
entitled to such notice, whether before, at or after the time stated therein, shall be equivalent to the giving of such
notice. By attending a meeting, a shareholder (a) waives objection to lack of notice or defective notice of such meeting
unless the shareholder, at the beginning of the meeting, objects to the holding of meeting or the transacting of business
at the meeting, and (b) waives objection to consideration at such meeting of a particular matter not within the purpose
or purposes described in the notice of such meeting unless the shareholder objects to considering the matter when it is
presented.
Section 2.06
Closing of Transfer Books or Fixing of Record Date . For the purpose of
determining shareholders entitled to notice of or to vote at any meeting of the shareholders or any adjournment thereof,
or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any
other proper purpose, the board of directors may provide that the stock transfer books shall be closed for any stated
period not exceeding 70 days. In lieu of closing the stock transfer books the board of directors may fix in advance a
date as the record date for any such determination of shareholders, such date in any case to be not more than 70 days
prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. If the
stock transfer books shall be closed or a record date fixed for the purpose of determining shareholders entitled to notice
of or to vote at a meeting of the shareholders, such books shall be closed for at least, or such record shall be fixed not
less than, ten days immediately preceding such meeting (30 days if the authorized stock is to be increased, 20 days if
the sale, lease, exchange or other disposition of all or substantially all of the property and assets of the corporation not
in the usual and regular course of business is to be considered). If the stock transfer books are not so closed or no
record date is so fixed, the date
2
on which notice of the meeting is mailed or the date on which the resolution of the board of directors declaring the
dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a
determination of shareholders entitled to vote at any meeting of the shareholders has been made as provided in this
Section, such determination shall apply to any adjournment thereof except where the determination has been made
through the closing of the stock transfer books and the stated period of the closing has expired. Notwithstanding the
foregoing provisions of this Section, the record date for determining shareholders entitled to take action without a
meeting as provided in Section 2.13 below shall be the date specified in such Section.
Section 2.07
Voting List . The officer or agent having charge of the stock transfer books for
shares of the corporation shall make, at least ten days before each meeting of the shareholders, a complete record of the
shareholders entitled to vote at such meeting or any adjournment thereof, arranged in alphabetical order, with the
address of and the number of shares held by each. For a period of ten days before such meeting, this record shall be
kept on file at the principal office of the corporation, whether within or outside Colorado, and shall be subject to
inspection by any shareholder for any purpose germane to the meeting at any time during usual business hours. Such
record shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection
of any shareholder for any purpose germane to the meeting during the whole time of the meeting. The original stock
transfer books shall be prima facie evidence as to who are the shareholders entitled to examine such record or transfer
books or to vote at any meeting of the shareholders.
Section 2.08
Proxies . At any meeting of the shareholders, a shareholder may vote by proxy
executed in writing by the shareholder or his duly authorized attorney-in-fact. Such proxy shall be filed with the
secretary of the corporation before or at the time of the meeting. No proxy shall be valid after eleven months from the
date of its execution, unless otherwise provided in the proxy.
Section 2.09
Quorum and Manner of Acting . At all meetings of shareholders, one-third of the
outstanding shares of the corporation entitled to vote, represented in person or by proxy, shall constitute a quorum. If a
quorum is present, the affirmative vote of a majority of the shares represented at the meeting and entitled to vote on the
subject matter shall be the act of the shareholders, unless the vote of a greater proportion or number or voting by classes
is otherwise required by the laws of Colorado, the articles of incorporation or these bylaws. In the absence of a
quorum, a majority of the shares so represented may adjourn the meeting from time to time for a period not to exceed
sixty days at any one adjournment. At any such adjourned meeting, at which a quorum shall be present or represented,
any business may be transacted which might have been transacted at the original meeting. Abstentions and broker
votes and broker nonvotes (only when accompanied by broker votes with respect to at least one matter at the meeting)
are considered present and entitled to vote for purposes of establishing a quorum for the transaction of business at a
meeting of stockholders. A “broker vote” occurs when a broker votes the shares on any matter pursuant to either (i) the
voting instructions and authority received from its client who is the beneficial owner of the shares or (ii) the broker’s
discretionary authority to vote the shares under the applicable rules and regulations of the NYSE Amex or other
national securities exchange governing the voting authority of brokers. A “broker nonvote” occurs when a broker has
not received voting instructions from its client who is the beneficial owner of the shares and
3
the broker is barred from exercising its discretionary authority to vote the shares under the applicable rules and
regulations of the NYSE Amex or other securities exchange governing the voting authority of brokers.
Section 2.10
Extraordinary Matters . Notwithstanding the provisions of Section 2.09, the
following actions shall require the affirmative vote or concurrence of two-thirds of all of the outstanding shares of the
corporation (or of each class if class voting is required by the laws of Colorado or the articles of incorporation) entitled
to vote thereon: (a) adopting an amendment or amendments to the articles of incorporation, (b) lending money to,
guaranteeing the obligations of or otherwise assisting any of the directors of the corporation or of any other corporation
the majority of whose voting capital stock is owned by the corporation, (c) authorizing the sale, lease, exchange or
other disposition of all or substantially all of the property and assets of the corporation, with or without its goodwill, not
in the usual and regular course of business, (d) approving a plan of merger, consolidation or exchange that is required
to be approved by the shareholders, (e) adopting a resolution submitted by the board of directors to dissolve the
corporation, and (f) adopting a resolution submitted by the board of directors to revoke voluntary dissolution
proceedings.
Section 2.11
Voting of Shares . Subject to the provisions of Section 2.06, each outstanding share
of record, regardless of class, is entitled to one vote, and each outstanding fractional share of record is entitled to a
corresponding fractional vote, on each matter submitted to a vote of the shareholders either at a meeting thereof or
pursuant to Section 2.13, except to the extent that the voting rights of the shares of any class or classes are limited or
denied by the articles of incorporation as permitted by the Colorado Corporation Code. For the avoidance of doubt,
abstentions and broker nonvotes will not be counted as votes cast. In the election of directors each record holder of
stock entitled to vote at such election shall have the right to vote the number of shares owned by him for as many
persons as there are directors to be elected, and for whose election he has the right to vote. Cumulative voting shall not
be allowed.
Section 2.12
Voting of Shares by Certain Holders .
(a)
Shares Held or Controlled by the Corporation. Neither treasury shares nor shares
held by another corporation if a majority of the shares entitled to vote for the election of directors of such other
corporation is held by this corporation, shall be voted at any meeting or counted in determining the total number of
outstanding shares at any given time.
(b)
Shares Held by Another Corporation. Shares standing in the name of another
corporation may be voted by such officer, agent or proxy as the bylaws of such corporation may prescribe or, in the
absence of such provision, as the board of directors of such corporation may determine.
(c)
Shares Held by More Than One Person. Shares standing of record in the names of
two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the
entirety or otherwise, or if two or more persons have the same fiduciary relationship respecting the same shares, voting
with respect to the shares shall have the following effects: (i) if only one person votes, his act binds all; (ii) if two or
more persons vote, the act of the majority so voting binds all; (iii) if two or more persons vote, but the
4
vote is evenly split on any particular matter, each faction may vote the shares in question proportionally, or any person
voting the shares of a beneficiary, if any, may apply to any court of competent jurisdiction in Colorado to appoint an
additional person to act with the persons so voting the shares, in which case the shares shall be voted as determined by
a majority of such persons; and (iv) if a tenancy is held in unequal interests, a majority or even split for the purposes of
subparagraph (iii) shall be a majority or even split in interest. The foregoing effects of voting shall not be applicable if
the secretary of the corporation is given written notice of alternative voting provisions and is furnished with a copy of
the instrument or order wherein the alternative voting provisions are stated.
(d)
Shares Held in Trust or by a Personal Representative. Shares held by an
administrator, executor, guardian, conservator or other personal representative may be voted by him, either in person or
by proxy, without a transfer of such shares into his name. Shares standing in the name of a trustee may be voted by
him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such
shares into his name.
(e)
Shares Held by a Receiver. Shares standing in the name of a receiver may be voted
by such receiver and shares held by or under the control of a receiver may be voted by such receiver without the
transfer thereof into his name if authority so to do is contained in an appropriate order of the court by which such
receiver was appointed.
Pledged Shares. A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to
vote the shares so transferred.
(f)
(g)
Redeemable Shares Called for Redemption. Redeemable shares that have been called
for redemption shall not be entitled to vote on any matter and shall not be deemed outstanding shares on and after the
date on which written notice of redemption has been mailed to shareholders and a sum sufficient to redeem such shares
has been deposited with a bank or trust company with irrevocable instruction and authority to pay the redemption price
to the holders of the shares upon surrender of certificates therefor.
Section 2.13
Action Without a Meeting. Any action required or permitted to be taken at a
meeting of the shareholders may be taken without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by all of the shareholders entitled to vote with respect to the
subject matter thereof. Such consent (which may be signed in counterparts) shall have the same force and effect as a
unanimous vote of the shareholders and may be stated as such in any document. Unless the consent specifies a
different effective date, action taken without a meeting pursuant to a consent in writing as provided herein shall be
effective when all shareholders entitled to vote have signed the consent. The record date for determining shareholders
entitled to take action without a meeting is the date the first shareholder signs the consent. All consents signed
pursuant to this Section 2.13 shall be delivered to the secretary of the corporation for inclusion in the minutes or for
filing with the corporate records.
5
Section 2.14
Conduct of Meetings . The chairman of the annual or any special meeting of the
shareholders shall be the chairman of the board, if there is one, or, if there is not one or in his absence, the vice
chairman of the corporation (or in his absence, any person designated by the board of directors), unless and until a
different person is elected by a majority of the shares present at the meeting and entitled to vote at such meeting.
The chairman of the meeting shall appoint one or more persons to act as inspectors of election at the
meeting.
Meetings of shareholders shall be conducted in accordance with the following rules:
(a)
The chairman of the meeting shall have absolute authority over matters of procedure
and there shall be no appeal from the ruling of the chairman. The chairman, in his absolute discretion, may conduct the
meeting in accordance with the rules of parliamentary procedure or otherwise.
(b)
If disorder should arise that prevents continuation of the legitimate business of the
meeting, the chairman may quit the chair and announce the adjournment of the meeting and upon his so doing the
meeting is immediately adjourned.
(c)
proxy leave the meeting.
The chairman may ask or require that anyone who is not a bona fide shareholder or
(d)
A resolution or motion shall be considered for vote only if proposed in accordance
with the provisions of Section 2.14(e) (if the meeting is an annual meeting) and only if proposed by a shareholder or a
duly authorized proxy and seconded by an individual who is a shareholder or a duly authorized proxy, other than the
individual who proposed the resolution or motion.
(e)
At any annual meeting of shareholders only such new business shall be conducted,
and only such proposals shall be acted upon, as shall have been properly brought before the meeting. For any new
business proposed by management to be properly brought before the annual meeting, such new business must first be
approved by the board of directors, either directly or through its approval by proxy solicitation materials related thereto,
and must be stated in writing and filed with the secretary of the corporation at least five days before the date of the
annual meeting, and all business so stated, proposed and filed shall be considered at the annual meeting.
Any shareholder may make any other proposal at the annual meeting and the same may be discussed and
considered, but unless properly brought before the meeting such proposal shall not be acted upon at the meeting. For a
proposal to be properly brought before an annual meeting by a shareholder, the shareholder must have given timely
notice thereof in writing to the secretary of the corporation. To be timely, a shareholder's notice must be delivered to or
mailed and received at the principal executive offices of the corporation not less than 60 days nor more than 90 days
prior to the meeting; provided, however, that in the event that less than 40 days notice or prior public disclosure of the
date of the meeting is given or made to the shareholders, notice by the shareholder to be timely must be so received not
later than the
6
close of business on the tenth day following the day on which such notice of the date of the annual meeting was mailed
or such public disclosure was made.
A shareholder's notice to the secretary shall set forth as to each matter the shareholder proposes to bring
before the annual meeting (i) a brief description of the proposal desired to be brought before the annual meeting and the
reasons for conducting such business at the annual meeting, (ii) the name and address, as they appear on the
corporation's books, of the shareholder proposing such business, (iii) the class and number of shares of the corporation
which are beneficially owned by the shareholder, and (iv) any financial interest of the shareholder in such proposal.
Notwithstanding anything in the bylaws to the contrary, no business shall be conducted at an annual
meeting except in accordance with the procedures set forth in this Section 2.14(e). The chairman of an annual meeting
shall, if the facts warrant, determine and declare to the meeting that new business or any share proposal was not
properly brought before the meeting in accordance with the provisions of this Section 2.14(e), and if the chairman
should so determine, the chairman shall so declare to the meeting and any such business or proposal not properly
brought before the meeting shall not be acted upon at the meeting.
This provision shall not prevent the consideration and approval or disapproval at the annual meeting of
reports of officers, directors and committees, but in connection with such reports no new business shall be acted upon
at such annual meeting unless stated and filed as herein provided.
(f)
Nomination of persons to stand for election at any annual or special shareholders
meeting may be made at any time prior to the vote thereon by the board of directors or a committee of the board of
directors. Other than as provided in the immediately preceding sentence, no such nominations shall be entertained
unless written notice of such proposed nominations is received by the secretary of the corporation, (i) if for an annual
meeting, not less than 90 days in advance of the date that corresponds to the date that the corporation's proxy statement
was first mailed or released to shareholders in connection with the previous year's annual meeting of shareholders,
except that if no annual meeting was held in the previous year or the date for the annual meeting has been changed by
more than 30 calendar days from the date of the previous year's annual meeting, such written notice shall suffice if
received not less than 30 days prior to such meeting, and (ii) if for any other shareholders meeting, not less than seven
days after notice of such meeting is first given. Such written notice shall provide the name and age of each nominee
and complete account of the business experience of each nominee during the past five years, including the present
occupation and business activities of the nominee regardless of whether compensation in any form whatever was
received for such activities or experience.]
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ARTICLE III
Board of Directors
Section 3.01
General Powers . The business and affairs of the corporation shall be managed by
its board of directors, except as otherwise provided in the Colorado Corporation Code, the articles of incorporation or
these bylaws.
Section 3.02
Number, Tenure and Qualifications . The number of directors of the corporation
shall be as fixed from time to time by resolution of the board of directors or shareholders, but in no instance shall there
be fewer directors than the minimum required by law. Except as provided in Sections 2.01 and 3.05, directors shall be
elected at each annual meeting of the shareholders. Each director shall hold office until the next annual meeting of the
shareholders and thereafter until his successor shall have been elected and qualified, or until his earlier death,
resignation or removal. Directors must be at least eighteen years old but need not be residents of Colorado or
shareholders of the corporation.
Section 3.03
Resignation . Any director may resign at any time by giving written notice to the
chairman of the board, the president or the board of directors. A director's resignation shall take effect at the time
specified in the notice and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary
to make it effective.
Section 3.04
Removal . At a meeting called expressly for that purpose, the entire board of
directors or any lesser number may be removed, with or without cause, by a vote of the holders of a majority of shares
then entitled to vote at an election of directors; except that if the holders of shares of any class of stock are entitled to
elect one or more directors by the provisions of the articles of incorporation, the provisions of this Section 3.04 shall
apply, with respect to the removal of a director or directors so elected by such class, to the vote of the holders of the
outstanding shares of that class and not to the vote of the outstanding shares as a whole. Any reduction in the
authorized number of directors shall not have the effect of shortening the term of any incumbent director unless such
director is also removed from office in accordance with this Section 3.04.
Section 3.05
Vacancies . Unless otherwise required in the articles of incorporation, any vacancy
occurring in the board of directors, other than vacancies due to an increase in the number of directors, may be filled by
the affirmative vote of a majority of the remaining directors though less than a quorum, or by the affirmative vote of
two directors if there are only two directors remaining, or by a sole remaining director, or by the shareholders if there
are no directors remaining. A director elected to fill a vacancy shall be elected for the unexpired term of his
predecessor in office. Any directorship to be filled by reason of an increase in the number of directors shall be filled by
the affirmative vote of a majority of the directors then in office or by the shareholders, and a director so chosen shall
hold office for the term specified in Section 3.02 above.
Section 3.06
Regular Meetings . A regular meeting of the board of directors shall be held
immediately after and at the same place as the annual meeting of the shareholders, or as soon thereafter as conveniently
may be, at the time and place, either within or outside
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Colorado, determined by the board, for the purpose of electing officers and for the transaction of such other business as
may come before the meeting. Failure to hold such meeting, however, shall not invalidate any action taken by any
officer then or thereafter in office. The board of directors may provide, by resolution, the time and place, either within
or outside Colorado , for the holding of additional regular meetings without other notice than such resolution.
Section 3.07
Special Meetings . Special meetings of the board of directors may be called by or at
the request of the chairman of the board, the president or any two directors. The person or persons authorized to call
special meetings of the board of directors may fix any convenient place, either within or outside Colorado , as the place
for holding any special meeting of the board called by them.
Section 3.08
Meetings by Telephone . Unless otherwise provided by the articles of
incorporation, one or more members of the board of directors may participate in a meeting of the board by means of
conference telephone or similar communications equipment by which all persons participating in the meeting can hear
each other at the same time. Such participation shall constitute presence in person at the meeting.
Section 3.09
Notice of Meetings . Notice of each meeting of the board of directors (except those
regular meetings for which notice is not required) stating the place, day and hour of the meeting shall be given to each
director at least five days prior thereto by the mailing of written notice by first class, certified or registered mail, or at
least two days prior thereto by personal delivery (including delivery by private courier) of written notice or by
telephone, telegram, telex, cablegram or other similar method, except that in the case of a meeting to be held pursuant
to Section 3.08 notice may be given by telephone one day prior thereto. The method of notice need not be the same to
each director. Notice shall be deemed to be given when deposited in the United States mail, with postage thereon
prepaid, addressed to the director at his business or residence address, when delivered or communicated to the director
or when the telegram, telex, cablegram or other form of notice is personally delivered to the director or delivered to the
last address of the director furnished by him to the corporation for such purpose. Neither the business to be transacted
at nor the purpose of any meeting of the board of directors need be specified in the notice or waiver of notice of such
meeting unless otherwise required by statute.
Section 3.10
Waiver of Notice . Whenever notice is required by law, the articles of
incorporation or these bylaws to be given to the directors, a waiver thereof in writing signed by the director entitled to
such notice, whether before, at or after the time stated therein, shall be equivalent to the giving of such notice. By
attending or participating in a meeting, a director waives any required notice of such meeting unless, at the beginning
of the meeting, he objects to the holding of the meeting or the transacting of business at the meeting.
Section 3.11
Presumption of Assent . A director of the corporation who is present at a meeting
of the board of directors at which action on any corporate matter is taken shall be presumed to have assented to the
action taken unless he objects at the beginning of the meeting to the holding of the meeting or the transacting of
business at the meeting, contemporaneously requests that his dissent to the action taken be entered in the minutes of
such meeting or gives written notice of his dissent to the presiding officer of such meeting before its
9
adjournment or to the secretary of the corporation immediately after adjournment of such meeting. The right of dissent
as to a specific action taken at a meeting of the board is not available to a director who votes in favor of such action.
Section 3.12
Quorum and Manner of Acting . Except as otherwise may be required by law, the
articles of incorporation or these bylaws, a majority of the number of directors fixed in accordance with these bylaws,
present in person, shall constitute a quorum for the transaction of business at any meeting of the board of directors, and
the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the board of
directors. If less than such majority is present at a meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice other than an announcement at the meeting, until a quorum shall be
present. No director may vote or act by proxy or power of attorney at any meeting of directors.
Section 3.13
Action Without a Meeting . Any action required or permitted to be taken at a
meeting of the directors may be taken without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by all of the directors. Such consent (which may be signed in
counterparts) shall have the same force and effect as a unanimous vote of the directors and may be stated as such in any
document. Unless the consent specifies a different effective date, action taken without a meeting pursuant to a consent
in writing as provided herein is effective when all directors have signed the consent. All consents signed pursuant to
this Section 3.13 shall be delivered to the secretary of the corporation for inclusion in the minutes or for filing with the
corporate records.
Section 3.14
Executive and Other Committees . The board of directors, by resolution adopted by
a majority of the full board, may designate from among its members an executive committee and one or more other
committees, each of which, to the extent provided in the resolution establishing such committee, shall have and may
exercise all of the authority of the board of directors in the management of the business and affairs of the corporation,
except that no such committee shall have the power or authority to (a) declare dividends or distributions, (b) approve,
recommend or submit to the shareholders actions or proposals required by law to be approved by the shareholders, (c)
fill vacancies on the board of directors or any committee thereof, including any committee authorized by this Section
3.14, (d) amend the bylaws, (e) approve a plan of merger not requiring shareholder approval, (f) reduce earned or
capital surplus, (g) authorize or approve the reacquisition of shares of the corporation, unless pursuant to a general
formula or method specified by the board of directors, or (h) authorize or approve the issuance or sale of, or any
contract to issue or sell, shares of the corporation's stock or designate the terms of a series of a class of shares. The
delegation of authority to any committee shall not operate to relieve the board of directors or any member of the board
from any responsibility imposed by law. Subject to the foregoing, the board of directors may provide such powers,
limitations and procedures for such committees as the board deems advisable. To the extent the board of directors does
not establish other procedures, each committee shall be governed by the procedures set forth in Sections 3.06 (except as
they relate to an annual meeting) and 3.07 through 3.13 as if the committee were the board of directors. Each
committee shall keep regular minutes of its meetings, which shall be reported to the board of directors when required
and submitted to the secretary of the corporation for inclusion in the corporate records.
10
Section 3.15
Compensation . By resolution of the board of directors, notwithstanding any
personal interest of a director in such action, a director may be paid his expenses, if any, of attendance at each meeting
of the board of directors and each meeting of any committee of the board of which he is a member and may be paid a
fixed sum for attendance at each such meeting or a stated salary, or both a fixed sum and a stated salary. No such
payment shall preclude any director from serving the corporation in any other capacity and receiving compensation
therefor.
ARTICLE IV
Officers
Section 4.01
Number and Qualifications . The officers of the corporation shall consist of a
chairman of the board, a president, a secretary, a treasurer and such other officers, including one or more vice-
presidents and a controller, as may from time to time be elected or appointed by the board. In addition, the board of
directors or the chairman of the board may elect or appoint such assistant and other subordinate officers, including
assistant vice-presidents, assistant secretaries and assistant treasurers, as it or he shall deem necessary or
appropriate. Any number of offices may be held by the same person, except that no person may simultaneously hold
the offices of president and secretary. All officers must be at least eighteen years old.
Section 4.02
Election and Term of Office . Except as provided in Sections 4.01 and 4.06, the
officers of the corporation shall be elected by the board of directors annually at the first meeting of the board held after
each annual meeting of the shareholders as provided in Section 3.06. If the election of officers shall not be held as
provided herein, such election shall be held as soon thereafter as conveniently may be. Each officer shall hold office
until his successor shall have been duly elected and shall have qualified, or until the expiration of his term in office if
elected or appointed for a specified period of time, or until his earlier death, resignation or removal.
Section 4.03
Compensation . Officers shall receive such compensation for their services as may
be authorized or ratified by the board of directors and no officer shall be prevented from receiving compensation by
reason of the fact that he is also a director of the corporation. Election or appointment as an officer shall not of itself
create a contract or other right to compensation for services performed as such officer.
Section 4.04
Resignation . Any officer may resign at any time, subject to any rights or
obligations under any existing contracts between the officer and the corporation, by giving written notice to the
chairman of the board, the president or the board of directors. An officer's resignation shall take effect at the time
specified in such notice, and unless otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 4.05
Removal . Any officer may be removed at any time by the board of directors, or, in
the case of assistant and other subordinate officers, by the board of directors or the chairman of the board or the
president (whether or not such officer was appointed by the chairman of the board or the president) whenever in its or
his judgment, as the case may be, the best interests of the corporation will be served thereby, but such removal shall be
without
11
prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer shall not in
itself create contract rights.
Section 4.06
Vacancies . A vacancy in any office, however occurring, may be filled by the board
of directors, or, if such office may be filled by the chairman of the board or the president as provided in Section 4.01,
by the chairman of the board or the president, for the unexpired portion of the term.
Section 4.07
Authority and Duties. The officers of the corporation shall have the authority and
shall exercise the powers and perform the duties specified below and as may be additionally specified by the chairman
of the board, the board of directors or these bylaws (and in all cases where the duties of any officer are not prescribed
by the bylaws or the board of directors, such officer shall follow the orders and instructions of the chairman of the
board), except that in any event each officer shall exercise such powers and perform such duties as may be required by
law:
(a)
Chairman of the Board . The chairman of the board shall be elected from among the
directors. Subject to the direction and supervision of the board of directors, he shall (i) preside at all meetings of the
corporation's shareholders and board of directors; and (ii) perform such other duties as may be assigned to him from
time to time by the board of directors.
(b)
Chief Executive Officer . The chief executive officer of the corporation, subject to
the direction and supervision of the board of directors, shall (i) have primary authority with respect to all matters
regarding corporate policy; (ii) supervise and control the business of the corporation, its officers and employees and
(iii) perform such other duties as may be assigned to him from time to time by the board of directors.
(c)
President . The president shall be the chief operating officer of the
corporation. Subject to the direction and supervision of the board of directors, he shall (i) supervise the day to day
operations of the corporation; and (ii) perform all other duties incident to the office of president and as from time to
time may be assigned to him by the chief executive officer or by the board of directors.
(d)
Vice-Presidents and Vice-Chairman . The vice-president, if any (or if there is more
than one then each vice-president), and vice-chairman, if any, shall assist the president and shall perform such duties as
may be assigned to him by the president, the chairman of the board or the board of directors. The vice-president, if
there is one (or if there is more than one, then the vice-president designated by the board of directors, or if there be no
such designation then the vice-presidents in order of their election), and vice-chairman, shall, at the request of the
president, or in his absence or inability or refusal to act, perform the duties of the president, and when so acting have all
of the powers of and be subject to all of the restrictions upon the president. Assistant vice presidents, if any, shall have
such powers and perform such duties as may be assigned to them by the chairman of the board or by the board of
directors.
(e)
Secretary . The secretary shall: (i) keep the minutes of the proceedings of the
shareholders, the board of directors and any committees of the board; (ii) see that all notices are duly given in
accordance with the provisions of these bylaws or as required by
12
law; (iii) be custodian of the corporate records and of the seal of the corporation; (iv) keep at the corporation's
registered office or principal place of business within or outside Colorado a record containing the names and addresses
of all shareholders and the number and class of shares held by each, unless such a record shall be kept at the office of
the corporation's transfer agent or registrar; (v) have general charge of the stock books of the corporation, unless the
corporation has a transfer agent; and (vi) in general, perform all duties incident to the office of secretary and such other
duties as from time to time may be assigned to him by the president, the chairman of the board or the board of
directors. Assistant secretaries, if any, shall have the same duties and powers, subject to supervision by the secretary.
(f)
Treasurer . The treasurer shall: (i) be the principal financial officer of the corporation
and have the care and custody of all its funds, securities, evidences of indebtedness and other personal property and
deposit the same in accordance with the instructions of the board of directors; (ii) receive and give receipts and
acquittances for moneys paid in on account of the corporation, and pay out of the funds on hand all bills, payrolls and
other just debts of the corporation of whatever nature upon maturity; (iii) unless there is a controller, be the principal
accounting officer of the corporation and as such prescribe and maintain the methods and systems of accounting to be
followed, keep complete books and records of account, prepare and file all local, state and federal tax returns, prescribe
and maintain an adequate system of internal audit and prepare and furnish to the chairman of the board and the board of
directors statements of account showing the financial position of the corporation and the results of its operations; (iv)
upon request of the board, make such reports to it as may be required at any time; and (v) perform all other duties
incident to the office of treasurer and such other duties as from time to time may be assigned to him by the president,
the chairman of the board or the board of directors. Assistant treasurers, if any, shall have the same powers and duties,
subject to the supervision by the treasurer.
Section 4.08
Surety Bonds . The board of directors may require any officer or agent of the
corporation to execute to the corporation a bond in such sums and with such sureties as shall be satisfactory to the
board, conditioned upon the faithful performance of his duties and for the restoration to the corporation of all books,
papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the
corporation.
ARTICLE V
Stock
Section 5.01
Issuance of Shares . The issuance or sale by the corporation of any shares of its
authorized capital stock of any class, including treasury shares, shall be made only upon authorization by the board of
directors, except as otherwise may be provided by law. No shares shall be issued until full consideration has been
received therefor. Every issuance of shares shall be recorded on the books maintained for such purpose by or on behalf
of the corporation.
Section 5.02
Stock Certificates; Uncertificated Shares . The shares of stock of the corporation
shall be represented by certificates, except that the board of directors may authorize the issuance of any class or series
of stock of the corporation without certificates as
13
provided by law. If shares are represented by certificates, such certificates shall be signed in the name of the
corporation by the chairman or vice-chairman of the board of directors or by the president or a vice-president and by
the treasurer or an assistant treasurer or by the secretary or an assistant secretary and sealed with the seal of the
corporation or with a facsimile thereof. The signatures of the corporation's officers on any certificate may also be
facsimiles if the certificate is countersigned by a transfer agent or registered by a registrar. In case any officer who has
signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before
such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer at the date
of its issue. Certificates of stock shall be in such form consistent with law as shall be prescribed by the board of
directors.
Section 5.03
Consideration for Shares . Shares shall be issued for such consideration expressed
in dollars (but not less than the par value thereof) as shall be fixed from time to time by the board of
directors. Treasury shares shall be disposed of for such consideration expressed in dollars as may be fixed from time to
time by the board. Such consideration may consist, in whole or in part, of money, other property, tangible or
intangible, or labor or services actually performed for the corporation, but neither the promissory note of a subscriber or
direct purchaser of shares from the corporation, nor the unsecured or nonnegotiable promissory note of any other
person, nor future services shall constitute payment or part payment for shares.
Section 5.04
Lost Certificates . In case of the alleged loss, destruction or mutilation of a
certificate of stock the board of directors may direct the issuance of a new certificate in lieu thereof upon such terms
and conditions in conformity with law as it may prescribe. The board of directors may in its discretion require a bond
in such form and amount and with such surety as it may determine before issuing a new certificate.
Section 5.05
Transfer of Shares . Upon presentation and surrender to the corporation or to the
corporation's transfer agent of a certificate of stock duly endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer, payment of all transfer taxes, if any, and the satisfaction of any other requirements
of law, including inquiry into and discharge of any adverse claims of which the corporation has notice, the corporation
or the transfer agent shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the
transfer on the books maintained for such purpose by or on behalf of the corporation. No transfer of shares shall be
effective until it has been entered on such books. The corporation or the corporation's transfer agent may require a
signature guaranty or other reasonable evidence that any signature is genuine and effective before making any
transfer. Transfers of uncertificated shares shall be made in accordance with applicable provisions of law.
Section 5.06
Holders of Record . The corporation shall be entitled to treat the holder of record of
any share of stock as the holder in fact thereof, and accordingly shall not be bound to recognize any equitable or other
claim to or interest in such share on the part of any other person whether or not it shall have express or other notice
thereof, except as may be required by the laws of Colorado.
Section 5.07
Shares Held for Account of Another . The board of directors, in the manner
provided by the Colorado Corporation Code, may adopt a procedure whereby a
14
shareholder of the corporation may certify in writing to the corporation that all or a portion of the shares registered in
the name of such shareholder are held for the account of a specified person or persons. Upon receipt by the corporation
of a certification complying with such procedure, the persons specified in the certification shall be deemed, for the
purpose or purposes set forth therein, to be the holders of record of the number of shares specified in place of the
shareholder making the certification.
Section 5.08
Transfer Agents, Registrars and Paying Agents . The board of directors may at its
discretion appoint one or more transfer agents, registrars or agents for making payment upon any class of stock, bond,
debenture or other security of the corporation. Such agents and registrars may be located either within or outside
Colorado. They shall have such rights and duties and shall be entitled to such compensation as may be agreed.
ARTICLE VI
Indemnification
Section 6.01
meanings set forth below:
Definitions . For purposes of this Article, the following terms shall have the
(a)
Code . The term "Code" means the Colorado Corporation Code as it exists on the
date of the adoption of this Article and as it may hereafter be amended from time to time, but in the case of any
amendment, only to the extent that the amendment permits the corporation to provide broader indemnification rights
than the Colorado Corporation Code permitted the corporation to provide at the date of the adoption of this Article and
prior to the amendment.
(b)
Corporation . The term "corporation" means the corporation and, in addition to the
resulting or surviving corporation, any domestic or foreign predecessor entity of the corporation in a merger,
consolidation or other transaction in which the predecessor's existence ceased upon consummation of the transaction.
Expenses . The term "expenses" means the actual and reasonable expenses (including
but not limited to expenses of investigation and preparation and fees and disbursements of counsel, accountants or other
experts) incurred by a party in connection with a proceeding.
(c)
(d)
Liability . The term "liability" means the obligation to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to an employee benefit plan) or expense incurred with
respect to a proceeding.
(e)
Party . The term "party" means any individual who was, is, or is threatened to be
made, a named defendant or respondent in a proceeding by reason of the fact that he is or was a director, officer or
employee of the corporation, or a member of the Office of the Chairman, and any individual who, while a director,
officer or employee or member of the Office of the Chairman of the corporation is or was serving at the request of the
corporation as a director, officer, partner, trustee, employee, fiduciary or agent of any other foreign or domestic
corporation or of any partnership, joint venture, trust, other enterprise or employee benefit plan.
15
A party shall be considered to be serving an employee benefit plan at the corporation's request if his duties to the
corporation also impose duties on or otherwise involve services by him to the plan or to participants in or beneficiaries
of the plan.
Proceeding . The term "proceeding" means any threatened, pending or completed
action, suit or proceeding, or any appeal therein, whether civil, criminal, administrative, arbitrative or investigative
(including an action by or in the right of the corporation), and whether formal or informal.
(f)
Section 6.02
Right to Indemnification . The corporation shall indemnify any party to a
proceeding against liability incurred in, relating to or as a result of the proceeding to the fullest extent permitted by law
(including without limitation in circumstances in which, in the absence of this Section 6.02, indemnification would be
(a) discretionary under the Code or (b) limited or subject to particular standards of conduct under the Code).
Section 6.03
Advancement of Expenses . In the event of any proceeding in which a party is
involved or which may give rise to a right of indemnification under this Article, following written request to the
corporation by the party, the corporation shall pay to the party, to the fullest extent permitted by law (including without
limitation in circumstances in which, in the absence of this Section 6.02, advancement of expenses would be (a)
discretionary under the Code or (b) limited or subject to particular standards of conduct under the Code), amounts to
cover expenses incurred by the party in, relating to or as a result of such proceeding in advance of its final disposition.
Section 6.04
Burden of Proof . If under applicable law the entitlement of a party to be
indemnified or advanced expenses hereunder depends upon whether a standard of conduct has been met, the burden of
proof of establishing that the party did not act in accordance with such standard shall rest with the corporation. A party
shall be presumed to have acted in accordance with such standard and to be entitled to indemnification or the
advancement of expenses (as the case may be) unless, based upon a preponderance of the evidence, it shall be
determined that the party has not met such standard. Such determination and any evaluation as to the reasonableness of
amounts claimed by a party shall be made by the board of directors of the corporation or such other body or persons as
may be permitted by the Code. Subject to any express limitation of the Code, if so requested by the party, such
determination and evaluation as to the reasonableness of the amounts claimed by the party shall be made by
independent counsel who is selected by the party and approved by the corporation (which approval shall not be
unreasonably withheld). For purposes of this Article, unless otherwise expressly stated, the termination of any
proceeding by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of
nolo contendere or its equivalent, shall not create a presumption that a party did not meet any particular standard of
conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable
law.
Section 6.05
Notification and Defense of Claim . Promptly after receipt by a party of notice of
the commencement of any proceeding, the party shall, if a claim in respect thereof is to be made against the corporation
under this Article, notify the corporation in writing of the commencement thereof; provided, however, that delay in so
notifying the corporation shall not constitute a waiver or release by the party of any rights under this Article. With
respect to
16
any such proceeding: (a) the corporation shall be entitled to participate therein at its own expense; (b) any counsel
representing the party to be indemnified in connection with the defense or settlement thereof shall be counsel mutually
agreeable to the party and to the corporation; and (c) the corporation shall have the right, at its option, to assume and
control the defense or settlement thereof, with counsel satisfactory to the party. If the corporation assumes the defense
of the proceeding, the party shall have the right to employ its own counsel, but the fees and expenses of such counsel
incurred after notice from the corporation of its assumption of the defense of such proceeding shall be at the expense of
the party unless (i) the employment of such counsel has been specifically authorized by the corporation, (ii) the party
shall have reasonably concluded that there may be a conflict of interest between the corporation and the party in the
conduct of the defense of such proceeding, or (iii) the corporation shall not in fact have employed counsel to assume
the defense of such proceeding. Notwithstanding the foregoing, if an insurance carrier has supplied directors' and
officers' liability insurance covering a proceeding and is entitled to retain counsel for the defense of such proceeding,
then the insurance carrier shall retain counsel to conduct the defense of such proceeding unless the party and the
corporation concur in writing that the insurance carrier's doing so is undesirable. The corporation shall not be liable
under this Article for any amounts paid in settlement of any proceeding effected without its written consent. The
corporation shall not settle any proceeding in any manner that would impose any penalty or limitation on a party
without the party's written consent. Consent to a proposed settlement of any proceeding shall not be unreasonably
withheld by either the corporation or the party.
Section 6.06
Enforcement . The right to indemnification and advancement of expenses granted
by this Article shall be enforceable in any court of competent jurisdiction if the corporation denies the claim, in whole
or in part, or if no disposition of such claim is made within 90 days after the written request for indemnification or
advancement of expenses is received. If successful in whole or in part in such suit, the party's expenses incurred in
bringing and prosecuting such claim shall also be paid by the corporation. Whether or not the party has met any
applicable standard of conduct, the court in such suit may order indemnification or the advancement of expenses as the
court deems proper (subject to any express limitation of the Code). Further, the corporation shall indemnify a party
from and against any and all expenses and, if requested by the party, shall (within ten business days of such request)
advance such expenses to the party, which are incurred by the party in connection with any claim asserted against or
suit brought by the party for recovery under any directors' and officers' liability insurance policies maintained by the
corporation, regardless of whether the party is unsuccessful in whole or in part in such claim or suit.
Section 6.07
Proceedings by a Party . The corporation shall indemnify or advance expenses to a
party in connection with any proceeding (or part thereof) initiated by the party only if such proceeding (or part thereof)
was authorized by the board of directors of the corporation.
Section 6.08
Subrogation . In the event of any payment under this Article, the corporation shall
be subrogated to the extent of such payment to all of the rights of recovery of the indemnified party, who shall execute
all papers and do everything that may be necessary to assure such rights of subrogation to the corporation.
17
Section 6.09
Other Payments . The corporation shall not be liable under this Article to make any
payment in connection with any proceeding against or involving a party to the extent the party has otherwise actually
received payment (under any insurance policy, agreement or otherwise) of the amounts otherwise indemnifiable
hereunder. A party shall repay to the corporation the amount of any payment the corporation makes to the party under
this Article in connection with any proceeding against or involving the party, to the extent the party has otherwise
actually received payment (under any insurance policy, agreement or otherwise) of such amount.
Section 6.10
Insurance . So long as any party who is or was an officer or director of the
corporation may be subject to any possible proceeding by reason of the fact that he is or was an officer or director of
the corporation (or is or was serving in any one or more of the other capacities covered by this Article during his tenure
as officer or director), if the corporation maintains an insurance policy or policies providing directors' and officers'
liability insurance, such officer or director shall be covered by such policy or policies in accordance with its or their
terms to the maximum extent of the coverage applicable to any then current officer or director of the corporation, or the
corporation shall purchase and maintain in effect for the benefit of such officer or director one or more valid, binding
and enforceable policy or policies of directors' and officers' liability insurance providing, in all respects, coverage at
least comparable to that provided to any then current officer or director at the corporation.
Section 6.11
Other Rights and Remedies . The rights to indemnification and advancement of
expenses provided in this Article shall be in addition to any other rights to which a party may have or hereafter acquire
under any law, provision of the articles of incorporation, any other or further provision of these bylaws, vote of the
shareholders or directors, agreement or otherwise. The corporation shall have the right, but shall not be obligated, to
indemnify or advance expenses to any agent of the corporation not otherwise covered by this Article in accordance with
and to the fullest extent permitted by the Code.
Section 6.12
Applicability; Effect . The rights to indemnification and advancement of expenses
provided in this Article shall be applicable to acts or omissions that occurred prior to the adoption of this Article, shall
continue as to any party during the period such party serves in any one or more of the capacities covered by this
Article, shall continue thereafter so long as the party may be subject to any possible proceeding by reason of the fact
that he served in any one or more of the capacities covered by this Article, and shall inure to the benefit of the estate
and personal representatives of each such person. Any repeal or modification of this Article or of any Section or
provision hereof shall not affect any rights or obligations then existing. All rights to indemnification under this Article
shall be deemed to be provided by a contract between the corporation and each party covered hereby.
Section 6.13
Severability . If any provision of this Article shall be held to be invalid, illegal or
unenforceable for any reason whatsoever (a) the validity, legality and enforceability of the remaining provisions of this
Article (including without limitation, all portions of any Sections of this Article containing any such provision held to
be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be
affected or impaired thereby, and (b) to the fullest extent possible, the provisions of this Article (including, without
limitation, all portions of any Section of this Article containing any
18
such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable)
shall be construed so as to give effect to the intent of this Article that each party covered hereby is entitled to the fullest
protection permitted by law.
ARTICLE VII
Miscellaneous
Section 7.01
Voting of Securities by the Corporation . Unless otherwise provided by resolution
of the board of directors, on behalf of the corporation the chairman of the board or the president or the vice-chairman or
any vice-president shall attend in person or by substitute appointed by him, or shall execute written instruments
appointing a proxy or proxies to represent the corporation at, all meetings of the shareholders of any other corporation,
association or other entity in which the corporation holds any stock or other securities, and may execute written waivers
of notice with respect to any such meetings. At all such meetings and otherwise, the president or any vice-president, in
person or by substitute or proxy as aforesaid, may vote the stock or other securities so held by the corporation and may
execute written consents and any other instruments with respect to such stock or securities and may exercise any and all
rights and powers incident to the ownership of said stock or securities, subject, however, to the instructions, if any, of
the board of directors.
Section 7.02
Seal . The corporate seal of the corporation shall be in such form as adopted by the
board of directors, and any officer of the corporation may, when and as required, affix or impress the seal, or a
facsimile thereof, to or on any instrument or document of the corporation.
Section 7.03
Fiscal Year . The fiscal year of the corporation shall be as established by the board
of directors.
Section 7.04
Amendments . The directors may amend or repeal these bylaws unless the articles
of incorporation reserve such power exclusively to the shareholders in whole or in part or the shareholders, in
amending or repealing a particular bylaw provision, provide expressly that the directors may not amend or repeal such
bylaw. The shareholders may amend or repeal the bylaws even though the bylaws may also be amended or repealed by
the directors.
(END)
19
EXHIBIT 21.1
THE SUBSIDIARIES OF THE REGISTRANT
Name
State of Incorporation
UQM Properties, Inc.
Colorado
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have issued our report dated May 29 , 2014, with respect to the consolidated financial statements included
in the Annual Report of UQM Technologies, Inc. on Form 10-K for the year ended March 31, 2014. We
hereby consent to the incorporation by reference of said report in the Registration Statements of UQM
Technologies, Inc. on Form S-3 ( File No. 333-193305 ) and on Forms S-8 (File No. 333-129251, 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 29 , 2014
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 29 , 201 4
/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 29 , 201 4
/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
4 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 29 , 201 4