Table of Contents
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 December 31, 2017
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
OR
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 American
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, a smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company”
in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ]
Non-accelerated filer [ ] (Do not check if a smaller reporting company)
Accelerated filer [ ]
Smaller reporting company [X]
Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
The aggregate market value of the registrant’s common stock (“Common Stock”) held by non-affiliates as of June 30, 2017, based on the closing price of the
Common Stock as reported by the NYSE American on such date was approximately $41,294,661. As of March 18, 2018, there were 54,126,647 shares of the
registrant’s Common Stock outstanding.
Document
Portions of the Proxy Statement for the 2018 Annual
Meeting of Shareholders.
Parts Into Which Incorporated
Part III
DOCUMENTS INCORPORATED BY REFERENCE
Table of Contents
Table of Contents
PART I
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Item 2.
Properties
Item 3.
Legal Proceedings
Item 4.
Mine Safety Disclosure
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchase of Equity
Securities
Item 6.
Selected Financial Data
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Financial Statements and Supplementary Data
Reports of Independent Registered Public Accounting Firms
Consolidated Balance Sheets as of December 31, 2017 and December 31, 2016
Consolidated Statements of Operations for the Year Ended December 31, 2017 and 2016 (unaudited),
Three Months Ended March 31, 2016 (unaudited) and Nine Months Ended December 31, 2016.
Consolidated Statements of Stockholders’ Equity for the Year Ended December 31, 2017 and Nine
Months Ended December 31, 2016
Consolidated Statements of Cash Flows for the Year Ended December 31, 2017 and 2016 (unaudited),
Three Months Ended March 31, 2016 (unaudited) and Nine Months Ended December 31, 2016.
Notes to Consolidated Financial Statements
Item 9.
Change In and Disagreements with Independent Accountants on Accounting and Financial Disclosure
Item 9A.
Controls and Procedures
Item 9B.
Other Information
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
Item 11.
Executive Compensation
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
PART IV
Item 15.
Exhibits and Financial Statement Schedules
Item 16.
Form 10-K Summary
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BUSINESS
PART I
This
Report
contains
statements
that
constitute
“forward-looking
statements”
within
the
meaning
of
Section
27A
of
the
Securities
Act
and
Section
21E
of
the
Securities
Exchange
Act.
These
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,
the
sufficiency
of
our
cash
and
other
resources
to
support
our
continued
operations
and
liquidity
needs
over
the
coming
twelve
months,
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.
ITEM 1.
Overview
UQM Technologies, Inc., (“UQM”, “Company”, “we”, “our”, or “us”) develops, manufactures and sells power dense, high
efficiency electric motors, generators, power electronic controllers and fuel cell compressors for the commercial truck, bus,
automotive, marine, and industrial markets. Our 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 generators with power ratings from 50 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%.
Our management team has significant experience in the automotive and electric propulsion industry with critical experience in
state-of-the-art design and high quality production. We are ISO/TS 16949 certified, the highest level of quality certification in the
automotive supplier industry, and ISO 14001 certified, the highest environmental standards. We have an approximately 130,000
square foot combined headquarters and manufacturing facility located in Longmont, Colorado. We were incorporated in 1967 as
a Colorado corporation.
In August 2017, we entered into a definitive stock purchase agreement (“Agreement”) with China National Heavy Duty Truck
Group Co., Ltd. through its wholly owned subsidiary, Sinotruk (BVI) Limited (collectively, “CNHTC”), the parent company of
Sinotruk (Hong Kong) Limited (“Sinotruk”), a leading Chinese commercial vehicle manufacturer, and also announced that UQM
and CNHTC plan to create a joint venture (“JV”) to manufacture and sell electric propulsion systems for commercial vehicles and
other vehicles in China. CNHTC has headquarters in Jinan, China. CNHTC’s investment is expected to occur in two
stages. First, CNHTC will acquire newly issued common shares of UQM, resulting in a 9.9% ownership interest of common
shares issued and outstanding. This stage was completed on September 25, 2017, with net proceeds to UQM of $5.1 million.
Second, CNHTC will acquire additional newly issued common shares resulting in CNHTC owning a total of 34% of UQM’s
issued and outstanding common stock on a fully diluted basis. The purchase price is $0.95 per share for each stage, which
represents a 15% premium over the 30-day closing price average for the period ending on the last trading date before the
execution date of the Agreement. If completed, the total transaction will bring approximately $28.3 million in cash to UQM. The
terms of the Agreement were unanimously approved by the boards of directors of both companies. UQM shareholders will
continue to hold their shares in UQM, and UQM stock will continue to be traded on the NYSE American.
Closing of the second stage investment is subject to certain closing conditions, including the approval by the Committee on
Foreign Investment in the United States (“CFIUS”) under Section 721 of the Defense Production Act of 1950, as amended, as it
would result in a material investment by a foreign-controlled entity in UQM. On March 5, 2018, we announced that UQM, along
with CNHTC, have decided to withdraw their joint application to CFIUS for the approval of the second stage investment
provided. Based upon the request of CFIUS, the application has been withdrawn to allow
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for more time to consider modifications to the business relationship of UQM and CNHTC that CFIUS would find
acceptable. Upon completion of this re-evaluation, both parties intend to resubmit the application to CFIUS for approval.
The Market
The global electrified vehicle market is an emerging market with high growth potential being driven by several factors. In China,
the market for electric vehicles is driven by strong government pressure to deal with the environmental concerns in its major
cities. The government has a number of initiatives to encourage electric vehicle market growth including mandates for purchases
of New Energy Vehicles by municipalities, incentives and other tools. We are seeing strong demand for electric buses across
several cities and regions. We are also seeing demand for electric buses, delivery vans, trucks and taxi fleets across several cities
and regions in China. As China is the world’s largest market for electric vehicles, we believe that our presence in China is critical
to our long-term success. Therefore, we continue to devote significant time and resources to business development efforts in
China, including the new relationship with CNHTC.
In other global markets, including the United States, the drivers for growth in the electric commercial truck and bus market
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 powertrain 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 growing 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 (“CAFE”) standards in the United States are expected to accelerate further electrification of
vehicle fleets.
Many studies have been conducted indicating the potential growth for electric vehicles over the next several years. For example,
Morgan Stanley Research has forecasted that almost 20 million electric vehicles will be sold by 2025, as shown in the chart
below:
There are several economic drivers that support this anticipated growth of electric vehicles. First, and perhaps most important,
battery costs, which comprise the single largest component cost in any electric vehicle, have declined dramatically. In 2010, the
cost per kW- hour of a lithium-ion battery was about $1,000; in 2015, this cost had fallen to about $200, and is projected to
continue to fall. This decline in battery costs has spurred higher demand. Second, published studies have shown that ownership
costs of electric vehicles are significantly lower than diesel powered vehicles. A diesel bus, for example, has a range of four
miles per gallon; an electric bus has the equivalent of twenty-one miles per gallon. Third, maintenance costs of electric vehicles
are significantly lower than diesel powered vehicles.
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The same studies showed that a diesel bus costs about one dollar per mile to maintain; the maintenance cost for an electric bus
was about six cents per mile. All of these economic benefits are helping to drive the market for electric vehicles.
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, beginning on January 1, 2017, subsidies for electric buses varied depending on the efficiency performance of the vehicle,
and could reach a maximum subsidy of $120,000 per bus. This bodes well for the use of our propulsion systems since they are
highly efficient. In Europe, a majority of European Union member states provide tax incentives for electrically chargeable
passenger vehicles, with Norway providing the most generous package of subsidies totaling almost EUR 17,000 (approximately
$19,000). The government of India has announced its desire that plug-in vehicles would represent 30 percent of new sales by
2030.
We believe that the trend toward increasing electrification of vehicles coupled with the government subsidies offered world-wide
and lower battery and vehicle operating costs 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, and other applications. 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 commercial bus and truck applications and heavier duty marine and other
applications. In 2016, we introduced the PowerPhase DT, a full electric drivetrain including the motor, inverter, transmission
and transmission control unit. 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 non-automotive markets including auxiliary systems
and motor and controller systems for aircraft. Further, we manufacture fuel cell compressor systems for the fuel cell business.
®
Our products are used in the following applications:
·
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. We supply electric propulsion
systems to Proterra, Inc., a developer and manufacturer of all-electric composite transit buses, under a multi-year supply
agreement. We have also provided electric propulsion systems for customers in China, South America, Europe and
Japan.
· Commercial Trucks, Vans and Shuttles - We supply electric propulsion systems to Zenith Motors, LLC for their electric
shuttle vans and have in the past supplied Electric Vehicles International (“EVI”) for their all-electric medium-duty
delivery trucks.
·
Fuel Cell Compressors – We manufacture fuel cell compressors which are an integral component of hydrogen powered
fuel cell vehicles designed for light duty automotive and commercial bus applications for 30kW to 150kW fuel cell
stacks.
· Aircraft HVAC – We provide small motors and controllers for aircraft HVAC usage to AirComm.
· Mining vehicles – In January 2015, we announced a long-term supply agreement with the KESHI Group, a Chinese
market leader that manufactures vehicles for the mining industry in China. KESHI will manufacture under license
explosion proof electric mining vehicles using UQM’s designs and parts supplied by UQM to KESHI. This first phase is
for the vehicles that move the coal from the mines. Future stages could also include vehicles that move people in and
out of the mines and other potential applications.
· Airplane tugs – In January 2016, we announced that Kalmar Motor AB in Sweden had successfully passed vehicle trials
with major airlines and plans on beginning production orders by mid-2016 using our heavy-duty
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commercial traction electric motor/controller system, for their TBL50 airplane tugs. Ground handling tugs play a vital
role at airports by enabling large aircraft to be moved from their hangars to the passenger gate, as well as for pushback
and other taxiing functions on the runway.
· Marine –We supply UQM motors and controllers used in a variety of marine applications and for a variety of
customers. We believe the marine market could be a growing sector of electrified vehicles.
· Automobiles – Government mandates for fuel economy and clean air emissions are accelerating the demand for electric
passenger cars. In the United States, for example, CAFE standards will increase the average fuel economy of each
manufacturer’s passenger car and light truck model offerings to 35.5 miles per gallon in 2017 and 54.5 miles per gallon
by 2025. We have in the past provided electric propulsion systems to many original equipment manufacturers (“OEMs”)
for testing and product development.
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 electric motor and controller business.
·
State-of-the-art manufacturing facility – Our headquarters and manufacturing plant are located in an approximately
130,000 square foot facility. We have designed, installed and qualified volume production lines for our motors and their
related electronic controllers.
· Manufacturing capacity – We currently have the capacity to build motor/controller systems, in quantities sufficient to
meet demands of our current and future customers for the foreseeable future.
· Highest production quality standards – Our Company is certified under the ISO/TS 16949 standards, the highest level of
automotive quality standards in the industry and ISO 14001, the highest environmental standards.
·
·
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 develop next generation products to achieve
improved performance and efficiency, smaller package sizes and lower production costs.
Presence in China – The signing of the Agreement with CNHTC gives us the ability, through the joint venture, to locally
manufacture our products in the largest market in the world for electric vehicles. We have hired a vice president of Asia
operations and two technical support personnel in China so far and have created UQM Technologies Asia Limited as the
legal entity for our Asia headquarters operations.
Products
We offer a full range of 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
220(+) : A high continuous power version designed for heavy duty trucks and buses that requires
additional power for higher GVW or more challenging hilly terrain, this product delivers 25% higher continuous
performance compared to the PowerPhase HD 220.
®
PowerPhase HD 950T : A high torque version designed for commercial vehicle that requires additional torque where
gear ratios are limited, this product delivers especially high torque performance compared to the PowerPhase HD 220.
®
®
PowerPhase HD 250 : A high voltage version of the product that produces high torque and power, designed for buses
as well as medium and heavy duty trucks.
®
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·
·
·
PowerPhase DT
system, an Eaton 2-speed transmission, and a Pi Innova transmission control unit.
: A full electric drivetrain, this system includes our PowerPhase HD 220/250 motor and inverter
®
®
PowerPhase Pro 100 : Designed for passenger vehicles and light duty truck or van applications.
®
PowerPhase Pro 135 : The PP 135 offers higher performance for those applications that require it versus 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, an integrated motor/controller for aircraft air conditioning
compressors, and an integrated motor/controller for aircraft air conditioning condenser fans.
· Custom Solutions : We offer variations of the above motors in semi-custom configurations as well as fully customized
solutions to meet individual customer specifications.
· R340 and R410 Fuel Cell Compressor Systems : These fuel cell compressors are used in hydrogen powered fuel cell
vehicles.
Product Development Activities
®
and PowerPhaseHD
We continue to develop new variations of our product lineup to meet 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 systems. The resulting products from this development
effort are expected to launch in the next two years. Development targets include a substantial size and cost reduction of the motor
controllers. Adopting new generation components and control strategies are also elements of this development. Target
applications include automotive and light commercial truck, medium and heavy-duty truck, and bus, markets.
®
In September, 2016, we completed our work on 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 has been awarded to protect this innovation. We had 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 provided $3.0 million of funding for this program and the Company provided $1.0 million of cost-share contribution. This
award was announced in August 2011.
In January 2017, we announced a development agreement with Meritor, Inc. to jointly develop and supply full electric axle
systems (E-axles) targeting the medium and heavy-duty commercial vehicle market. This next-generation technology could
accelerate market demand over the next few years due to improved component packaging, lower costs from integration, and
increased vehicle performance.
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Excess Inventory
®
We re-evaluated the carrying value of the PowerPhase Pro
inventory during 2016 and as of December 31, 2016. A key factor
in our analysis during the nine months ended December 31, 2016 was that in October of 2016, our customer ITL had informed us
of their intention to purchase in cash a significant portion of the PowerPhase Pro
inventory, which did not happen. Because of
the long delays in this customer’s product launch and the lack of a significant cash payment towards this inventory, we
determined that, out of a total of $7.6 million, approximately $6.8 million of this inventory should be reserved as excess inventory
and we took a charge for this amount against this inventory as of December 31, 2016. At that time, we had purchase orders from
existing customers to acquire the remaining balance of the PowerPhase Pro inventory. We also reserved approximately $350,000
for other obsolete inventory as of December 31, 2016. As of December 31, 2017, no additional reserve was required.
®
®
Competition
All of the markets in which we operate are highly competitive and are characterized by changes due to technological advances
that could render existing technologies and products obsolete, although we are not currently aware of any such advances that
could render our current product portfolio 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 the following sources: 1) the sale of products designed, engineered and manufactured by us primarily
to OEMs, Tier 1 suppliers of OEMs, and vehicle integrators; 2) funded contract research and development services performed for
strategic partners, customers, and in the past from the U.S. government, directed toward either the advancement of our proprietary
technology portfolio or the application of our proprietary technology to customers’ products; and 3) after-market services and
remanufacture.
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 the fiscal year ended
December 31, 2017, two customers individually comprised 10% or more of our total revenues. Any loss of business with these
customers 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. In the fiscal year ended December 31, 2017, one supplier
comprised 10% or more of our total purchases. 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.
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Financial Information about Geographic Areas
The following summarizes total revenue by geographic area:
United States
Foreign Countries
Year ended December 31,
2017
Nine months ended
December 31,
2016
$
$
4,009,941 $
3,768,808
7,778,749 $
3,101,153
1,021,842
4,122,995
Classification of geographic area is determined based upon the country where the purchase transaction originated.
U.S. Government Contracts
We had a $4.0 million program with the DOE to develop non-rare-earth magnet electric motors for use in electric and hybrid
vehicles. This grant ended in September 2016. The DOE provided $3.0 million of funding for this program and the Company
provided $1.0 million of cost-share contribution. The objective of the program was 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. We have been
granted a U.S. patent for our electric and hybrid electric vehicle motor design using non-rare earth magnets.
Backlog
Our order backlog for products at January 31, 2018 was approximately $2.4 million versus $4.9 million at January 31, 2017.
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 $200,000 at January 31, 2018 versus $0 at January 31, 2017. Substantially all of the backlog
amounts at January 31, 2018 and 2017 are subject to amendment, modification or cancellation. We expect to ship motor and
controller backlog products over the next twelve 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 treated 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 and protection 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.
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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.
Employee and Labor Relations
As of January 31, 2018, we had 51 employees, all of whom are full-time employees. We have entered into employment
agreements with our executive officers. The employment agreements expire on December 31, 2019. 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 2017 Annual Report on Form
10-K, 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 Transition Report on Form 10-KT, 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.
ITEM 1A. RISK FACTORS
We
operate
in
a
challenging
and
changing
environment
that
involves
numerous
known
and
unknown
risks
and
uncertainties
that
could
materially
affect
our
operations.
The
risks,
uncertainties
and
other
factors
set
forth
below
may
cause
our
actual
results,
performances
or
achievements
to
be
materially
different
from
those
expressed
or
implied
by
our
forward-looking
statements.
If
any
of
these
risks
or
events
occur,
our
business,
financial
condition
or
results
of
operations
may
be
adversely
affected.
We have incurred significant losses and may continue to do so.
We have incurred significant net losses as shown in the following tables:
Year ended December 31,
Three
months ended March
31,
2017
2016
(Unaudited)
2016
(Unaudited)
Nine
months ended December 31,
2016
Net loss
$
4,778,316 $
13,948,426 $
930,918 $
13,017,508
We determined in 2016 that most of our PowerPhase Pro® inventory was impaired. As a result, the net loss for the year ended
December 31, 2016 (unaudited) and nine months ended December 31, 2016 includes a reserve for excess inventory of $6,817,010
related to that inventory and a reserve of $349,906 for other obsolete inventory.
As of December 31, 2017, we had an accumulated deficit of $124,671,250.
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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 year ended December 31, 2017 was $4,778,316 versus a net loss for the nine months ended December 31,
2016 of $13,017,508 (which includes a reserve for excess and obsolete inventory of $7,166,916). At December 31, 2017, our
cash, cash equivalents and restricted cash totaled $6,809,325. We expect our losses to continue for the foreseeable future. Our
existing cash resources and cash generated from our revenues, are expected to be sufficient to complete our business plan for at
least the next twelve months. Should those resources be insufficient, we may need to renegotiate existing debt, secure additional
debt or equity funding, which may not be available on terms acceptable to us, if at all.
We may not be able to sell the remaining PowerPhase Pro
this inventory carried on our books.
®
inventory and may recognize additional loss on the value of
Following the write-down of the value of inventory of the PowerPhase Pro systems we still have aged inventory of $739,262 of
PowerPhase Pro systems. Based upon anticipated customer demand, we continue to believe there is still a market for this
product. If customers do not purchase the amount of inventory they have ordered or we are unable to find new customers for this
inventory, it may become obsolete, causing an adverse effect on our results of operations.
®
®
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. We cannot predict how and the extent to
which the recent substantial decrease of oil prices will affect the domestic interest in electric and hybrid vehicles. 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 our introduction of new products that have limited testing in the marketplace. We have made
substantial investments in manufacturing facilities and equipment, production and application engineering, among other things, to
increase our production capacity in order to capitalize on the anticipated expansion in demand for electric propulsion systems and
generators in the commercial truck, bus and automobile markets. We cannot be 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.
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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 CODA 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 December 31, 2017 totaled $3,838,092, all of
which had been written off as uncollectible in prior years. In addition, CODA was 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
CODA supply agreement, if any.
All funding from our DOE Grant to develop non-rare –earth magnet electric motors ended as of September 30, 2016 when
the Grant expired.
Funds from the DOE Grant were very useful in supporting our growth initiatives and reducing our losses over the past several
years. While we are pursuing other grant opportunities, there can be no assurance that we will be successful in obtaining other
government grants.
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.
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Our customer arrangements generally are non-exclusive, have no long-term volume commitments and are typically 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 its intent to retain more of this
mineral for China use, rather than exporting it. During calendar year 2011, for example, 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
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resources for marketing their products. For these reasons, potential customers may choose to purchase electric motors from our
competitors rather than from us.
Changes in environmental policies could hurt the market for our products.
The market for electric and other alternative fuel vehicles and equipment and the demand for our products are influenced, to a
degree, by federal, state and local regulations relating to air quality, greenhouse gases and pollutants. These laws and regulations
may change, which could result in transportation or equipment manufacturers abandoning or delaying their interest in electric or
hybrid electric vehicles or equipment. In addition, a failure by authorities to enforce current laws and regulations or to adopt
additional environmental laws or regulations could limit the demand for our products.
Although many governments have identified as a significant priority the development of alternative energy sources, governments
may change their priorities, and any change they make could materially affect our revenue or the development of our products.
If we are unable to protect our patents and other proprietary technology, we will be unable to prevent third parties from
using our technology, which would impair our competitiveness and ability to commercialize our products. In addition, the
cost of enforcing our proprietary rights may be expensive and result in increased losses.
Our ability to compete effectively against other companies in our industry will depend, in part, on our ability to protect our
proprietary technology. Although we have attempted to safeguard and maintain our proprietary rights, we do not know whether
we have been or will be successful in doing so. We have historically pursued patent protection in the United States and a limited
number of foreign countries where we believe significant markets for our products exist or where potentially significant
competitors have operations. It is possible that a substantial market could develop in a country where we have not received patent
protection and under such circumstances our proprietary products would not be afforded legal protection in these markets.
Further, our competitors may independently develop or patent technologies that are substantially equivalent or superior to ours.
We cannot assure that additional patents will be issued to us or, if they are issued, as to the scope of their protection. Patents
granted may not provide meaningful protection from competitors. Even if a competitor's products were to infringe patents owned
by us, it would be costly for us to pursue our rights in an enforcement action, it would divert funds and resources which otherwise
could be used in our operations and we may not be successful in enforcing our intellectual property rights. In addition, effective
patent, trademark, service mark, copyright and trade secret protection may not be available in every country where we may
operate or sell our products in the future. If third parties assert technology infringement claims against us, the defense of the
claims could involve significant legal costs and require our management to divert time and attention from our business operations.
If we are unsuccessful in defending any claims of infringement, we may be forced to obtain licenses or to pay royalties to
continue to use our technology. We may not be able to obtain any necessary licenses on commercially reasonable terms or at all.
If we fail to obtain necessary licenses or other rights, or if these licenses are costly, our results of operations may suffer either
from reductions in revenues through our inability to serve customers or from increases in costs to license third-party technologies.
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
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Table of Contents
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.
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.
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.
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Threats to information technology systems associated with cybersecurity risks and cyber incidents or attacks continue to grow.
Cybersecurity attacks could include, but are not limited to, malicious software, viruses, attempts to gain unauthorized access,
whether through malfeasance or error, either from within or outside of our organization, to our data or that of our customers or
our customers’ customers which may be in our possession, and the unauthorized release, corruption or loss of the data, loss of the
intellectual property, theft of the proprietary or licensed technology, whether ours, that of our customers or their customers, loss
or damage to our data delivery systems, other electronic security breaches that could lead to disruptions in our critical systems,
and increased costs to prevent, respond to or mitigate cybersecurity events. It is possible that our business, financial and other
systems could be compromised, which might not be noticed for some period of time. Although we utilize various procedures and
controls to mitigate our exposure to such risk, cybersecurity attacks are evolving and unpredictable and we cannot guarantee that
any risk prevention measures implemented will be successful. The occurrence of such an attack could lead to financial losses and
have a material adverse effect on our reputation, business, financial condition and results of operations.
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;
investor perception of our industry or our prospects;
insider selling or buying;
demand for our common stock; and
general technological or economic trends.
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 become 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.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
We own our offices and manufacturing facility and believe the facility to be well maintained, adequately insured and suitable for
its present and intended uses. Information concerning our facility as of December 31, 2017 is set forth in the table below:
Location
Square Feet Expiration Date of Lease
Ownership or
Longmont, Colorado
129,304
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.
14
Table of Contents
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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 American under the symbol UQM. The high and low trade prices, by fiscal quarter, as
reported by the NYSE American stock exchange for the last two fiscal years are as follows:
Year Ended December 31, 2017
High
Low
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Year Ended December 31, 2016
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
$
$
$
$
$
$
$
$
1.66
1.34
0.96
0.53
High
0.62
0.69
0.90
0.67
$
$
$
$
$
$
$
$
1.10
0.73
0.46
0.43
Low
0.42
0.54
0.55
0.43
On March 16, 2018 the closing price of our common stock, as reported on the NYSE American, was $1.40 per share and there
were 516 active holders of record of our common stock. Because many of our shares of common stock are held by brokers and
other institutions on behalf of shareholders, we are unable to estimate the total number of shareholders represented by these
record holders.
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.
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PERFORMANCE GRAPH
1
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 Components & Equipment Index, and those companies
comprising the S&P 500 Index for the five year period from March 31, 2013 through December 31, 2017:
UQM Technologies, Inc.
S&P 500
S&P Electrical Components & Equipment
3/13
100
100
100
3/14
356.76
121.86
125.16
3/15
148.65
137.37
115.83
3/16
77.31
139.82
113.41
12/16
2
58.11
154.46
121.22
12/17
187.84
188.18
154.32
* $100 invested on 3/31/13 in stock or index, including reinvestment of dividends Fiscal year ending December 31.
Copyright 2018 S&P Global Market Intelligence. All rights reserved.
1
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.
2
The Company changed its fiscal year end from March to December in 2016.
16
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ITEM 6. SELECTED FINANCIAL DATA
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
Product sales
Contract services revenue
Loss from operations
Net loss
Net loss per common share - basic and diluted
Total assets
Long-term obligations
Year Ended December 31,
2016
2017
(Unaudited)
7,162,456
616,293
(5,284,502)
4,710,654
$
$
916,629
$ (13,945,725)
(4,778,316)
$ (13,948,426)
(0.10)
$
(0.29)
Three months
ended
March 31,
2016
(Unaudited)
1,218,795
285,493
(940,425)
$
$
$
Nine months
ended
December 31,
2016
3,491,859
$
$
631,136
$ (13,005,300)
$
$
(930,918)
$ (13,017,508)
(0.02)
$
(0.27)
15,134,176
$ 11,272,750
$ 23,350,903
$
11,272,750
3,241,117
$
141,667
$
288,889
$
141,667
$
$
$
$
$
$
$
Cash dividend declared per common share
—
—
—
—
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ITEM 7 . MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Introduction
UQM develops, manufactures and sells power dense, high efficiency electric motors, generators, power electronic controllers and
fuel cell compressors for the commercial truck, bus, automotive, marine, and industrial markets. We generate revenue from two
principal activities: 1) the sale of motors, generators, electronic controls, and fuel cell compressors; 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 service
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, military, and industrial 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 are certified as an ISO/TS 16949 quality supplier, which is the highest level of quality standards in
the automotive industry, and we are ISO 14001 certified, meeting the highest environmental standards. 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 and bank financing resources to fund our operations for at least
the next twelve months.
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, particularly in China.
· We hired our first employees in China in 2016. As China represents the largest market in the world for electric vehicles,
our presence in that market is critical to our long-term success.
· On August 28, 2017, we entered into a definitive stock purchase agreement (“Agreement”) with China National Heavy
Duty Truck Group Co., Ltd. through its wholly owned subsidiary, Sinotruk (BVI) Limited (collectively, “CNHTC”), the
parent company of Sinotruk (Hong Kong) Limited (“Sinotruk”), a leading Chinese commercial vehicle manufacturer,
and also announced that UQM and CNHTC plan to create a joint venture to manufacture and sell electric propulsion
systems for commercial vehicles and other vehicles in China, the largest market in the world for electric vehicles..
· 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 leading 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.
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· We participate in trade show events globally to demonstrate our products and engage with users of electric motor
technology.
· We actively involve all functional groups within the Company to support the needs of our customers.
We believe that the successful execution of these activities will lead us to secure volume production commitments from
customers, so that our operations will become cash flow positive and ultimately profitable.
Recent Events
In April 2017, we announced a significant purchase order from a major Chinese OEM for delivery of our R340 fuel cell
compressor systems. The purchase order was valued at $2.2 million. Shipments were completed by fall of 2017. These
compressor modules are a key component in hydrogen powered fuel cell systems.
In August 2017, we entered into a definitive stock purchase agreement (“Agreement”) with China National Heavy Duty Truck
Group Co., Ltd. through its wholly owned subsidiary, Sinotruk (BVI) Limited (collectively, “CNHTC”), the parent company of
Sinotruk (Hong Kong) Limited (“Sinotruk”), a leading Chinese commercial vehicle manufacturer, and also announced that UQM
and CNHTC plan to create a joint venture (“JV”) to manufacture and sell electric propulsion systems for commercial vehicles and
other vehicles in China. CNHTC has headquarters in Jinan, China. CNHTC’s investment is expected to occur in two
stages. First, CNHTC will acquire newly issued common shares of UQM, resulting in a 9.9% ownership interest of common
shares issued and outstanding. This stage was completed on September 25, 2017, with net proceeds to UQM of $5.1 million.
Second, CNHTC will acquire additional newly issued common shares resulting in CNHTC owning a total of 34% of UQM’s
issued and outstanding common stock on a fully diluted basis. The purchase price is $0.95 per share for each stage, which
represents a 15% premium over the 30-day closing price average for the period ending on the last trading date before the
execution date of the Agreement. If completed, the total transaction will bring approximately $28.3 million in cash to UQM. The
terms of the Agreement were unanimously approved by the boards of directors of both companies. UQM shareholders will
continue to hold their shares in UQM, and UQM stock will continue to be traded on the NYSE American.
Closing of the second stage investment is subject to certain closing conditions, including the approval by the Committee on
Foreign Investment in the United States (“CFIUS”) under Section 721 of the Defense Production Act of 1950, as amended, as it
would result in a material investment by a foreign-controlled entity in UQM. On March 5, 2018, we announced that UQM, along
with CNHTC, have decided to withdraw their joint application to CFIUS for the approval of the second stage investment
provided. Based upon the request of CFIUS, the application has been withdrawn to allow for more time to consider modifications
to the business relationship of UQM and CNHTC that CFIUS would find acceptable. Upon completion of this re-evaluation, both
parties intend to resubmit the application to CFIUS for approval.
In September 2017, we announced that Sinotruk had made an initial purchase of UQM PowerPhase® DT systems for
implementation and evaluation in their commercial vehicles. This is the first step towards the long term strategy of utilizing UQM
electric drive products across Sinotruk’s portfolio of commercial vehicles signaled the beginning of the commercial partnership
with UQM.
In November 2017, we announced we had signed a Joint Venture Agreement (“JVA”) with CNHTC and Sinotruk Global Village
Investment Limited, a Hong Kong based limited liability company owned by CNHTC. Under the JVA, we will acquire a 25%
ownership share of the joint venture with CNHTC and its affiliate collectively acquiring a 75% share. We have the option to
increase our ownership position to 33% in the next one to three years. The initial total capital of the joint venture will be $24
million, with UQM contributing $6 million in three installments during the next year. Our funding requirement is contingent on
the closing of the second stage investment with CNHTC in accord with the terms of the Agreement.
The JV will be named Sinotruk Qingdao Zhongqi New Energy Automobile Co., Ltd. and will be headquartered in the city of
Qingdao, China. The purpose of the JV will be to serve the China market for commercial vehicle E-drives and the global market
for E-axles. The annual production capacity which the JV intends to establish is 50,000 systems, and it is anticipated to
commence commercial operations in 2019.
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In January 2018, we announced the first significant purchase order from KESHI, a major Chinese manufacturer of commercial
mining vehicles. The purchase order is for explosion-proof E-drive systems and was valued at $1.2 million. Shipments are
expected to occur during 2018. While we signed a cooperation agreement with KESHI in 2015, KESHI’s production launch was
delayed due to the market conditions, but now has made a major commitment to this new energy market application. KESHI
plans to move forward with their strategy to do final assembly and test in China under our current cooperation agreement for
explosion-proof electric propulsion systems in China.
Inventory Matters
systems under a ten-year supply agreement with CODA
In 2011, we began manufacturing and delivering PowerPhase Pro
Automotive. As a result of substantial uncertainty regarding CODA’s financial ability, in late 2012 we recorded an allowance for
doubtful accounts for CODA receivables and stopped manufacturing products for CODA. On May 1, 2013, CODA filed for
reorganization under the U.S. Bankruptcy Code.
®
At the time of its bankruptcy, we had on hand approximately $8.2 million of PowerPhase Pro inventory originally purchased and
manufactured for CODA. We believe the PowerPhase Pro
system is still the appropriate size for many medium-duty truck,
marine, passenger vehicle and stationary power applications, and this inventory continues to be sold to a number of customers at
prices greater than our costs, although the rate of sales has been very slow. Since CODA’s bankruptcy, we have analyzed sales
forecasts of current and potential customers for this product, including the forecasts anticipated in the long-term supply agreement
with ITL that was signed in October 2015, although at lower margins, and believed that there was sufficient market demand to
consume the balance of the PowerPhase Pro
inventory on hand at fiscal year ended March 31, 2016. So as of the fiscal year
ended March 31, 2016, no impairment of this inventory was recorded. At December 31, 2016, we had approximately $7.6 million
of PowerPhase Pro inventory originally purchased and manufactured for CODA.
®
®
®
®
®
We re-evaluated the carrying value of the PowerPhase Pro
inventory during 2016 and as of December 31, 2016. A key factor
in our analysis during the nine months ended December 31, 2016 was that in October of 2016, our customer ITL had informed us
of their intention to purchase in cash a significant portion of the PowerPhase Pro
inventory, which did not happen. Because of
the long delays in this customer’s product launch and the lack of a significant cash payment towards this inventory, we
determined that, out of a total of $7.6 million, approximately $6.8 million of this inventory should be reserved as excess inventory
and we took a charge for this amount against this inventory as of December 31, 2016. At that time, we had purchase orders from
existing customers to acquire the remaining balance of the PowerPhase Pro inventory. We also reserved approximately $350,000
for other obsolete inventory as of December 31, 2016. As of December 31, 2017, no additional reserve was required.
®
®
Financial Condition
Cash and cash equivalents at December 31, 2017 were $6,309,269 and working capital was $7,762,363 compared with
$2,100,089 and $3,173,848, respectively, at December 31, 2016. The increase in cash and cash equivalents was the result of
operating losses offset by the sale of vacant land (net proceeds of $1.4 million) and closing of the first stage investment of $5.1
million related to the Agreement with CNHTC. Working capital increased in year ending December 31, 2017 due to the increase
in cash as previously noted.
Restricted cash (current and long-term) at December 31, 2017 was $500,056 compared to zero in the prior year. The increase in
restricted cash is related to the securing a line of credit with a bank in March 2017. The cash is reserved for payment of the
interest on the line of credit.
Accounts receivable decreased $339,523 to $823,793 at December 31, 2017 from $1,163,316 at December 31, 2016. The
decrease is primarily due to the mix of prepaid versus credit term customers for our December 2017 sales. Our sales are
conducted through acceptance of customer purchase orders or in some cases through supply agreements. For credit qualified
customers, our standard terms are net 30 days. For international customers and customers without an adequate credit rating or
history, our typical terms are irrevocable letter of credit or cash payment in advance of delivery. At both December 31, 2017 and
2016, we had no allowance for doubtful accounts receivable.
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Costs and estimated earnings on uncompleted contracts decreased to zero at December 31, 2017 versus $29,917 at December 31,
2016. The decrease is due to the timing of billings on certain contracts in process in the respective fiscal year ends.
Total inventories increased $591,625 to $2,341,360 at December 31, 2017 compared to $1,749,735 at December 31, 2016,
reflecting an increase in raw materials and work-in-process for confirmed sales orders to be sold to customers in 2018.
Prepaid expenses and other current assets decreased to $233,566 at December 31, 2017 from $259,682 at December 31, 2016,
primarily due to a reduction in vendor prepayments.
We invested $83,838 for the acquisition of property and equipment during the year ended December 31, 2017 versus $47,954
during the nine months ended December 31, 2016. The increase in capital expenditures is primarily attributable to increased
levels of investments in production tooling and equipment during the year ended December 31, 2017.
Patent costs increased to $222,461 at December 31, 2017 compared to $213,326 at December 31, 2016, primarily due to new
patent applications being submitted for approval which was partially offset by the amortization of capitalized patent costs.
Trademark costs decreased to $90,460 at December 31, 2017 compared to $94,955 at December 31, 2016 due to the amortization
of capitalized trademark costs.
Accounts payable increased $138,925 to $948,875 at December 31, 2017 from $809,950 at December 31, 2016, primarily due to
the timing of vendor payments.
Other current liabilities decreased $345,158 to $973,783 at December 31, 2017 from $1,318,941 at December 31, 2016. The
decrease is primarily attributable to the payment of accrued executive compensation during 2017 offset by an increase in accrued
payroll and employee benefits, warranty costs, and unearned revenue at December 31, 2017.
Billings in excess of costs and estimated earnings on engineering services contracts was $199,160 at December 31, 2017 versus
zero at December 31, 2016. The increase is due to timing of costs incurred versus billings on certain contracts that were in
process in the respective fiscal year ends.
Long-term debt was $3,119,450 at December 31, 2017 versus zero at December 31, 2016 due to borrowings against the
Company’s line of credit during the current fiscal year.
Other long-term liabilities decreased $20,000 to $121,667 at December 31, 2017 from $141,667 at December 31, 2016 due to the
amortization of a license fee received from a customer under a ten-year cooperation agreement.
Common stock and additional paid-in capital increased to $541,085 and $133,901,406, respectively, at December 31, 2017
compared to $485,193 and $128,409,933, respectively, at December 31, 2016. The increases in common stock and additional
paid-in capital were primarily attributable to the closing of the first stage investment related to the Agreement with CNHTC.
Results of Operations – Year Ended December 31, 2017 Compared to Year Ended December 31, 2016 (unaudited)
As a result of electing to change our fiscal year end from March 31 to December 31 in 2016, and in accordance with reporting
rules stipulated under the Exchange Act, the following discussion is based on a comparison of operating results for the year ended
December 31, 2017 (“2017”), which are audited, to operating results for the year ended December 31, 2016 (“2016”), which are
unaudited.
Revenue
Product sales for 2017 increased 52 percent to $7,162,456 compared to $4,710,654 for 2016, reflecting an increase in orders from
our customers, both domestically and internationally.
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Revenue from contract services decreased $300,336, or 33 percent, to $616,293 for 2017 versus $916,629 for 2016. This was
driven by the completion of the Department of Energy non-rare-earth grant that expired in September, 2016 and reduction of
securing new contracts in 2017.
Gross
Profit
Margin
Gross profit margins on product sales for 2017 increased to 39 percent compared to (119) percent for 2016. The increase is
primarily due to a reserve for excess and obsolete inventory of $7,166,916 recognized in 2016.
Gross profit margins on contract services increased to 54 percent for 2017 compared to 8 percent for 2016, reflecting a change in
the mix of contracts in process.
Costs
and
Expenses
Research and development expenditures for 2017 were $2,042,732 compared to $3,061,541 for 2016. In 2017, resources were
allocated to business development activities versus a greater focus on internally funded development projects in 2016.
Selling, general and administrative expenses for 2017 were $6,367,331 compared to $5,918,990 for 2016. The increase for 2017
is attributable to an increase in legal and business development expenses.
Recovery of impaired assets decreased to $0 for 2017 compared to $585,800 for 2016. In 2016, we reduced the carrying value of
the accrued vendor settlement liability based on a settlement with the vendor.
Loss on disposal of long-lived assets decreased to $0 for 2017 from $39,247 for 2016. The decrease is attributable to an
abandoned patent application in 2016.
Other
Interest income decreased to $5,127 for 2017 from $11,803 for 2016. The decrease is attributable to lower levels of invested cash
balances.
Interest expense was $108,146 in 2017 versus zero in 2016. The increase is attributable to interest paid on the borrowings from
the line of credit we secured in March 2016.
Amortization of deferred financing costs was $29,535 in 2017 versus zero in 2016. The increase is attributable to the line of
credit we secured in March 2016. The financing costs are amortized over the life of the loan.
Gain on sale of long-lived assets was $606,006 in 2017 versus zero in 2016. The gain was recognized on the sale of vacant land
in July, 2017.
Other income for 2017 was $32,734 versus $24,743 for 2016. The increase between the years is attributable to higher recovery
from claims of vendor bankruptcy proceedings.
Net
Loss
As a result, net loss for 2017 was $4,778,316, or $0.10
per common share, compared to a net loss of $13,948,426, or $0.29 per
common share, for 2016.
Liquidity and Capital Resources
Our cash balances and liquidity throughout 2017 were adequate to meet operating needs. At December 31, 2017, we had cash and
cash equivalents of $6,309,269 and working capital of $7,762,363 compared to $2,100,089 and $3,173,848 at December 31, 2016,
respectively. Cash and working capital increased as of December 31, 2017 due to the sale of vacant land (net proceeds of $1.4
million) and closing of the first stage investment of the Agreement with CNHTC of $5.1 million, which was offset by operating
losses.
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For 2017, net cash used in operating activities was $4,870,626 compared to net cash used in operating activities of $6,403,598 for
2016. The decrease in cash used in operating activities for 2017 versus 2016 is primarily attributable to decreased net operating
losses.
Net cash provided by investing activities for 2017 was $1,279,050 compared to cash used of $153,445 for 2016. The change for
2017 is primarily due to the sale of vacant land.
Net cash provided by financing activities was $8,300,812 for 2017 versus cash used in financing activities of $31,536 for 2016.
The change in cash provided by in 2017 was primarily attributable to the cash received from the closing of the first stage
investment related to the Agreement with CNHTC.
On March 15, 2017, the Company entered into a non-revolving line of credit with a bank for $5.6 million. The interest rate is
variable based upon the one month LIBOR rate plus 4.0% per annum on the outstanding balance. The non-revolving line of
credit will expire on March 15, 2019 and the amounts repaid during the term of the loan may not be reborrowed. At the expiry
date, all outstanding principal and interest are due. As of December 31, 2017, $3,164,529 was drawn on the line of credit. For
additional information, see Note 8 of the Consolidated Financial Statements.
We expect to fund our operations over the next year from existing cash and cash equivalent balances, funding available from our
non-revolving line of credit and, to the extent all closing conditions are satisfied (including obtaining CFIUS approval), proceeds
from the closing of the second stage investment related to the Agreement with CNHTC.
Although we expect to manage our operations and working capital requirements to minimize the future level of operating losses
and working capital usage, our working capital requirements may increase in the future. If customer demand accelerates
substantially, our working capital requirements may also increase substantially.
If our existing financial resources are not sufficient to execute our business plan, we may 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 cash equivalents to fund our operations for at least the next twelve months.
Contractual Obligations
The following table presents information about our contractual obligations and commitments as of December 31, 2017:
Less Than
1 Year
Payments due by Period
More than
1 - 3 Years 3 - 5 Years 5 Years
Total
$3,164,529 $
1,986,877
— $3,164,529 $
1,986,877
$5,151,406 $1,986,877 $3,164,529 $
—
— $
—
— $
—
—
—
Long-term debt obligations
Purchase obligations
Total
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.
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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 as appropriate.
During the year ended December 31, 2017, nine months ended December 31, 2016 and three months ended March 31, 2016
(unaudited), we recorded an inventory reserve for excess and obsolete inventory of $0, $7,166,916, and $0, respectively.
It is reasonably possible that future events or changes in circumstances could cause the realizable value of our inventories to
decline materially, resulting in material impairment losses.
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. 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.
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
24
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result in a material change in the value of an asset or liability resulting in a material adverse change in our operating results.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RIS K
Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency exchange and
interest rates. One component of interest rate risk involves the short term investment of excess cash in short term, investment
grade interest-bearing securities. If there are changes in interest rates, those changes would affect the investment income we earn
on these investments and, therefore, impact our cash flows and results of operations, 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 purposes. All of our product sales and related receivables are payable in U.S. dollars.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
UQM Technologies, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated
balance sheet of UQM Technologies, Inc. and subsidiaries (the “Company”) as
of December 31, 2017 , the related consolidated statements of operations, stockholders’ equity and cash flows for the year then
ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated
financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31,
2017, and the consolidated results of its operations and its cash flows for the year then ended, in conformity with accounting
principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s consolidated
f
inancial statements based on our audit. We are a public accounting firm registered with
the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to
the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement,
whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial
reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated
financial statements,
whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the
consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ Moss Adams LLP
Denver, Colorado
March 20, 2018
We have served as the Company’s auditor since 2017.
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Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
UQM Technologies, Inc.
We have audited the accompanying consolidated balance sheet of UQM Technologies, Inc. and subsidiaries as of December 31,
2016, and the related consolidated statements of operations, stockholders’ equity and cash flows for the nine months ended
December 31, 2016. 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 audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit 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 audit provides 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 December 31, 2016, and the results of their operations and their cash flows for
the nine months ended December 31, 2016, in conformity with U.S. generally accepted accounting principles.
/s/ Hein & Associates LLP
Hein & Associates LLP
Denver, Colorado
March 30, 2017
27
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UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
Assets
Current assets:
Cash and cash equivalents
Restricted cash
Accounts receivable
Costs and estimated earnings in excess of billings on uncompleted contracts
Inventories, net
Prepaid expenses and other current assets
Total current assets
Property and equipment, at cost:
Land
Building
Machinery and equipment
Less accumulated depreciation
Net property and equipment
Patent costs, net of accumulated amortization of $953,491 and $932,564, respectively
Trademark costs, net of accumulated amortization of $85,381 and $80,885,
respectively
Restricted cash
Total assets
See accompanying notes to consolidated financial statements.
28
December 31,
2017
December 31,
2016
$
$
6,309,269
176,193
823,793
-
2,341,360
233,566
9,884,181
2,100,089
-
1,163,316
29,917
1,749,735
259,682
5,302,739
896,388
4,516,301
7,136,578
12,549,267
(7,936,056)
4,613,211
1,683,330
4,516,301
7,052,740
13,252,371
(7,590,641)
5,661,730
222,461
213,326
90,460
323,863
15,134,176
$
94,955
-
11,272,750
$
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UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
Other current liabilities
Billings in excess of costs and estimated earnings on engineering services contracts
$
Total current liabilities
Long-term debt, net of deferred financing costs of $45,079 and $0, respectively
Other long-term liabilities
Total long-term liabilities
Total liabilities
Commitments and contingencies (Note 9)
Stockholders’ equity:
December 31,
2017
December 31,
2016
948,875 $
973,783
199,160
2,121,818
3,119,450
121,667
3,241,117
809,950
1,318,941
-
2,128,891
-
141,667
141,667
5,362,935
2,270,558
Common stock, $0.01 par value, 175,000,000 shares authorized; 54,108,510 and
48,519,313 shares issued and outstanding, respectively
Additional paid-in capital
Accumulated deficit
Total stockholders’ equity
541,085
133,901,406
(124,671,250)
9,771,241
485,193
128,409,933
(119,892,934)
9,002,192
Total liabilities and stockholders’ equity
$
15,134,176 $
11,272,750
See accompanying notes to consolidated financial statements.
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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
Selling, general and administrative
Recovery of impaired assets
2017
Year ended December 31,
2016
(Unaudited)
Three months
ended March 31,
2016
(Unaudited)
Nine months ended
December 31,
2016
$
$
7,162,456
616,293
7,778,749
$
4,710,654
916,629
5,627,283
4,368,093
285,095
2,042,732
6,367,331
-
13,063,251
10,336,136
842,141
3,061,541
5,918,990
(585,800)
19,573,008
$
1,218,795
285,493
1,504,288
809,834
303,441
684,346
1,232,892
(585,800)
2,444,713
3,491,859
631,136
4,122,995
9,526,302
538,700
2,377,195
4,686,098
-
17,128,295
Loss from operations
(5,284,502)
(13,945,725)
(940,425)
(13,005,300)
Other income / (expense):
Interest income
Interest expense
Amortization of deferred financing costs
Gain on sale of vacant land
Loss on disposal of long-lived assets
Other
5,127
(108,146)
(29,535)
606,006
-
32,734
506,186
11,803
-
-
-
(39,247)
24,743
(2,701)
3,882
-
-
-
-
5,625
9,507
7,921
-
-
-
(39,247)
19,118
(12,208)
Net loss
$
(4,778,316)
Net loss per common share - basic and
diluted
$
(0.10)
$
$
(13,948,426)
(0.29)
$
$
(930,918)
(0.02)
$
$
(13,017,508)
(0.27)
Weighted average number of shares of
common stock outstanding - basic and diluted
50,038,799
48,405,894
48,327,219
48,448,718
See accompanying notes to consolidated financial statements.
30
Table of Contents
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity
Balances at March 31, 2016
Issuance of common stock under employee
stock purchase plan
Issuance of common stock under stock bonus
plan
Common stock used for tax withholdings
Compensation expense from employee and
director stock option and common stock
grants
Net loss
Balances at December 31, 2016
Issuance of common stock upon exercise of
employee and director options
Issuance of common stock under employee
stock purchase plan
Issuance of common stock under stock bonus
plan
Issuance of common stock under definitive
stock purchase agreement
Common stock used for tax withholdings
Compensation expense from employee and
director stock option and common stock
grants
Net loss
Balances at December 31, 2017
Number of
common
shares
issued
48,330,286
Common
stock
483,303 $
$
Additional
paid-in
capital
128,103,861 $
Accumulated
deficit
(106,875,426) $
Total
stockholders’
equity
21,711,738
60,325
603
30,744
146,155
(17,453)
1,462
(175)
(1,462)
(10,503)
-
-
-
31,347
-
(10,678)
-
-
48,519,313
-
-
287,293
-
$
485,193 $
128,409,933 $
-
(13,017,508)
(119,892,934) $
287,293
(13,017,508)
9,002,192
72,347
723
58,810
116,023
1,160
52,601
68,023
680
(680)
5,347,300
(14,496)
53,473
(144)
5,046,425
(12,236)
-
-
-
-
-
59,533
53,761
-
5,099,898
(12,380)
346,553
(4,778,316)
54,108,510 $ 541,085 $ 133,901,406 $ (124,671,250) $ 9,771,241
-
(4,778,316)
346,553
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 of impaired assets
(Gain) / loss on sale of long-lived assets
Impairment of inventories
Change in operating assets and liabilities:
Accounts receivable
Costs and estimated earnings 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
engineering services contracts
Other long-term liabilities
Net cash used in operating activities
Cash flows from investing activities:
Acquisition of property and equipment, net
Cash paid for patent and trademark fees
Cash proceeds from the sale of long-lived assets
Net cash provided by / (used in) investing activities
Cash flows from financing activities:
Cash received for shares exercised under employee stock
purchase plan
Registered direct offering costs
Borrowings on line of credit
Payment of employee tax withholdings in exchange for return
of common stock
Issuance of common stock upon definitive stock
purchase agreement
Issuance of common stock upon exercise of employee and
directors options
Net cash provided by / (used in) financing activities
Year ended December 31,
2017
2016
(Unaudited)
Three months
ended March 31,
2016
(Unaudited)
Nine months
ended
December 31,
2016
$
(4,778,316)$ (13,948,426)$
(930,918)$
(13,017,508)
400,370
346,553
-
(606,006)
-
339,523
29,917
(591,625)
16,031
(206,233)
673,813
336,857
(585,800)
39,247
7,176,822
(500,275)
-
75,607
39,211
455,167
221,686
49,564
(585,800)
-
9,906
181,637
(30,379)
(119,183)
26,296
(323,448)
452,127
287,293
-
39,247
7,166,916
(681,912)
30,379
194,790
12,915
778,615
199,160
(20,000)
(4,870,626)
(60,266)
(105,555)
(6,403,598)
(60,266)
41,667
(1,519,238)
-
(147,222)
(4,884,360)
(83,838)
(30,060)
1,392,948
1,279,050
(132,607)
(20,838)
-
(153,445)
(84,653)
(2,342)
-
(86,995)
53,761
-
3,100,000
44,142
(65,000)
-
12,795
(65,000)
-
(12,380)
(10,678)
5,099,898
-
-
-
59,533
8,300,812
-
(31,536)
-
(52,205)
(47,954)
(18,496)
-
(66,450)
31,347
-
-
(10,678)
-
-
20,669
Increase / (decrease) in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash at beginning of period
Cash, cash equivalents, and restricted cash at end of period
$
4,709,236
2,100,089
6,809,325 $
(6,588,579)
8,688,668
2,100,089 $
(1,658,438)
8,688,668
7,030,230 $
(4,930,141)
7,030,230
2,100,089
See accompanying notes to consolidated financial statements.
32
Table of Contents
(1) Summary of Significant Accounting Policie s
(a) Description of Business
UQM Technologies, Inc. and our wholly-owned subsidiaries develops, manufactures and sells power dense, high
efficiency electric motors, generators, power electronic controllers and fuel cell compressors for the commercial truck,
bus, automotive, marine, and industrial markets. Our facility is located in Longmont, Colorado. Our revenue is derived
primarily from product sales to customers in the commercial truck, bus, automotive, marine, and industrial markets, and
from contract research and development services. We are impacted by other factors such as the continued receipt of
contracts from industrial and governmental parties, our ability to protect and maintain the proprietary nature of our
technology, continued product and technological advances and our ability, together with our partners, to commercialize
our products and technology.
(b) Principles of Consolidation
The consolidated financial statements include the accounts of UQM Technologies, Inc. and its wholly-owned
subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
(c) Cash, Cash Equivalents and Restricted Cash
We consider cash on hand and investments with original maturities of three months or less to be cash and cash
equivalents.
We limit our cash and cash equivalents to high quality financial institutions in order to minimize our credit risk. We
maintain cash and cash equivalent balances with financial institutions that exceed federally insured limits. We have not
experienced any losses related to these balances and management believes our credit risk to be minimal.
(d) Accounts Receivable
We extend unsecured credit to many of our customers following a review of the customers’ financial condition and
credit history. Our sales are conducted through acceptance of customer purchase orders or in some cases through supply
agreements. For credit qualified customers, our standard terms are net 30 days. For international customers without an
adequate credit rating, our typical terms are irrevocable letter of credit or cash payment in advance of delivery. We
establish an allowance for uncollectable accounts based upon a number of factors including the length of time trade
receivables are past due, the customer’s ability to pay its obligation to us, the condition of the general economy,
estimates of credit risk, historical trends and other information. We write off accounts receivable when they become
uncollectible against our allowance for doubtful accounts receivable. At December 31, 2017 and 2016, we had no
allowance for doubtful accounts receivable.
(e) Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is determined by the first-in, first-out method. We
analyze slow-moving and excess inventory on a periodic basis and we charge directly to expense obsolete inventory
items during the period we assess the value of such inventory to be impaired. For the year ended December 31, 2017,
nine months ended December 31, 2016 and three months ended March 31, 2016, we recognized a reserve for excess and
obsolete inventory of $0, $7,166,916, and $9,906 (unaudited), respectively. See Footnote 5.
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Table of Contents
(f) Property and Equipment
Property and equipment are stated at cost, unless the asset was acquired, in part, with U.S. Department of Energy
(“DOE”) grant funds, in which case it is stated at cost net of DOE reimbursements. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets, which range from three to five years, except for
buildings,
Maintenance and repairs are charged to expense as
incurred. Depreciation expense for the years ended December 31, 2017 and 2016, three months ended March 31, 2016,
and nine months ended December 31, 2016 was $345,415, $640,888 (unaudited), $207,734 (unaudited) and $433,154,
respectively, and was reported in operating costs and expenses on the Consolidated Statements of Operations.
which are depreciated over 27.5 years.
(g) Patent and Trademark Costs
Patent and trademark costs consist primarily of legal expenses, and represent those costs incurred by us for the filing of
patent and trademark applications. Amortization of patent and trademark costs is computed using the straight-line
method over the estimated useful life of the asset, typically 8 years for patents, and 40 years for trademarks.
Amortization expense for the years ended December 31, 2017 and 2016, three months ended March 31, 2016, and nine
months ended December 31, 2016 was $25,423, $32,925 (unaudited), $13,952 (unaudited), and $18,973, respectively.
(h) Impairment of Long-Lived Assets
We periodically evaluate whether circumstances or events have affected the recoverability of long-lived assets including
intangible assets with finite useful lives. The assessment of possible impairment is based on our ability to recover the
carrying value of the asset or groups of assets from expected future cash flows (undiscounted and without interest
charges) estimated by management. If expected future cash flows are less than the carrying value, an impairment loss is
recognized to adjust the asset to fair value as determined by expected discounted future cash flows. As of December 31,
2017 and 2016 and three months ended March 31, 2016 (unaudited), there was no impairment of long-lived assets.
(i) Product Warranties
Our warranty policy generally provides three months to four years of coverage depending on the product. We record a
liability for estimated warranty obligations at the date products are sold. The estimated cost of warranty coverage is
based on our actual historical experience with our current products or similar products. For new products, the required
reserve is based on historical experience of similar products until sufficient historical data has been collected on the new
product. Adjustments are made as new information becomes available. The following is a summary of warranty activity
for the years ended December 31, 2017 and 2016 (unaudited), three months ended March 31, 2016 (unaudited), and nine
months ended December 31, 2016:
Year ended December 31, 2017
Accrued warranty cost
Year ended December 31, 2016
Accrued warranty cost
Three months ended March 31, 2016
Accrued warranty cost
Nine months ended December 31, 2016
Accrued warranty cost
Balance at
Beginning
of Year
Additions
Charged to
Costs and
Expenses
Deductions
Balance at
End of Year
(1)
$ 289,710
173,014
(129,293) $ 333,431
$ 231,372
106,464
(48,126) $ 289,710
$ 231,372
27,364
(14,426) $ 244,310
$ 244,310
79,100
(33,700) $ 289,710
Note
(1)
Represents
actual
warranty
payments
for
units
covered
under
warranty
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Table of Contents
(j) Segment Reporting
The Company has performed its quarterly assessment to determine if additional disclosures are required for segment
reporting. Management has determined that the Company has one operating segment because the chief operating
decision maker (CODM) and management make business decisions based on product and contract services revenues
taken as a whole. Therefore, no further disclosure is required at this time. Management will perform an assessment
quarterly to determine if additional disclosures around this standard are needed in the future.
(k) Revenue and Cost Recognition
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.
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 Consolidated Statements of Operations on a systematic basis over the periods
in which the Company recognizes the related costs for which the government grant is intended to compensate.
Specifically, when government grants are related to reimbursements for cost of revenues or operating expenses, the
government grants are recognized as a reduction of the related expense in the Consolidated Statements of Operations.
For government grants related to reimbursements of capital expenditures, the government grants are recognized as a
reduction of the basis of the asset and recognized in the Consolidated Statements of Operations over the estimated useful
life of the depreciable asset as reduced depreciation expense. If we dispose of assets acquired using grant funding, we
may be required to reimburse the DOE upon such sale date if the fair value of the asset on the date of disposition
exceeds $5,000. The amount of any such reimbursement shall be equal to 50 percent of the fair value of the asset on the
date of disposition.
The Company records government grants receivable in the Consolidated Balance Sheets in accounts receivable.
(m) Income Taxes
The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax basis and operating loss and tax credit carry-forwards. Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The valuation of deferred tax assets may be reduced
if future realization is not assured. The effect of a change in tax rates on deferred tax assets and liabilities is recognized
in income tax expense or benefit in the period that includes the enactment date. The Company has unexpired net
operating losses and research and development credits carrying forward into current years that date from the tax year
1999 and 2001, respectively. As such, all federal tax returns from 2000 to the present are subject to audit.
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Table of Contents
(n) Research and Development
Costs of researching and developing new technology, or significantly altering existing technology, are expensed as
incurred.
(o) Loss Per Common Share
The following table sets forth the computation of basic and diluted net loss per share for the years ended December 31,
2017 and 2016, three months ended March 31, 2016, and nine months ended December 31, 2016:
Numerator:
Net loss
Denominator for basic and diluted net loss per
common share:
Weighted average number of shares of
common stock outstanding - basic and diluted
Year ended December 31,
2017
2016
Three months
ended
March 31,
2016
Nine months
ended
December 31,
2016
(Unaudited)
(Unaudited)
$ (4,778,316) $ (13,948,426) $
(930,918) $ (13,017,508)
50,038,799
48,405,894 48,327,219
48,448,718
Net loss per common share - basic and diluted $
(0.10) $
(0.29) $
(0.02) $
(0.27)
The following table sets forth the potential shares of common stock that are not included in the calculation of diluted net
loss per share because to do so would be anti-dilutive as of the end of each period presented:
Non-vested stock bonus plan shares
Stock options outstanding
Warrants to purchase common stock
(p) Use of Estimates
December 31,
2017
2016
57,760
3,315,819
5,489,733
102,048
3,029,494
5,489,733
The preparation of financial statements in conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets, obsolescence reserves, and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
(q) New Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued a new standard to achieve a consistent
application of revenue recognition within the U.S., resulting in a single revenue model to be applied by reporting
companies under U.S. generally accepted accounting principles. Under the new model, recognition of revenue occurs
when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the
entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that reporting
companies disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with
customers. The new standard is effective for us for the first fiscal year beginning after December 15, 2017. Earlier
application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim
reporting periods within that reporting period. The new standard is required to be applied retrospectively to each prior
reporting period presented or retrospectively with
36
Table of Contents
the cumulative effect of initially applying it recognized at the date of initial application and providing additional
disclosures. The Company will adopt this standard in the quarter ending March 31, 2018 using the retrospective method
with the cumulative effect and additional disclosures at the period of adoption. Based on the Company’s assessment of
the impact of this standard on our consolidated financial statements, we expect revenue related to product and contract
services to remain substantially unchanged.
In November 2016, the FASB issued guidance on the Statement of Cash Flows and the presentation of restricted cash in
the statement. The new standard will require the Statement of Cash Flows to explain the change during the period in the
total of cash, cash equivalents, and amounts generally described as restricted cash. As a result, the amounts generally
described as restricted cash should be included in the cash and cash equivalents when reconciling the beginning of the
period and end of the period total amounts shown on the Statement of Cash Flows. This is effective for annual periods
beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The
amendments should be applied using the retrospective transition method in each period presented. The Company elected
to early adopt this standard in the quarter ended June 30, 2017. Additional disclosure has been included in Note 3 of the
Consolidated Financial Statements as required by adopting the standard.
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Table of Contents
(2) Going Concern Assessment
These Consolidated Financial Statements are presented on the basis that the Company will continue as a going concern. The
going concern concept contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
As of December 31, 2017, the Company has sustained recurring losses from continuing operations, had working capital
surplus of $7,762,363, and accumulated deficit of $124,671,250. The Company’s cash and cash equivalents balance at
December 31, 2017 was $6,309,269.
On March 15, 2017, the Company entered into a non-revolving line of credit for $5.6 million. The interest rate is variable
based upon the one month LIBOR rate plus 4.0% per annum on the outstanding balance. The non-revolving line of credit
will expire on March 15, 2019 and the amounts repaid during the term of the loan may not be reborrowed. At the expiry date,
all outstanding principal and interest are due. As of December 31, 2017, $3,164,529 was drawn on the line of credit. For
additional information, see Note 8 of the Consolidated Financial Statements.
On September 25, 2017, the Company closed the first stage investment pursuant to a definitive stock purchase agreement
entered into with China National Heavy Duty Truck Group Co., Ltd. and its wholly-owned subsidiary, Sinotruk (BVI)
Limited (the Buyer), which resulted in the sale of 5,347,300 shares of the Company’s common stock to the Buyer and the
Company’s receipt of cash proceeds of approximately $5.1 million on that date.
Based on management’s projections of operations, the non-revolving line of credit, and the Company’s cash position on
December 31, 2017, the Company believes that it currently has sufficient cash and bank financing resources to support day to
day activities through operations as they become due and sustain operations for at least the next twelve months.
As of the date of this filing, the Company believes it has sufficient cash flow to continue as a going concern for the ensuing
twelve months.
(3) Cash, cash equivalents, and restricted cash
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported on the Consolidated
Balance Sheets to the cash on the Consolidated Statements of Cash Flows for the period ending December 31, 2017. There
was no restricted cash as of December 31, 2016.
Cash and cash equivalents
Restricted cash, current
Restricted cash, long-term
Total cash, cash equivalents, and restricted cash shown in the Consolidated Statements of
Cash Flows
$
December 31,
December 31,
2017
6,309,269 $ 2,100,089
-
-
176,193
323,863
2016
$
6,809,325 $ 2,100,089
Restricted cash classified as a current asset on the Consolidated Balance Sheets represents the amount required to be set aside
pursuant to a contractual agreement with the Company’s lender for the payment of interest on borrowings from the line of
credit that is expected to be paid within the next twelve months. In addition, restricted cash included in other long-term
assets on the Consolidated Balance Sheets represents interest due on the line of credit more than twelve months from the date
of the financial statements as contractually required by the lender. The restrictions will lapse when the related long-term debt
is paid off.
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Table of Contents
(4) Contracts in Process
At December 31, 2017 and December 31, 2016, the estimated period to complete contracts in process ranged from one to
three months and one to three months, respectively. We expect to collect all accounts receivable arising from these contracts
within sixty days of billing.
The following summarizes contracts in process:
Costs incurred on engineering services contracts
Estimated earnings
Less billings to date
Contracts in process
Included in the accompanying Consolidated Condensed Balance Sheets is as follows:
Costs and estimated earnings in excess of billings on uncompleted contracts
Billings in excess of costs and estimated earnings on engineering services contracts
December 31, December 31,
$
2017
56,175 $
144,665
200,840
(400,000)
2016
502,701
331,969
834,670
(804,753)
$ (199,160) $
29,917
$
- $
(199,160)
$ (199,160) $
29,917
-
29,917
Contracts in process
(5) Inventories
Inventories consist of:
Raw materials
Work-in-process
Finished products
Reserve for excess and obsolete inventory
December 31,
December 31,
2016
2017
7,679,922 $ 7,279,855
105,252
289,848
1,531,544
1,390,200
(7,018,610)
(7,166,916)
2,341,360 $ 1,749,735
$
$
In 2011, we began manufacturing and delivering PowerPhase Pro systems under a ten-year supply agreement with CODA
Automotive. As a result of substantial uncertainty regarding CODA’s financial ability, in late 2012 we recorded an allowance
for doubtful accounts for CODA receivables and stopped manufacturing products for CODA. On May 1, 2013, CODA filed
for reorganization under the U.S. Bankruptcy Code.
®
inventory originally
At the time of its bankruptcy, we had on hand approximately $8.2 million of PowerPhase Pro
purchased and manufactured for CODA. We believe the PowerPhase Pro
system is still the appropriate size for many
medium-duty truck, marine, passenger vehicle and stationary power applications, and this inventory continues to be sold to a
number of customers at prices greater than our costs, although the rate of sales has been very slow.
®
®
®
We re-evaluated the carrying value of the PowerPhase Pro
inventory during 2016 and as of December 31, 2016. A key
factor in our analysis during the nine months ended December 31, 2016 was that in October of 2016, our customer ITL had
inventory, which did not
informed us of their intention to purchase in cash a significant portion of the PowerPhase Pro
happen. Because of the long delays in this customer’s product launch and the lack of a significant cash payment towards this
inventory, we determined that, out of a total of $7.6 million, approximately $6.8 million of this inventory should be reserved
as excess inventory and we took a charge for this amount against this inventory as of December 31, 2016. At that time, we
had purchase orders from existing customers to acquire the remaining balance of the PowerPhase Pro
inventory. We also
reserved approximately $350,000 for other obsolete inventory as of December 31, 2016. As of December 31, 2017, no
additional reserve was required.
®
®
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Table of Contents
(6) Patents and Trademarks
Patents owned by the Company had a gross carrying amount of $1,175,952 and $1,145,890, accumulated amortization of
$953,491 and $932,564, and a net carrying amount of $222,461 and $213,326, at December 31, 2017 and December 31,
2016, respectively. Trademarks owned by the Company had a gross carrying amount of $175,841 and $175,841, accumulated
amortization of $85,381 and $80,885, and a net carrying value of $90,460 and $94,955 at December 31, 2017 and December
31, 2016, respectively. Patents and trademarks are amortized on a straight-line basis over the estimated useful life of the
asset. The weighted-average period of amortization is eight years for patents, and forty years for trademarks.
Estimated future amortization of these intangible assets by fiscal year is as follows:
2018
2019
2020
2021
2022
Thereafter
(7) 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
Accrued executive compensation
Other
Patents
Trademarks
$
$
18,578
12,316
8,226
8,226
8,226
166,889
222,461
$
$
4,496
4,496
4,496
4,496
4,496
67,980
90,460
December 31, December 31,
2016
2017
62,220
94,680 $
232,326
235,133
289,710
333,431
116,886
153,944
48,336
48,336
87,100
87,100
189,175
-
272,222
-
20,966
21,159
973,783 $ 1,318,941
$
$
40
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(8) Debt
On March 15, 2017, the Company entered into a non-revolving line of credit for $5.6 million. The loan is collateralized by
the Company’s headquarters facility. The interest rate is variable based upon the one month LIBOR rate plus 4.0% per
annum on the outstanding balance which was 5.57% as of December 31, 2017. As a condition of the loan, $600,000 was
immediately drawn on the line of credit to be used for monthly interest payments on borrowings over the life of the
loan. This is reported as restricted cash on the Consolidated Balance Sheet as of December 31, 2017. For additional
information, see Note 3 to the Consolidated Financial Statements. The covenants under the debt agreement require the
Company to have liquid assets of a minimum of $1.5 million with the lender. In addition, financial statements are to be
presented no later than 45 days after the end of each quarter and 90 days after the end of each fiscal year. These covenants
took effect for the quarter ending June 30, 2017. As of December 31, 2017, the Company was in compliance with its
covenants. The non-revolving line of credit will expire on March 15, 2019 and the amounts repaid during the term of the loan
may not be re-borrowed. At the expiry date, all outstanding principal and interest are due. As of December 31, 2017,
$3,164,529 was drawn on the line of credit. The Company incurred deferred financing costs of $73,060 upon securing the
line of credit.
(9) Commitments and Contingencies
Employment Agreements
On July 21, 2015, the Company entered into employment agreements with its executive officers that expired on June 30,
2017. The July 2015 employment agreements provided for future retention payments under the conditions and for the
amounts specified in the agreements. These future retention payments were recorded over the required service period and as
a result, we had recorded a liability of $272,222 at December 31, 2016. These retention bonuses were paid in July 2017.
Effective July 1, 2017, the Company entered into new employment agreements with its four executive officers, which expire
December 31, 2019. The aggregate future base salary payable to the executive officers over their remaining terms is
$2,133,008.
Lease Commitments
At December 31, 2017, there were no operating leases and there was no rental expense during the year ended December 31,
2017, three months ended March 31, 2016 (unaudited) and nine months ended December 31, 2016.
Litigation
In November, 2015, we were notified that a supplier of electronic components under the former CODA automotive program
had filed a lawsuit against us alleging breach of contract. This lawsuit was settled as of March 31, 2016 and we adjusted our
Consolidated Financial Statements accordingly.
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, cash equivalents, restricted cash, accounts receivable and accounts payable approximate fair
value because of the short maturity of these instruments.
The Company measures the fair value of outstanding debt for disclosure purposes on a recurring basis and its long-term debt
of $3,119,450 is reported at amortized cost. The Company’s long-term debt is subject to variable rates of interest and
accordingly its carrying value is considered to be representative of its fair market value.
41
Table of Contents
(11) Stockholders’ Equity
The Company has warrants outstanding as follows:
Offering Date
February, 2014
October, 2015
Common Stock
Follow-on Offering
(Shares)
2,864,872
8,000,000
10,864,872
Warrants
Under Option
(Shares)
1,489,733
4,000,000
5,489,733
Outstanding at December 31, 2016
Granted
Exercised
Forfeited
Outstanding at December 31, 2017
Exercisable at December 31, 2017
(12) Stock-Based Compensation
Stock
Option
Plans
Earliest
Exercise Date
August 6, 2014
April 30, 2016
Expiration Date
August 5, 2018
October 30, 2020
Warrants
Under
Option
5,489,733
-
-
-
5,489,733
5,489,733
$
$
$
$
$
$
Weighted-
Average
Exercise
Price
1.53
-
-
-
1.53
Weighted-
Average
Remaining
Contractual
Life
3.3 years
2.3 years
1.53
2.3 years
As of December 31, 2017, we had 4,600,000 shares of common stock authorized and 2,117,893 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 granted under the Plan to employees require the option holder to
abide by certain Company policies, which restrict their ability to sell the underlying common stock. Prior to the adoption of
the 2012 Plan, we issued stock options under our 2002 Equity Incentive Plan. Forfeitures under the 2002 Equity Incentive
Plan may not be re-issued.
We also have a Stock Option Plan for Non-Employee Directors (“Directors Plan”) pursuant to which Directors may elect to
receive stock options in lieu of cash compensation for their services as directors. As of December 31, 2017, we had
1,000,000 shares of common stock authorized and 446,635 shares of common stock available for future grant under the
Directors Plan. Option terms range from three to ten years from the date of grant. Option exercise prices are equal to the fair
value of the common shares on the date of grant. Options granted under the plan vest immediately. Forfeitures under the
Directors Plan are available for re-issuance at a future date.
Stock
Bonus
Plan
We have a Stock Bonus Plan (“Stock Plan”) administered by the Board of Directors. As of December 31, 2017, we had
2,554,994 shares of common stock authorized and there were 351,091 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.
42
Table of Contents
Stock
Purchase
Plan
We have established a Stock Purchase Plan under which eligible employees may contribute up to 10 percent of their
compensation to purchase shares of our common stock at 85 percent of the fair market value at specified dates. At December
31, 2017, we had 1,200,000 shares of common stock authorized and 556,318 shares of common stock available for issuance
under the Stock Purchase Plan.
Share-Based
Compensation
Expense
We use the straight-line attribution method to recognize share-based compensation costs over the requisite service period of
the award. The exercise price of options is equal to the market price of our common stock (defined as the closing price
reported by the NYSE American) on the date of grant. We adjust share-based compensation on a quarterly basis for changes
to the estimate of expected equity award forfeitures based on actual forfeiture experience. The effect of adjusting the
forfeiture rate for all expense amortization is recognized in the period the forfeiture estimate is changed. The effect of
forfeiture adjustments during the years ended December 31, 2017 and 2016, three months ended March 31, 2016, and nine
months ended December 31, 2016, was insignificant.
We use the Black-Scholes-Merton option pricing model for estimating the fair value of stock option awards. The expected
volatility and the expected life of options granted are based on historical experience, and the risk free interest rate is obtained
from the U.S. Department of the Treasury daily yield curve rates. The weighted average estimated values of employee and
director stock option grants, as well as the weighted average assumptions that were used in calculating such values during the
years ended December 31, 2017 and 2016, three months ended March 31, 2016, and nine months ended December 31, 2016,
were based on estimates at the date of grant as follows:
Weighted average estimated fair value
of grant
Expected life (in years)
Risk free interest rate
Expected volatility
Expected dividend yield
Year ended December 31,
2016
2017
Three months ended
March 31,
2016
Nine months ended
December 31,
2016
(Unaudited)
(Unaudited)
$ 0.59 per option $ 0.72 per option $ 0.16 per option $ 0.74 per option
6.0 years
6.4 years
0.3 years
6.6 years
2.07 %
83.52 %
0.00 %
1.79 %
85.07 %
0.00 %
0.00 %
88.67 %
0.00 %
1.85 %
84.95 %
0.00 %
Total share-based compensation expense and the classification of these expenses for the years ended December 31, 2017 and
2016, three months ended March 31, 2016, and nine months ended December 31, 2016, were as follows:
Costs of product sales
Costs of contract services
Research and development
Selling, general and administrative
Year ended December 31,
2016
2017
(Unaudited)
Three months
ended March 31,
2016
(Unaudited)
Nine months
ended
December 31,
2016
23,033
5,447
51,596
266,477
346,553 $
10,833
8,605
32,312
285,107
336,857 $
2,280
1,926
4,595
40,763
49,564 $
8,553
6,679
27,717
244,344
287,293
$
43
Table of Contents
Stock
Option
Plans
Activity
Additional information with respect to stock option activity during the year ended December 31, 2017 under our Stock
Option Plans is as follows:
Outstanding at December 31, 2016
Granted
Exercised
Forfeited
Outstanding at December 31, 2017
Exercisable at December 31, 2017
Shares
Under
Option
3,004,798
500,047
(72,347)
(136,996)
3,295,502
2,364,161
Vested and expected to vest at December 31, 2017
2,864,152
Weighted-
Weighted-
Average
Average
Remaining
Aggregate
Exercise
Contractual
Price
Life
Intrinsic
Value
1.40
0.87
0.82
1.16
1.16
6.4 years
6.3 years
$
-
-
-
1,120
$ 1,383,525
1.32
5.3 years
$
807,799
1.23
6.0 years
$ 1,078,322
$
$
$
$
$
$
$
Additional information with respect to stock option activity during the nine months ended December 31, 2016 under our
Stock Option Plans is as follows:
Outstanding at April 1, 2016
Granted
Exercised
Forfeited
Outstanding at December 31, 2016
Exercisable at December 31, 2016
Shares
Under
Option
2,561,769
632,098
-
(189,069)
3,004,798
2,184,741
Vested and expected to vest at December 31, 2016
2,736,080
44
Weighted-
Weighted-
Average
Average
Remaining
Aggregate
Exercise
Contractual
Price
1.40
0.68
-
2.06
1.40
Life
6.2 years
6.4 years
1.37
5.4 years
1.21
6.2 years
$
$
$
$
$
$
$
$
$
$
$
Intrinsic
Value
-
-
-
-
-
-
-
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Additional information with respect to stock option activity during the year ended December 31, 2016 (unaudited) under our
Stock Option Plans is as follows:
Weighted-
Weighted-
Average
Outstanding at December 31, 2015
Granted
Exercised
Forfeited
Outstanding at December 31, 2016
Shares
Under
Option
2,773,152 $
$
632,098
$
-
$
(400,452)
3,004,798
$
1.42 6.4 years
0.68
-
1.87
1.40
6.4 years
Average
Exercise
Price
Remaining
Contractual
Life
Aggregate
Intrinsic
Value
Exercisable at December 31, 2016
2,184,741
Vested and expected to vest at December 31, 2016
2,736,080
$
$
1.37
5.4 years
1.21
6.2 years
$
$
$
$
-
-
-
-
-
-
-
The weighted-average grant date fair value of options granted during the years ended December 31, 2017 and 2016, three
months ended March 31, 2016, and nine months ended December 31, 2016 was $0.59, $0.72 (unaudited), $0.16 (unaudited),
and $0.74, respectively.
As of December 31, 2016, there was $400,513 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 twenty-three months. The total fair value of stock options that vested during the years ended December 31, 2017
and 2016, three months ended March 31, 2016, and nine months ended December 31, 2016 was $236,329, $264,004
(unaudited), $98,339 (unaudited) and $165,665, respectively.
Cash received by us upon the exercise of stock options for the years ended December 31, 2017 and 2016, three months ended
March 31, 2016, and nine months ended December 31, 2016 was $59,533 in 2017 and zero for all periods in 2016. The
source of shares of common stock issuable upon the exercise of stock options is from authorized and previously unissued
common shares.
Stock
Bonus
Plan
Activity
Activity with respect to non-vested shares under the Stock Bonus Plan as of December 31, 2017 and December 31, 2016
(unaudited), three months ended March 31, 2016 (unaudited), and nine months ended December 21, 2016 and the changes
during the above noted periods are presented below:
Year ended December 31,
2017
2016
(Unaudited)
Three months ended
March 31,
2016
(Unaudited)
Nine months ended
December 31,
2016
Shares
Under
Contract Fair Value Contract Fair Value Contract Fair Value
Shares
Grant Date Under
Shares
Under
Shares
Grant Date Under
Weighted-
Average
Weighted-
Average
Weighted-
Average
Grant Date
Contract Fair Value
Weighted-
Average
Grant Date
beginning of
Unvested at
period
Granted
Vested
Forfeited
Unvested at end of period
102,048 $
23,735 $
(68,023) $
- $
57,760 $
0.84
0.87
0.98
-
0.68
90,561 $
160,389 $
(144,981) $
(3,921) $
102,048 $
1.36
0.68
0.98
2.87
0.84
90,561 $
- $
- $
(2,347) $
88,214 $
1.36
-
-
3.95
1.36
88,214 $
160,389 $
(144,981) $
(1,574) $
102,048 $
1.36
0.68
0.98
1.25
0.84
As of December 31, 2017, there was $28,725 of total unrecognized compensation costs related to common stock granted
under our Stock Bonus Plan. The unrecognized compensation cost at December 31, 2017 is expected to be recognized over a
weighted-average period of eighteen months.
45
Table of Contents
Stock
Purchase
Plan
Activity
During the years ended December 31, 2017 and 2016, three months ended March 31, 2016 and nine months ended December
31, 2016, we issued 116,023, 83,586 (unaudited), 23,261 (unaudited) and 60,325 shares of common stock, respectively,
under the Stock Purchase Plan. Cash received by us upon the purchase of shares under the Stock Purchase Plan for the years
ended December 31, 2017 and 2016, three months ended March 31, 2016 and nine months ended December 31, 2016 was
$53,761, $44,142 (unaudited), $12,795 (unaudited), and $31,347, respectively.
(13) Significant Customers
We have historically derived significant revenue from a few key customers. The following table summarizes revenue and
percent of total revenue from significant customers for the years ended December 31, 2017 and 2016, three months ended
March 31, 2016, and nine months ended December 31, 2016:
Year Ended December 31,
2017
2016
(Unaudited)
Customer A
Customer B
Customer C
Customer D
Customer E
Customer F
Customer G
$
-
$
166,094
$
286,515
$
298,775
$
500,840
$ 2,424,000
$ 2,559,452
%
%
%
%
%
%
%
-
2
4
4
6
31
33
$
811,629
14
$
450,505
$
382,113
8
7
$
665,615
12
$
-
$
160,500
-
3
Three months ended
March 31,
2016
(Unaudited)
Nine months ended
December 31,
2016
%
%
%
%
%
%
%
$ 285,494
$ 186,800
$
33,685
$ 132,905
$
$
-
-
19
12
2
9
-
-
%
%
%
%
%
%
%
$
526,136
13
$
263,705
$
348,428
6
8
$
532,710
13
$
-
$
160,500
-
4
%
%
%
%
%
%
%
$ 1,740,929
31
$ 410,220
27
$ 1,330,709
32
The following table summarizes accounts receivable from significant customers as of December 31, 2017 and 2016:
Customer A
Customer B
Customer C
Customer D
Customer E
Customer F
Customer G
December 31,
2017
December 31,
2016
- %
2 %
- %
4 %
- %
- %
80 %
- %
11 %
29 %
10 %
- %
- %
45 %
46
Table of Contents
(14) Income Taxes
On December 22, 2017 (the "Enactment Date"), the U.S. government enacted comprehensive tax legislation commonly
referred to as the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act makes broad and complex changes to the U.S. tax
code and key provisions applicable, or that may be applicable, to us or certain of UQM Technologies Inc.’s existing or
potential customers for 2018 include the following: (1) reduction of the U.S. federal corporate tax rate from 35 % to 21 %
percent; (2) elimination of the corporate alternative minimum tax (AMT); (3) a new limitation on deductible interest expense;
(4) limitations on the deductibility of certain executive compensation; (5) limitations on the use of foreign tax credits
("FTCs") to reduce the U.S. income tax liability; (6) limitations on net operating losses (“NOL’s”) generated after December
31, 2017 to 80 percent of taxable income; and (7) the introduction of the Base Erosion Anti-Abuse Tax (“BEAT”) for tax
years beginning after December 31, 2017.
Concurrent with the enactment of the Tax Act, in December 2017, the SEC staff issued Staff Accounting Bulletin 118 ("SAB
118"), which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period
that should not extend beyond one year from the Enactment Date for companies to complete the accounting under
Accounting Standards Codification 740 -
Income
Taxes
("ASC 740"). In accordance with SAB 118, a company must reflect
the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent
that an entity's accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable
estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional
estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the
tax laws that were in effect immediately before the enactment of the Tax Act.
Our assessment and accounting for the income tax effects of the Tax Act affecting our consolidated financial statements is
generally complete, subject to continued evaluation under SAB 118. The change in federal corporate income tax rate from
35% to 21% was enacted in 2017 and effective January 1, 2018. For 2017, the rate change does not impact the calculation of
current income tax liability but does require the future rate to be applied to deferred income tax assets and liabilities that exist
at December 31, 2017. An expense of $13.3 million was recorded to deferred income tax expense for this change. An
adjustment to the effective tax rate is also required to reflect the different rates (35% and 21%) applied to currently arising
temporary differences for current tax and deferred tax. There is no P&L impact of these adjustments as the valuation
allowance will have a corresponding adjustment to offset any changes to the deferred tax asset.
Income tax benefit attributable to loss from operations differed from the amounts computed by applying the U.S. federal
income tax rate of 34 percent to December 31, 2017 and to the prior years as a result of the following:
Computed "expected" tax benefit
Increase (decrease) in taxes resulting from:
Increase (decrease) in valuation allowance for net deferred tax assets
Change in rate on deferred opening balance
Other Adjustments
Other, net
Income tax expense
47
Year ended
December 31,
2017
Year ended
December 31,
2016
$
(1,608,777) $ (4,425,953)
(13,303,260)
13,289,000
1,662,208
(39,171)
$
— $
6,120,293
—
—
(1,694,340)
—
Table of Contents
The components of the Company’s federal and state deferred tax assets and liabilities at December 31, 2017 and 2016 are
shown below. The tax effects of temporary differences that give rise to significant portions of the net deferred tax asset are:
Deferred tax assets:
Research and development credit carry-forwards
Net operating loss carry-forwards
Deferred compensation
Property and equipment
Stock Compensation
Other
Total deferred tax assets
Deferred tax liabilities:
Intangible assets
Total deferred tax liabilities
Net deferred tax assets
Less valuation allowance
December 31,
2017
December 31,
2016
$
4,073 $
22,947,741
9,443
75,545
659,526
2,033,592
25,729,920
4,073
32,864,500
111,006
122,814
985,219
3,157,324
37,244,936
35,211
35,211
53,128
53,128
25,694,709
37,191,808
(25,694,709)
(37,191,808)
Deferred tax assets, net of valuation allowance
$
— $
—
As of December 31, 2017 and December 31, 2016, respectively, we had net operating loss (“NOL”) carry-forwards of
approximately $95.3 million and $90.3 million for U.S. income tax purposes that expire in varying amounts through 2037. At
December 31, 2016, approximately $5.3 million of the net operating loss carry-forwards are attributable to stock options, the
benefit of which will be credited to additional paid-in capital if realized. At December 31, 2017, the new accounting
pronouncements (ASU 2016-09) changed the accounting for net operating losses allowing recognition in 2017. However,
due to the provisions of Section 382 of the Internal Revenue Code, the utilization of a portion of these NOLs may be limited.
Future ownership changes under Section 382 could occur that would result in additional Section 382 limitations, which could
further restrict the use of NOLs. In addition, any Section 382 limitation could reduce our ability for utilization to zero if we
fail to satisfy the continuity of business enterprise requirement for the two-year period following an ownership change.
The valuation allowance for deferred tax assets of $25.7 million and $37.2 million at December 31, 2017 and December 31,
2016, respectively, relates principally to the uncertainty of the utilization of deferred tax assets in various tax jurisdictions.
The Company continually assesses both positive and negative evidence to determine whether it is more-likely-than-not that
the deferred tax assets can be realized prior to their expiration. Based on the Company’s assessment it has determined the
deferred tax assets are not currently realizable.
We have not recorded any potential liability for uncertain tax positions taken on our tax returns.
We may, from time to time, be assessed interest or penalties by major tax jurisdictions, although any such assessments
historically have been minimal and immaterial to our financial results. Penalties are recorded in selling, general and
administrative expenses and interest paid or received is recorded in interest expense or interest income, respectively, in the
consolidated statements of operations.
(15) 401(k) Employee Benefit Plan
We have established a 401(k) Savings Plan (“401K Plan”) under which eligible employees may contribute up to 15 percent
of their compensation. Employees over the age of 18 are eligible immediately upon hire to participate in the 401K Plan. At
the direction of the participants, contributions are invested in several investment options offered by the 401K Plan. We
currently match 33 percent of participants’ contributions, subject to certain limitations. These matching contributions vest
ratably over a three-year period. Matching contributions to the 401K Plan were
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Table of Contents
$118,512, $115,746 (unaudited), $30,265 (unaudited), and $85,481, for the years ended December 31, 2017 and 2016, three
months ended March 31, 2016 and nine months ended December 31, 2016, respectively.
(16) Interim Financial Data (Unaudited)
March 31,
Quarters Ended
June 30,
September 30, December 31,
Year ended December 31, 2017
Sales
Gross profit
Net loss
$
$
$
1,015,045 $
326,132 $
1,788,955 $ 2,752,554 $
701,764 $ 1,281,220 $
2,222,195
816,445
(543,401) $ (1,280,668)
(1,606,026) $ (1,348,221) $
Net loss per common share basic and diluted:
$
(0.03) $
(0.03) $
(0.01) $
(0.03)
March 31,
June 30,
September 30,
December 31,
Quarters Ended
Year ended December 31, 2016
Sales
Gross profit
Net loss
1,666,789
$ 1,504,288 $
391,013 $
$
244,521 $ (6,625,571)
(930,918) $ (1,954,030) $ (2,368,245) $ (8,695,233)
$
1,435,081 $
439,043 $
1,021,125 $
Net loss per common share basic and diluted:
$
(0.02) $
(0.04) $
(0.05) $
(0.18)
ITEM 9. CHANGE IN AND DISAGREEMENTS WITH INDEPENDENT ACCOUNTANTS O N ACCOUNTING
AND FINANCIAL DISCLOSURE
Effective November 16, 2017, Hein & Associates LLP (“ Hein
”), the independent registered public accounting firm for the
Company, merged with Moss Adams LLP (“ Moss
Adams
”). As a result of this transaction, on November 16, 2017, Hein
resigned as the independent registered public accounting firm for the Company. Concurrent with such resignation of Hein, the
Company’s audit committee approved the engagement of Moss Adams as the new independent registered public accounting firm
for the Company effective for the year ended December 31, 2017.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls And Procedures
We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of
December 31, 2017 under the supervision and with the participation of management, including our Chief Executive Officer
(“CEO”) and Chief Financial Officer (“CFO”).
Based on their evaluation as of December 31, 2017, our CEO and CFO have concluded that our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective to ensure that the information
required to be disclosed by our management in the reports that it files or submits under the Exchange Act is (i) recorded,
processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and
communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosure.
Management Report on Internal Control Over Financial Reporting
Our management is responsible for all aspects of the business, including the preparation of the consolidated financial statements
in this annual report. Management prepared the consolidated financial statements using accounting principles generally accepted
in the United States. Management has also prepared the other information in this annual report and is responsible for its accuracy
and consistency with the consolidated financial statements.
Management is responsible for establishing and maintaining an adequate system of internal control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act), including safeguarding of assets against unauthorized
acquisition, use or disposition. This system is designed to provide reasonable assurance to management and
49
Table of Contents
the board of directors regarding preparation of reliable published financial statements and safeguarding of our assets. This system
is supported with written policies and procedures and contains self-monitoring mechanisms. Appropriate actions are taken by
management to correct deficiencies as they are identified. All internal control systems have inherent limitations, including the
possibility of circumvention and overriding of controls, and, therefore, can provide only reasonable assurance as to the reliability
of financial statement preparation and such asset safeguarding.
Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2017. In making
this assessment, it used the criteria described in the 2013 “Internal Control-Integrated Framework” issued by the Committee of
Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment, management has concluded that,
as of December 31, 2017, our internal control over financial reporting is effective. Management reviewed the results of its
assessment with the Audit Committee of our Board of Directors who oversees the financial reporting process.
Attestation Report of the Registered Public Accounting Firm
This Form 10-K does not include an attestation report of our registered public accounting firm regarding internal control over
financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the
rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Form 10-K.
Changes in Internal Control Over Financial Reporting
There were no changes to our internal control over financial reporting that occurred during the quarter ended December 31, 2017
that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
March 20, 2018
/s/JOSEPH R. MITCHELL
Joseph Mitchell
President and Chief Executive Officer
ITEM 9B . OTHER INFORMATION
None.
/s/DAVID I. ROSENTHAL
David I. Rosenthal
Treasurer, Secretary and
Chief Financial Officer
50
Table of Contents
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Additional information required by Item 10 is incorporated by reference from and contained under the headings “Election of
Directors”, “Management” “Section 16(a) Beneficial Ownership Reporting Compliance” and “Code of Ethics” in our Definitive
Proxy Statement for the 2018 Annual Meeting of Shareholders.
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 2017,” “Aggregate Option Exercises During Fiscal Year 2017,” “Option
Values at the End of Fiscal Year 2017,” “Director Compensation,” “Compensation discussion and Analysis,” “Compensation and
Benefits Committee Report,” and “Compensation Committee Interlocks” in our definitive Proxy Statement for the 2018 Annual
Meeting of Shareholders.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMEN T AND
RELATED STOCKHOLDER MATTERS
The information required by Item 12 is incorporated by reference from and contained under the heading “Security Ownership of
Certain Owners and Management” and “Equity Compensation Plan Information” in our definitive Proxy Statement for the 2018
Annual Meeting of Shareholders.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTION S AND DIRECTOR INDEPENDENCE
The information required by Item 13 is incorporated by reference from and contained under the headings “Certain Relationships
and Related Transactions” in our definitive Proxy Statement for the 2018 Annual Meeting of Shareholders.
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 2018 Annual Meeting of Shareholders.
51
Table of Contents
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)
1. Financial Statements
PART IV
UQM Technologies, Inc. (included in Part II):
Reports of Independent Registered Public Accounting Firm.
Consolidated Balance Sheets, December, 31, 2017 and 2016.
Consolidated Statements of Operations for the Year Ended December 31, 2017, 2016 (unaudited), Three Months
Ended March 31, 2016 (unaudited), and Nine Months Ended December 31, 2016
Consolidated Statements of Stockholders’ Equity for the Year Ended December 31, 2017 and Nine Months Ended
December 31, 2016
Consolidated Statements of Cash Flows for the Year Ended December 31, 2017, 2016 (unaudited), Three Months
Ended March 31, 2016 (unaudited), and Nine Months Ended December 31, 2016
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:
3.1
3.2
4.1
4.2
4.3
10.1
10.2
10.3
Amended and Restated Articles of Incorporation as further amended. Reference is made to Exhibit 3.1 of our
current report on Form 8-K filed on January 10, 2017, which is incorporated herein by reference.
Bylaws, as amended. Reference is made to Exhibit 3.2 of our Annual Report on Form 10-K filed May 30, 2014,
which is incorporated herein by reference.
Specimen Stock Certificate. Reference is made to Exhibit 3.1 of our Registration Statement on Form 10 dated
February 27, 1980, which is incorporated herein by reference.
Form of Common Stock Purchase Warrant (expiration August 5, 2018). Reference is made to Exhibit 4.1 of our
current report on Form 8-K, filed February 5, 2014, which is incorporated herein by reference.
Form of Common Stock Purchase Warrant (expiration October 30, 2020). Reference is made to Exhibit 4.1 of our
current report on Form 8-K, filed October 30, 2015, which is incorporated herein by reference.
Credit Agreement dated March 15, 2017 between UQM Properties, Inc. and Bank of the West pertaining to the
Company’s working capital and cash managment non-revolving line of credit. Reference is made to Exhibit 4.4 of
our Transition Report on Form 10-KT filed March 30, 2017, which is incorporated herein by reference.
Supply Agreement dated October 20, 2015 by and between ITL and UQM Technologies, Inc. Reference is made
to Exhibit 10.1 of our current report on Form 8-K filed on October 26, 2015, which is incorporated herein by
reference.
Employment Agreement dated as of July 1, 2017, between UQM Technologies, Inc. and Joseph R. Mitchell.
** Reference is made to Exhibit 10.1 of our Current Report on Form 8-K filed on July 6, 2017, which is
incorporated herein by reference.
52
Table of Contents
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
First Amendment to Employment Agreement, dated as of September 25, 2017, between UQM Technologies, Inc.
and Joseph R. Mitchell. ** Reference is made to Exhibit 10.1 of our Current Report on Form 8-K filed on
September 29, 2017, which is incorporated herein by reference.
Employment Agreement dated as of July 1, 2017, between UQM Technologies, Inc. and David I. Rosenthal.
** Reference is made to Exhibit 10.2 of our Current Report on Form 8-K filed on July 6, 2017, which is
incorporated herein by reference.
Employment Agreement dated as of July 1, 2017, between UQM Technologies, Inc. and Adrian P. Schaffer.
** Reference is made to Exhibit 10.3 of our Current Report on Form 8-K filed on July 6, 2017, which is
incorporated herein by reference.
Stock Bonus Plan. ** Reference is made to Exhibit 10.2 of our Current Report on Form 8-K filed on August 12,
2005, which is incorporated herein by reference.
Amendment to UQM Technologies, Inc. Stock Bonus Plan dated May 9, 2012. ** Reference is made to Exhibit
10.22 of our Annual Report on Form 10-K filed May 24, 2012, which is incorporated herein by reference.
Amendment to UQM Technologies, Inc. Stock Bonus Plan adopted August 13, 2014.** Reference is made to
Appendix B of our Proxy Statement filed July 2, 2014, which is incorporated herein by reference.
UQM Technologies, Inc. 2012 Equity Incentive Plan adopted April 11, 2012.** Reference is made to Exhibit
10.19 of our Annual Report on Form 10-K filed May 24, 2012, which is incorporated herein by reference.
Amendment to UQM Technologies, Inc. 2012 Equity Incentive Plan adopted August 13, 2014.** Reference is
made to Appendix A of our Proxy Statement filed July 2, 2014, which is incorporated herein by reference.
Amended and Restated UQM Technologies, Inc. Employee Stock Purchase Plan. ** Reference is made to
Appendix A of our Proxy Statement filed October 25, 2017, which is incorporated herein by reference.
UQM Technologies, Inc. Outside Director Stock Option Plan amended November 2, 2011. ** Reference is made to
Exhibit 10.21 of our Annual Report on Form 10-K filed May 24, 2012, which is incorporated herein by reference.
Form of Incentive Stock Option Agreement. ** Reference is made to Exhibit 10.6 of our Annual Report on Form
10-K, filed on May 22, 2008, which is incorporated herein by reference.
Form of Non-Qualified Stock Option Agreement. ** Reference is made to Exhibit 10.7 of our Annual Report on
Form 10-K, filed on May 22, 2008, which is incorporated herein by reference.
Form of Restricted Stock Agreement, amended May 9, 2012. ** Reference is made to Exhibit 10.20 of our Annual
Report on Form 10-K filed May 24, 2012, which is incorporated herein by reference.
Stock Purchase Agreement, dated as of August 25, 2017, among UQM and Sinotruk (BVI) Limited, and China
National Heavy Duty Truck Group Co., Ltd. Reference is made to Exhibit 10.1 of our Current Report on Form 8-K
filed on August 30, 2017, which is incorporated herein by reference.
Registration Rights Agreement, dated September 25, 2017, between UQM Technologies, Inc. and Sinotruk (BVI)
Limited. Reference is made to Exhibit 10.1 of our Current Report on Form 8-K filed on September 28, 2017,
which is incorporated herein by reference.
53
Table of Contents
10.19
10.20
16.1
21.1
23.1
23.2
31.1
31.2
32.1
Joint Venture Agreement, dated November 30, 2017, among China National Heavy Duty Truck Group Co., Ltd.,
UQM Technologies, Inc., and Sinotruk Global Village Investment Limited. Reference is made to Exhibit 10.1 of
our Current Report on Form 8-K filed on December 1, 2017, which is incorporated herein by reference.
Technology License and Services Agreement, dated November 6, 2017, between UQM Technologies, Inc. and
Sinotruk Qingdao Zhongqi New Energy Automobile Co., Ltd. Reference is made to Exhibit 10.1 of our Current
Report on Form 8-K filed on December 27, 2017, which is incorporated herein by reference.
Letter of Hein & Associates LLP. Reference is made to Exhibit 16.1 of our Current Report on Form 8-K filed on
November 17, 2017, which is incorporated herein by reference.
Subsidiaries of the Company.
Consent of Moss Adams LLP.
Consent of Hein & Associates 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.
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
** management contract or compensation plan.
ITEM 16. FORM 10-K SUMMARY
None.
54
Table of Contents
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,
th
Colorado on the 20 day of March, 2018.
SIGNATURES
UQM TECHNOLOGIES, INC.,
a Colorado Corporation
By: /s/ JOSEPH MITCHELL
Joseph Mitchell
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
/s/JOSEPH R. MITCHELL
Joseph R. Mitchell
President and Chief Executive Officer
Date
March 20, 2018
March 20, 2018
/s/DAVID I. ROSENTHAL
Treasurer and Secretary (Principal Financial and
March 20, 2018
David I. Rosenthal
Accounting Officer)
/s/STEPHEN J. ROY
Stephen J. Roy
/s/JOSEPH P. SELLINGER
Joseph P. Sellinger
/s/JOHN E. SZTYKIEL
John E. Sztykiel
Director
Director
Director
55
March 20, 2018
March 20, 2018
March 20, 2018
THE SUBSIDIARIES OF THE REGISTRANT
Exhibit 21.1
Name
Incorporation
Domestic Subsidiary
UQM Properties, Inc.
Foreign Subsidiary
Colorado
UQM Technologies Asia Limited
Hong Kong
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statements (Form S-1 No. 333-221657, Forms S-
8 Nos. 333-129251, 333-168999, 333-169000, 333-183786, 333-183788, 333-183796, 333-198227, and 333-
198228) of our report dated March 20, 2018,
relating to the consolidated financial statements of UQM
Technologies, Inc., appearing in this Annual Report (Form 10-K) for the year ended December 31, 2017.
/s/ Moss Adams LLP
Denver, Colorado
March 20, 2018
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statements on Form S-1 (No. 333-221657) and
Forms S-8
(File No. 333-129251, 333-168999, 333-169000, 333-183786, 333-183788, 333-183796, 333-198227,
and 333-198228) of our report dated March 30, 2017, relating to our audit of the consolidated financial statements
of UQM Technologies, Inc., which appears in this Annual Report on Form 10-K of UQM Technologies, Inc. for the
year ended December 31, 2017.
Exhibit 23.2
/s/ Hein & Associates LLP
Denver, Colorado
March 20, 2018
Exhibit 31.1
I, Joseph R. Mitchell, certify that:
1.
I have reviewed this Annual Report on Form 10-K of UQM Technologies, Inc.;
Certification
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 registrant’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 registrant’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.
arch
Date: March 20, 2018
/s/ J OSEPH R. M ITCHELL
Joseph R. Mitchell
President and Chief Executive Officer
Exhibit 31.2
I, David I. Rosenthal, certify that:
1.
I have reviewed this Annual Report on Form 10-K of UQM Technologies, Inc.;
Certification
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 registrant’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 registrant’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: March 20, 2018
/s/ DAVID I. ROSENTHAL
David I. Rosenthal
Treasurer, Secretary and
Chief Financial Officer
Exhibit 32.1
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 twelve months
ended December 31, 2017 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, as amended, and 2) the information contained
in the Report 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.
/s/ JOSEPH R M ITCHELL
Joseph R. Mitchell
President and Chief Executive Officer
arch
/s/ D AVID I . R OSENTHAL
David I. Rosenthal
Treasurer, Secretary and Chief Financial Officer
Date: March 20, 2018