Annual Reports

  • 10-K (May 23, 2013)
  • 10-K (May 24, 2012)
  • 10-K (Jun 2, 2011)
  • 10-K (May 24, 2010)
  • 10-K (May 21, 2009)
  • 10-K (Mar 10, 2009)

 
Quarterly Reports

 
8-K

 
Other

UQM TECHNOLOGIES 10-K 2010
Form 10-K 03/31/2010

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

 

WASHINGTON, D.C. 20549

 

_____________________

 

FORM 10-K

_____________________

[X]

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

   

For the fiscal year ended March 31, 2010

OR

 

[  ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

   

For the transition period from                  to                 

Commission file number 1-10869

   
 

               UQM TECHNOLOGIES, INC.               

 

(Exact name of registrant as specified in its charter)

 

______________________

   

Colorado

 

84-0579156

 
   

(State or other jurisdiction

 

(I.R.S. Employer

 
   

of incorporation or organization)

 

Identification No.)

 
   

7501 Miller Drive, Frederick, Colorado

 

80504

 
   

(Address of principal executive offices)

 

(Zip Code)

 
 

Registrant's telephone number, including area code: (303) 682-4900

 

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

       

Name of each exchange on which registered

 
   

Title of each class

 

NYSE Amex

 
   

Common Stock

 

Pacific Stock Exchange

 
       

Chicago Stock Exchange

 
       

Frankfurt Stock Exchange

 
       

Berlin Stock Exchange

 
       

Stuttgart Stock Exchange

 
 

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

None.

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes  [  ]   No  [X]

   
 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.

Yes  [  ]   No  [X]

   
 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),

 

and (2) has been subject to such filing requirements for the past 90 days.

Yes [X]   No  [  ]

   
 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every interactive data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter

period that the registrant was required to submit and post such files).

Yes  [  ]   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.  [ X ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

 

 [  ]  Large accelerated filer

[X]  Accelerated filer

[  ]  Non-accelerated filer

[  ]  Smaller reporting company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  [  ]   No  [X]

 

The aggregate market value of the registrant's common stock ("Common Stock") held by non-affiliates as of September 30, 2009, based on the closing price of the Common Stock as reported by the NYSE Amex on such date was approximately $153,140,555. As of May 20, 2010, there were 36,046,667 shares of the registrant's Common Stock outstanding.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

Document

 

Parts Into Which Incorporated

 

Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held August 4, 2010.

 

Part III

 

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.

Submission of Matters to a Vote of Security Holders

 
   

  PART II.

 
 
 

Item 5.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of

     

Equity Securities

 
     
 

Item 6.

Selected Consolidated 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 Firm

 
       
     

Consolidated Balance Sheets as of March 31, 2010 and March 31, 2009

 
       
     

Consolidated Statements of Operations for the Fiscal Years ended March 31, 2010, 2009 and 2008

 
       
     

Consolidated Statements of Stockholders' Equity for the Fiscal Years

 
       

ended March 31, 2010, 2009 and 2008

 
         
     

Consolidated Statements of Cash Flows for the Fiscal Years ended March 31, 2010, 2009 and 2008

 
       
     

Notes to Consolidated Financial Statements

 
       
 

Item 9.

Change In and Disagreements with 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 and Reports on Form 8-K

 
       

 

PART I

ITEM 1.

BUSINESS

TOC

This Report contains statements that constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. These statements appear in a number of places in this Report and include statements regarding our plans, beliefs or current expectations; including those plans, beliefs and expectations of our officers and directors with respect to, among other things, orders to be received under our supply agreement with CODA, our ability to successfully expand our manufacturing facilities, the ability to sell our existing facility on terms satisfactory to us 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.

General

UQM Technologies, Inc., ("UQM") is a developer and manufacturer of power dense, high efficiency electric motors, generators and power electronic controllers for the automotive, aerospace, military and industrial markets. A major emphasis of the Company is developing products for the alternative energy technologies sector including propulsion systems for electric, hybrid electric, plug-in hybrid electric and fuel cell electric vehicles, under-the-hood power accessories and other vehicle auxiliaries. The Company's headquarters, engineering and product development center, and motor manufacturing operation are located in Frederick, Colorado. Our primary focus is incorporating our advanced technology into products aimed at emerging markets for electrically propelled vehicles that are expected to experience rapid growth.

In June 2009 we entered into a ten year Supply Agreement with CODA Automotive to supply UQM® PowerPhase® electric propulsion systems to CODA Automotive's production partner, Harbin HaFei Automobile Industry Group Co. Ltd. ("HaFei"), Harbin, China. HaFei is the third largest automobile manufacturer in China. Initial shipments of production systems under the agreement are expected to begin later this calendar year and ramp up prior to scheduled deliveries of CODA's all-electric four-door sedan in the California market in the fall of 2010. CODA hopes to sell 14,000 vehicles in calendar year 2011 reaching an annual run rate of 20,000 vehicles, which, if achieved, would result in annual revenue to us well in excess of $50 million.

In August 2009 we were selected to receive a $45.1 million award from the U.S. Department of Energy ("DOE") under the American Recovery and Reinvestment Act to accelerate the manufacturing and deployment of electric vehicles, batteries and components in the United States. The award was finalized in January 2010. The award provides for a 50 percent cost-share by the Company raising the total value of the project to $90.2 million. Capital expenditures for facilities, tooling and manufacturing equipment and the qualification and testing of products associated with the launch of volume production for CODA Automotive, as well as other customers, are expected to qualify for reimbursement under the DOE program. The contract also provides for the reimbursement of qualifying pre-award expenditures incurred after August 5, 2009. Expected reimbursements under this provision for production engineering expenditures incurred through March 31, 2010 totaled approximately $1.6 million and are expected to be recorded during the first quarter of fiscal 2011 as a reduction of production engineering expense. Reimbursements received from the DOE through March 31, 2010 for capital assets acquired totaled $3.6 million, which were recorded as a reduction in the cost basis of the assets acquired.

In October 2009 we completed a public offering of 8.625 million shares of our common stock. Net cash proceeds to the Company from the offering were approximately $32 million. Proceeds from the offering are being used as matching funds under the DOE ARRA grant and the remaining portion is expected to be used for working capital and general corporate purposes.

In December 2009 we completed the purchase of a 129,304 square foot facility on a 30 acre site in Longmont, Colorado to support our expected growth in manufacturing operations. The facility, which includes approximately 30,000 square feet of office space, will house the Company's engineering, vehicle integration and headquarters staff in addition to the Company's high volume motor and electronic manufacturing operations. Approximately 15 acres of the site are available for future facility expansion. The purchase price of the facility was $7,624,729, of which $3,438,365 was funded under the DOE ARRA grant. We expect to sell our existing 28,000 square foot facility once we complete the relocation of our operations to the new facility this summer. The new facility was acquired to accommodate our planned expansion of high volume manufacturing operations for CODA Automotive's all-electric passenger vehicle program and future growth arising from the expected launch of additional production programs.

We also have entered into a marketing collaboration with BorgWarner (NYSE:BWA) on electric powertrain products for all-electric and hybrid electric passenger automobiles. We expect that BorgWarner's global presence will bring a higher level of visibility to our electric propulsion system products and result in additional business opportunities with automobile customers worldwide.

We operate our business in two segments: 1) technology - which encompasses advanced research, development and application of our proprietary motors, generators, power electronics and software; and 2) power products - which encompasses the volume manufacturing of motors, generators, power electronic controllers and related products. We were incorporated in the state of Colorado in 1967.

The Company's revenue is derived from two principal sources: 1) funded contract research and development services performed for strategic partners, customers and the U.S. government directed toward either the advancement of our proprietary technology portfolio or the application of our proprietary technology to customers' products; and 2) the manufacture and sale of products engineered by us.

We have three principal operating companies: 1) UQM Technologies, Inc. which includes the Corporate Headquarters and Engineering and Product Development Center; and 2) wholly-owned subsidiary UQM Power Products, Inc. ("UQM Power") which is an ISO quality certified manufacturer of our products and UQM Properties, Inc. which owns our recently acquired facility in Longmont, Colorado. Each of these operating companies is located in Frederick, Colorado.

Technology

Our technology base includes a number of proprietary technologies and patents related to brushless permanent magnet motors, generators and power electronic controllers, together with software code to intelligently manage the operation of our systems.

The typical architecture of a UQM® electric machine (motor/generator) consists of a stator winding employing a high pole count configuration, which allows for high copper utilization (minimizing energy loss and cost), and a rotor that contains powerful rare earth permanent magnets. The stator is affixed to a housing that includes a mounting cylinder and bearings, which allow the rotor to be suspended within the stator. Commutation of the machine is accomplished electronically by sensing the position of the rotor in relation to the stator and intelligently pulsing electrical energy into the stator such that the electric field generated by the stator interacts with the magnetic field of the rotor, producing rotational motion (motor operation). Conversely, the application of rotational motion by an external force results in the generation of electrical power (generator operation). UQM® machines can be operated in either a forward or reverse direction of rotation and either in motor or generator mode and can dynamically change from one mode of operation to another in millisecond response time. The design features inherent to the electric machine contribute to lower usage of copper, iron and other materials generally (due to smaller package dimensions), reducing manufacturing costs compared to conventional machines of similar power. In addition, the utilization of the rare earth magnet chemistry, neodymium-iron-boron (NdFeB), in a wide-range of consumer devices such as cell phones, disk drives and medical devices, has dramatically improved the availability, performance and price of this material. This has allowed us to price our advanced motors and controls competitively with lesser performing conventional motors and controls, which we believe will accelerate the rate of commercialization of our technology.

Attributes of our permanent magnet motor/generator technology include brushless electronic commutation, a relatively large air-gap dimension (useful for hybrid electric applications where the motor is integrated with an engine or transmission), good heat rejection, minimized NdFeB magnet, iron and copper content, and low mechanical losses. As a result, UQM® machines have high operating efficiencies, high power density (high power output to weight ratio) and generally have smaller external dimensions and weight for a given power output, improving packaging. The electromagnetic design of our machines incorporates parameters that are compatible with software control algorithms described in a later section. These parameters are essential to achieve optimized output and efficiency; i.e., the machine design and software work together to create performance advantages that are not possible without the combination.

Attributes of our microprocessor-based digital power electronic controllers include high power operation (up to 600 amps at 400 volts), four-quadrant control (forward/reverse and motoring/generating), reduced switching losses relative to conventional technology, adaptive switch timing control and controller area network ("CAN") capability. As a result, UQM® controllers have high operating efficiencies, high power density (high power output to weight ratio) and generally have smaller external dimensions and weight for a given power output, improving packaging.

The UQM® embedded digital signal processor (DSP) software is the intelligence that coordinates the interaction between the motor/generator and controller, as well as interfacing with a vehicle controller. Software control algorithms are an important part of the Company's intellectual property portfolio. One aspect of the software is a patented method of control referred to as Phase Timing Advancement that enables UQM® motors to deliver both high output torque at low operating speeds and high power at increasing operating speeds. We have extended the capability of Phase Advance Control by using Adaptive Control techniques. These proprietary software algorithms alter the switching strategy as a function of DC voltage, operating speed, output power and temperature to optimize system performance under dynamically changing conditions. The result is maximized output and efficiency that decreases fuel consumption in hybrid electric vehicles and increases the range of battery electric vehicles. The Company's software also optimizes the output per unit of voltage and current, maximizing the utilization of the onboard stored energy and other electrical devices by extracting power from substantially the entire electrical cycle of the motor/generator. The development and application of these proprietary control algorithms have allowed us to continue increasing the peak and continuous power output and the efficiency of our systems. In addition, our controllers now have user configurable functionality and increased data transmission speeds and response times, improving vehicle capability. Included in this functionality is the ability to switch between torque, speed, and voltage control dynamically, which is especially useful for parallel hybrids and generator applications of our technology. For vehicle developers, our Graphical User Interface provides the means to tailor UQM® systems to create the desired driving experience.

Conventional permanent magnet motor designs are limited to operating at high torque and low speeds, sacrificing highway power, or low torque and high speeds, sacrificing acceleration and hill climbing ability. Desired propulsion attributes consist of high torque to launch the vehicle from a standing-stop, with a subsequent transition to high power as the vehicle is accelerated to highway speeds. In the majority of conventional internal combustion engine powered vehicles, the transition from high torque to high power is accomplished through the multiple gear changes performed by a mechanical transmission. UQMeg; systems, incorporating proprietary DSP software technology as described above, are suited as propulsion drives in electric, hybrid electric, plug-in hybrid electric and fuel cell electric vehicles due to their ability to power a vehicle from a standing-stop to highway speeds without mechanical gear changes, thereby eliminating the size, weight, complexity and cost of mechanical transmissions.

The ability to provide both high torque and high top speed creates additional advantages in military vehicles. High torque at low speed translates into obstacle and grade climbing capability that is more challenging in an off-road environment, while high speed enables pursuit, dash and evasive maneuvers as well as convoy transport. Conventional propulsion systems meet the high torque and high road speed requirements by using a transmission and additional gearing beyond that used for commercial vehicles. UQM's performance has proven to address the requirements of military and off-road vehicles with simplified transmissions, providing opportunities in these markets.

We have also developed auxiliary electronic products that support systems unrelated to propulsion. We currently manufacture proprietary DC-to-DC converters that convert energy from 250 volt to 450 volt vehicle battery packs to 12 volts to power lower voltage devices onboard these vehicles. We have also recently developed a high voltage DC-to-AC inverter with output efficiencies of up to 93 percent for use within electrified vehicles. Our inverters convert DC power stored in vehicle battery packs with nominal operating voltages of 340 volts DC to high quality 110 volt AC power.

During fiscal year 2010, we were granted a new US patent that relates to the Company's motor/generator technology. U.S. Patent No. 7,598,645 is titled Stress Distributing Permanent Magnet Rotor Geometry for Electric Machines. This technology covers machine geometry that incorporates two methods of torque production in a way that optimizes the electromagnetic and mechanical performance of the machine. These two methods are referred to as magnet and reluctance torque. Centrifugal forces internal to the rotor are distributed to the strongest sections of the rotor steel, allowing the weaker sections to be electromagnetically optimized for greater reluctance torque contribution. The result is higher output torque and higher top speed, which fits UQM's ongoing effort to address the performance of both commercial and military vehicle applications.

We have three U.S. patent applications pending related to new technology: two that relate to electric machines and the other related to inverters. We are also performing internally funded research and development to continually improve the functionality of the microprocessor software we use to intelligently control our motor/controller system. These enhancements include the following: additional user-selectable and adaptive algorithms that optimize system operation as a function of vehicle-level variables, refined generator voltage regulation to facilitate improved voltage and battery pack management, and further improvements in system efficiency and power output through advances in motor control algorithms. For electric machines, the U.S. Navy has awarded us a contract to apply and extend our recently patented motor technology within shipboard auxiliary applications, beginning with valve actuators. For controllers, UQM is working to obtain funding to continue work that is directed toward the development of high temperature power switching devices using silicon carbide.

The majority of our research and development activities are the result of projects contracted with and funded by customers, for which we typically retain intellectual property rights in the resulting technology developed. Customer funded development activities are recorded in our financial statements as contract services revenue and the associated development costs are shown as costs of contract services. Internally-funded research and development expenditures are charged to research and development expense when incurred.

In recent years, we have focused our research and development activities on the development of commercial products and production engineering activities to lower the cost of manufacture, as well as enhance the performance and capability of our systems, as opposed to basic research in the field. We believe our future growth is dependent, in part, on the continued advancement of our technology portfolio and our ability to commercialize our technology in additional product applications and markets. Accordingly, we expect to continue to pursue additional customer funded programs and to selectively invest in internally funded development projects to accomplish these objectives.

CODA Automotive Program

In June 2009 we entered into a ten year Supply Agreement with CODA Automotive to supply UQM® PowerPhase® electric propulsion systems to CODA Automotive's production partner, HaFei. Initial shipments of production systems under the agreement are expected to begin later this calendar year and ramp up prior to scheduled deliveries of CODA's full performance all-electric four-door sedan in the California market in the fall of 2010. CODA hopes to sell 14,000 vehicles in calendar year 2011 reaching an annual run rate of 20,000 vehicles, which, if achieved, would result in annual revenue to us well in excess of $50 million.

The CODA all-electric sedan was developed by CODA's internal team of engineers working with multiple external engineering partners, including Porsche Engineering. The vehicle is propelled by a 100 kW UQM® PowerPhase® electric propulsion system and is expected to carry a 5-star crash worthiness rating and sell in the mid $30,000s after a $7,500 Federal tax credit. Powered by a 33.8 kWh lithium-ion battery, the vehicle is expected to have a range between charges of 90 to 120 miles depending on individual driving habits. The onboard charger plugs into a 110V or a 220V outlet and can charge for a 40-mile commute in approximately two hours (full charge in less than six hours) at 220V.

The CODA electric sedan chassis will be assembled and tested, incorporating the UQM® power-train on an existing large-scale assembly line operated by HaFei. Hafei is one of the premier production and R&D companies in China and is China's third largest automobile manufacturer. Hafei has over 575,000 square meters of production facilities and 11,000 employees.

CODA announced that the battery system is being supplied by a joint venture between CODA Automotive and Tianjin Lishen Battery Co. ("Lishen"). Lishen is one of the world's largest manufacturers of lithium-ion cells and a key supplier to Apple, Motorola, Samsung and Vodafone, among others. In March 2010, the CODA-Lishen joint venture announced that it had secured $100 million in committed equity capital and received a commitment for a $294 million line of credit from the Bank of Tianjin Joint-Stock Co., Ltd. CODA is working to establish U.S. based manufacturing of their joint venture batteries.

We understand that CODA is also working to establish final vehicle assembly in Southern California where at a minimum the battery system would be installed in the chassis produced by Hafei. It is likely, that over time, the UQM propulsion system and other US- sourced components would be assembled into the vehicle in Southern California, rather than China.

CODA advertises that the CODA sedan is backed by a three-year/36,000 mile warranty and an eight-year/100,000 mile battery warranty.

CODA Automotive states its strategy is to design, brand, market and distribute electric vehicles utilizing manufacturing partnerships which allow it to develop vehicles rapidly in a flexible manner - avoiding the traditionally capital-intensive nature of the automobile business. CODA expects to employ a direct distribution model, with initial sales of the all-electric sedan commencing in the late fall of 2010 in California. CODA plans to have vehicle maintenance and service performed through an outsourced network comprised of brand name car service partners. CODA Automotive has announced that to date it has raised $125 million in capital to facilitate the execution of its business plan.

Other announced suppliers to the CODA program include: Continental (electronic stability control); Delphi (DC to DC converter and electric power steering); BorgWarner (transaxle); Hella (electric vacuum pump); Energy CS (battery management system); Lear (battery charger); OMITEC (main controller); and Mitsubishi (electric AC compressor).

U.S. Department of Energy Stimulus Grant

On January 13, 2010 (the "Grant Date"), we executed an Assistance Agreement (the "Agreement") for a $45,145,534 grant (the "Grant") with the U.S. Department of Energy ("DOE") under the American Recovery and Reinvestment Act (the "Stimulus Act"). The Grant provides funds to facilitate the manufacture and deployment of electric drive vehicles, batteries and electric drive vehicle components in the United States. We were one of seven component manufacturers selected for an award and the only small business under the component category. Pursuant to the terms of the Agreement, the DOE will reimburse us for 50 percent of qualifying costs incurred on or after August 5, 2009 for the purchase of facilities, tooling and manufacturing equipment, and for engineering related to product qualification and testing of our electric propulsion systems and other products. The period of the Grant is through January 12, 2013.

The $45.1 million size of the Grant is based on the estimated cost of a project to implement high volume manufacturing operations provided in our application to the DOE under the Electric Drive Vehicle Battery and Component Manufacturing Initiative. Funding for qualifying project costs incurred during the period commencing August 5, 2009 through June 26, 2010 is initially limited to $8.1 million until the following conditions are satisfied: 1) review and approval of our accounting system by the DCAA; and 2) mutual agreement by the parties on an updated total estimated cost of the project. In the event either condition is not satisfied by June 26, 2010, the Grant may be terminated. In addition, we are required, no later than January 12, 2011, to provide the DOE with an additional updated total estimated cost of the project along with evidence of firm commitments for our 50 percent share of the total estimated cost of the project. If all such funds have not been secured, we must submit, by such date, a funding plan to obtain the remainder of such funds, which is acceptable to the DOE.

The Grant is also subject to our compliance with certain reporting requirements. As specified in the Act, we are required to use the Grant funds in a manner that maximizes job creation and economic benefits. The Stimulus Act and the Agreement impose minimum construction wages and labor standards for projects funded by the Grant and some sourcing restrictions.

If we dispose of assets acquired using Grant funding, we may be required to reimburse the DOE upon such sale date if the fair value of the asset on the date of disposition exceeds $5,000. The amount of any such reimbursement shall be equal to 50 percent of the fair value of the asset on the date of disposition.

While UQM has exclusive patent ownership rights for any technology developed with Grant funds, we are required to grant the DOE a non-exclusive, non-transferable, paid-up license to use such technology.

The Grant has numerous benefits to the Company and its shareholders including: 1) substantially reducing the Company's cost of capital; 2) substantially mitigating the financial risk of facilitizing to manufacture products for an emerging market; 3) substantially reducing product qualification and testing costs; and 4) improving product margins on products manufactured on equipment subsidized by the Grant.

At March 31, 2010 we had received reimbursements from the DOE under the Grant for facilities and equipment totaling $3.6 million and had approximately $1.6 million of contingently reimbursable engineering costs related to product qualification and testing which we expect to receive in the first quarter of fiscal 2011. Further, we expect to record in the quarter that the contingency is removed, a reduction of expense of a corresponding amount.

Manufacturing

It is our primary objective to become a major manufacturer of electric motor, generator and other power electronic products that incorporate our proprietary technology and to supply these products to electric, hybrid electric and fuel cell electric vehicle manufacturers and/or their Tier 1 suppliers. To this end, in December 2009 we acquired a 129,304 square foot facility on a 30 acre site in Longmont, Colorado to support our expected growth in manufacturing operations. We are in the process of establishing semi-automated production cells at this facility with the capacity to produce 20,000 units per shift of our automotive qualified 100 kW PowerPhase® electric motor and motor controller for the CODA program. We expect to have these cells in operation in August 2010 to support the launch of the CODA program later this year. We expect to add additional production capacity in this facility coincident with future demand.

We currently manufacture a truck qualified DC-to-DC converter for Eaton Corporation as part of their hybrid electric power system for the heavy truck market, as well as for other electric and hybrid electric vehicle manufacturers. We have a dedicated manufacturing cell for these electronic boxes that includes the robotic application of sealant, sixteen hours of burn-in cycling between hot and cold temperature extremes, pressure testing for cooling leaks and complete functional testing.

We also have a production cell for the assembly of our larger frame size, higher power lower volume prototype motors. The annual capacity of this cell is approximately 5,000 systems per shift per year.

The foregoing products are currently manufactured at our 28,000 square foot ISO 9001:2000 quality certified facility in Frederick, Colorado. We expect to relocate all of our manufacturing operations to our new facility over the next three months. After completion of the relocation, we expect to sell our existing manufacturing facility.

Over the last several years we have established a production engineering group with decades of manufacturing design and production experience, much of which is specific to the automotive industry. Today, this team consists of nearly twenty professionals. In the last two years we have made significant improvements in manufacturing systems, facilities and space utilization and we have adopted the Advanced Product Quality Planning ("APQP") automotive procedures.

In order to ensure our cost competitiveness, we have adopted a manufacturing strategy for the near term of designing all product components and then sourcing these parts with quality suppliers. Final assembly, testing, pack-out and shipping of the product is performed at our Colorado facility. We have established relationships with many high-quality, low-cost suppliers, including a number of international companies. Future plans are to continue the development and introduction of more advanced and automated manufacturing systems which we believe will ensure our competitiveness in new and emerging markets.

We are primarily focused on launching high volume production of electric propulsions systems for CODA and potentially other electric and hybrid electric vehicle customers. We believe that the Company is well positioned to leverage its technology and pursue and win additional high volume production programs with major automotive, truck, bus and military vehicle OEMs and/or their Tier 1 suppliers.

Emerging Markets

Potentially large markets are developing as a result of the electrification of a wide-range of vehicle platforms. The electrification of vehicles is being pursued for a variety of application specific reasons including: 1) improved fuel economy, 2) lower vehicle emissions, 3) greater reliability and lower maintenance, 4) the need for higher levels of available onboard electric power to run electrical devices, and 5) improved performance and vehicle control. Of these reasons, improved fuel economy has emerged as a significant factor in the development and potential rate of growth of the emerging vehicle electrification markets as crude oil prices are expected to resume their rise, and consumers and businesses alike have to contend with higher gasoline and diesel prices. This trend toward higher fuel prices is expected to continue for the foreseeable future, driven by tight supply levels, geopolitical turmoil in key oil producing countries and expected future increases in world demand, driven principally by escalating consumption of fossil fuels by developing countries such as China and India. In addition, government regulations mandating reductions in pollutants from diesel engines are expected to further accelerate the trend toward electrification as increasingly stringent regulations continue. Further, Corporate Average Fuel Economy (CAFE) standards recently received their first overhaul in more than 30 years.

The Energy Independence and Security Act of 2007 requires, in part, that automakers boost fleetwide gas mileage to 35 mpg by the year 2020. This requirement applies to all passenger automobiles, including "light trucks." Other recent government legislation, including the Advanced Technology Vehicles Manufacturing Incentive Program and the American Recovery and Reinvestment Act of 2009, encourage the development and introduction of environmentally friendly vehicles. A partial listing of some of the more notable provisions of this legislation includes:

  • Tax credits for the purchase of environmentally friendly vehicles

  • Low cost loans to manufacturers and component suppliers to purchase infrastructure and develop manufacturing capacity for clean vehicles and components used in these vehicles

  • Funding for government agencies to acquire environmentally friendly vehicles

  • Grants for the development of clean vehicles and clean vehicle component technology

  • Grants for the development of a "smart" electric grid

The electrification of conventional vehicles, ranging from passenger vehicles and over-the-road trucks, to off-road vehicles such as agricultural tractors, construction equipment and military vehicles, can potentially offer improvements in fuel economy and emissions. Today, nearly all conventional vehicles are powered by a gasoline or diesel fueled internal combustion engine that converts the energy stored in the fuel to rotating power out of the engine. The power out of the engine's rotating shaft is used to propel the vehicle and operate all of the vehicles auxiliaries either directly with belts, pulleys and gears or indirectly through electricity generated from a belted alternator.

Internal combustion engines are relatively inefficient, typically converting only 25 to 35 percent of the input energy in the fuel to the output shaft to do useful work. The remaining 65 to 75 percent of the input energy is wasted by the engine as heat loss. Electric motors on the other hand, are much more efficient in converting input electric energy to the rotating shaft to do useful work. UQM® electric propulsion systems have some of the highest efficiencies (input energy to output work) in the industry ranging from 80 to 95 percent.

The electrification of vehicles can range from simply replacing inefficient belt and gear driven under-the-hood auxiliaries (water pump, power steering, HVAC, cooling fans etc.) with efficient electric powered ones, to eliminating the internal combustion engine entirely and replacing it with full electric propulsion such as in a battery or fuel cell powered vehicle. Generally, as the vehicle power plant content becomes increasingly more electric, the fuel efficiency improves and the cost and complexity increases. With rising fuel prices, vehicle makers are finding it much more feasible to justify this added complexity and cost.

 

We believe that the trend toward increasing electrification of vehicles will continue at an accelerated pace. Accordingly, we have developed and continue to develop, with considerable funding from our customers, electric propulsion systems and other motor and electronic products that will enable our customers to introduce alternative powered vehicles in the markets they serve, should they elect to do so. An expanded description of the different degrees of vehicle electrification follows:

  • Electrification of engine driven auxiliaries - In most existing conventional gasoline and diesel-powered vehicles, under-the-hood components such as water, oil and fuel pumps, power steering systems, cooling fans and air conditioning compressors are powered by engine belts, pulleys and gears. These devices perform their functions very inefficiently and represent a significant load on the engine. Because they are directly connected to the engine, there is no way to independently vary their speed or modulate their power. The electrification of these components provides numerous advantages including: 1) variable speed and power operation which improves efficiency and fuel economy, 2) the ability to locate them strategically anywhere in the vehicle because an electric component does not require proximity to an engine driven belt or gear, 3) improved controllability and reliability and 4) flexible architectures and improved access for service and maintenance. Existing conventional alternators do not provide enough power to electrify the engine driven auxiliaries and must be replaced with a higher power generator. The typical UQM® generator is nearly twice as efficient and provides five times the power of a conventional alternator. In addition, these higher power generators can provide export power to power other on-board or off-board equipment. This electrification strategy is easily adopted because required changes to vehicle design and operation are the least disruptive and can improve vehicle fuel economy by 7 to 15 percent.

  • Parallel hybrids - Parallel hybrid vehicles incorporate an electric motor to join the internal combustion engine in propelling the vehicle. In a low power configuration, often referred to as a "mild hybrid", a starter/motor/generator that is typically integrated into the flywheel of an engine is used to combine three separate functions in one electric machine. The machine starts the engine, eliminating the need for a conventional starter, performs power generation, eliminating a conventional belt driven alternator, and can be run in motoring mode, supplying supplemental power to the driveline to improve acceleration and vehicle performance. Higher power parallel hybrids incorporate additional system features such as regenerative braking and automatic engine shutdown and all-electric propulsion during certain operating conditions. In a typical parallel hybrid vehicle, acceleration from a standing-stop is generally performed by the electric motor in all-electric mode up to a given speed, at which time the engine starts and the engine and electric motor work in parallel to accelerate the vehicle. Once the vehicle achieves highway speed, the motor ceases operation and the vehicle is propelled using the engine only. During braking operations, the motor is switched to power generation mode and used to recapture energy that is normally lost as brake heat in conventional vehicles. The stored energy is then consumed by the electric motor in the next acceleration cycle. If the batteries need additional charging, the engine drives the electric machine in generator mode, sending electricity to charge the battery pack. These vehicles have sufficient battery charging capacity to be self-sustaining thereby eliminating the need to plug the vehicle into the electric power grid. Depending on the vehicle's level of electric motive power and its duty cycle, parallel hybrids can achieve fuel economy improvements of 10 to 45 percent.

  • Series hybrids - Series hybrid vehicles contain a greater degree of electrification than parallel hybrids. In a typical series hybrid vehicle, all of the motive power for the vehicle is supplied by electric motors, thereby eliminating conventional driveline components such as the transmission and drive shaft. Generally, series hybrids contain a larger amount of batteries to store electrical energy and the engine's principal function is to turn a separate generator to produce the electrical energy necessary to maintain the state of charge of the onboard battery pack. These onboard engine generators are often referred to as auxiliary power units (APUS) or range extenders. As in a parallel hybrid, during braking operations the electric motor is switched to power generation mode and used to recapture energy that is normally lost as brake heat in conventional vehicles. The stored energy is then consumed by the electric motor in the next acceleration cycle. Also, as in the parallel hybrid, a series hybrid vehicle has sufficient battery charging capacity to be self-sustaining, thereby eliminating the need to plug the vehicle into the electric power grid. Because the engine serves as an under-the-hood power plant, series hybrids typically have large amounts of available onboard power to perform additional functions while the vehicle is operating or when it reaches its final destination. Depending on vehicle configuration and duty cycle, series hybrids can achieve fuel economy improvements of 35 to 50 percent.

  • Plug-in hybrids - A plug-in hybrid vehicle can be configured as either a parallel or a series hybrid. What distinguishes this category of hybrid is that it is designed to operate in all-electric only mode for a range of 20 to 40 miles and be charge depleting therefore requiring it to be periodically plugged in and recharged from the electric grid. Because a portion of the energy consumed by a plug-in hybrid vehicle is acquired at a relatively low cost from the electrical grid in addition to the efficiencies obtained from its hybrid configuration, this category of vehicle can achieve fuel economy improvements of 60 to 75 percent.

  • All-electric battery and fuel cell vehicles - All-electric battery and fuel cell vehicles are powered entirely from electric energy stored on board in batteries or generated on board by a fuel cell. In this category of vehicle, all motive power is produced by electric motors and there is no engine and associated fuel, driveline and exhaust components. Similarly, many vehicle functions currently performed by auxiliaries attached to the engine through belts or gears, such as power steering and air conditioning, must be performed using electric motors. As with hybrid electric vehicles, all-electric battery-powered vehicles can switch the electric propulsion motor during braking operations; the electric motor is switched to power generation mode and used to recapture energy that is normally lost as brake heat in conventional vehicles. The stored energy is then consumed by the electric motor in the next acceleration cycle. The energy needs of all-electric battery-powered vehicles are obtained by recharging their batteries using the electric power grid. Fuel cells are energy production devices that generate electricity through a chemical reaction resulting from combining hydrogen and oxygen. The by-product of this reaction is water, therefore allowing for the total elimination of vehicle exhaust emissions in this category of vehicle. Because there is no battery energy storage in a fuel cell powered vehicle, there is no opportunity for regenerative braking energy recapture. Fuel economy improvements for all-electric battery and fuel cell vehicles are generally 75 percent or greater.

 

Existing Markets

Today there are numerous well-established markets for products that incorporate electric motors, generators and power electronic controllers that are targets for replacement by our advantaged systems. Examples of existing electric vehicle markets that we believe may present opportunities for the commercialization of our proprietary technology include electric wheelchairs, golf carts, forklift trucks and other warehouse vehicles, aircraft tugs and other support equipment, commercial floor cleaning equipment and other similar markets where the product application generally requires high torque and variable speed operation. In addition, there are a multitude of electric auxiliary motors used on conventional vehicles that provide a further opportunity for replacement by our systems.

We have developed and commercialized several products for existing markets. These products include a fan blower motor and a compressor drive motor that are used in aircraft air conditioning systems manufactured by Keith Products, Inc., a vehicle auxiliary actuator motor for a product manufactured by Lippert Components, Inc. and an electric brake actuation motor that is used in selected golf carts manufactured by Club Car, Inc.

We expect to continue to commercialize both technologically advanced and low cost products that we develop to customer specifications in selected large, established markets.

Markets We Serve

We have historically focused our resources on the development of highly efficient electric propulsion systems for each category of vehicle described above with power levels of 0.5 kW to 150 kW, which are suitable for vehicles ranging from wheelchairs to passenger automobiles to large trucks, buses, tractors, construction equipment and military vehicles. In addition, we have developed electric motors, generators and electronic controls to power under-the-hood auxiliaries such as water, oil and fuel pumps, power steering, cooling fans and air conditioning compressors. We have also developed DC-to-DC converters that step down high voltage electrical systems to 12 volts and DC-to-AC inverters that convert DC power to consumer friendly 110-volt alternating current power. We are pursuing the commercialization of our technology and products designed by us in numerous large emerging and existing markets where we intend to introduce technologically advanced products or lower cost systems or a combination of both.

We believe that our technology and products are well-suited for application in a wide-range of vehicles as the trend toward electrification continues to gain momentum. In this regard, we have focused our attention on several markets where we believe we can most effectively compete and which we expect will have higher than average rates of growth and expansion. A brief description of each of these markets follows:

Passenger automobiles and light trucks - In past years, approximately 16 million passenger automobiles and light trucks were sold in the United States each year, although these production levels have declined dramatically over the last year to a current annual rate of approximately 11 million units. Over the last several years a market has developed for automobiles that are powered by hybrid electric powertrains. These vehicles have good performance and provide above average fuel economy compared to conventional automobiles. Several automakers have introduced vehicle models incorporating hybrid electric powertrains including Toyota, Lexus, Nissan, Honda, Ford, Saturn, and General Motors. These automakers to date are using hybrid electric powertrains that they have developed themselves or have acquired from other automakers or existing Tier 1 automotive suppliers. Many of these automobile companies are also developing fuel cell or battery-powered vehicles that they hope to introduce at a future date. Several automakers have also announced plans to introduce all-electric passenger vehicles in the coming years, the most highly publicized of which is Nissan's all-electric Leaf passenger vehicle. We have recently shipped electric and hybrid electric propulsion systems and /or generators to eight international automobile companies for use in vehicle development programs. Of this group, one customer Citroen, has publicly announced that it is testing a Citroen C4 Hybrid Rally Car powered by a UQM® PowerPhase® 125 electric propulsion system and UQM® PowerPhase® 75 generator.

In addition to established automakers, there are a variety of small entrepreneurial companies that are developing and hope to commercialize electric, hybrid electric and/or plug-in hybrid electric cars. Although many of these companies lack substantial financial resources and/or significant automobile industry experience, they are pursuing a variety of strategies to introduce these types of automobiles into either niche markets, such as for fleet users or high-end luxury sports car buyers, or the consumer vehicle market generally. Should any of these companies be successful in commercializing their product offerings, it could cause the growth rate of this market to accelerate significantly. These companies are generally using electric or hybrid electric powertrains that they have developed themselves or have been developed by other entrepreneurial companies. We have recently shipped electric and hybrid electric propulsion systems and/or generators to eight of these companies, including CODA Automotive which is launching an all-electric four -door sedan powered by a UQM® PowerPhase® electric propulsion system. See also the "CODA Automotive Program" above.

Trucks, Buses and Recreational Vehicles - The U.S. Department of Energy estimated that in 2007, trucks consumed 6.3 million barrels of crude oil per day and they project that by 2030, trucks will consume approximately 55 percent of all crude oil used in transportation, or 10 million barrels of crude oil per day.

In recent years, approximately 6 million trucks, buses and other medium and heavy-duty on-road vehicles were sold in the United States each year, although these quantities have declined substantially over the last year. The market for these vehicles is characterized by a large number of suppliers, a wide-range of vehicle designs and configurations, diverse power and performance levels and relatively low production volumes for each model. As a result, the typical truck, bus and other medium and heavy-duty vehicle manufacturer is unlikely to have the technical expertise or financial resources to internally develop components that can compete in emerging markets for increasingly electrified vehicles. Accordingly, we expect these manufacturers to purchase products from suppliers who have developed technologically advanced electric motors; generators and power electronic energy management controls that can be applied to their vehicles.

We are currently supplying an automotive qualified DC-to-DC converter to Eaton Corporation which is used onboard medium and heavy-duty hybrid trucks. We have also developed a DC-to-AC inverter that we expect to sell into the truck market to meet the growing onboard and export power requirements of hybrid trucks. Some medium and heavy-duty hybrid electric trucks manufactured by customers of Eaton currently have our DC-to-DC converter on board. We expect the medium and heavy-duty hybrid electric truck market to grow at an accelerating rate as potential customers for these vehicles gain a greater understanding of their operational, environmental and economic advantages. In addition to our supplier relationship with Eaton, we have been and expect to continue to be in discussion with truck OEMs regarding potential niche vehicle programs. We have supplied electric and hybrid electric propulsion systems to a number of truck manufacturers including ZeroTruck™ and Electric Vehicle International for all-electric medium-duty delivery trucks. The ZeroTruck7trade; is available on the GSA schedule for purchase by government agencies.

Also, several truck manufacturers are considering other electrically-based products that either enhance the utility of their vehicles, such as the ability to generate large amounts of exportable electric power, or that may be necessary to meet regulatory mandates, such as diesel engine emission standards and restrictions on emissions arising from diesel engine idling. These products include electric propulsion systems, higher power engine generators, electric auxiliaries and DC-to-DC converters and DC-to-AC inverters. We intend to continue to aggressively pursue the commercialization of our products for these and other applications in the market for electric and hybrid trucks as it emerges over the next several years.

We are also involved in a number of bus programs. Over the last several years we have supplied generators and motor controllers to the Denver Regional Transportation District (RTD) for its fleet of thirty-six MallRide hybrid electric shuttle buses, the first large-scale deployment of hybrid electric buses for use in the United States. The 45-foot MallRide hybrid electric shuttles operate on the 16th Street Mall in downtown Denver, providing a free ride for passengers across the 1.3 mile long 16th Street Mall.

We also are the propulsion system supplier for electric buses being developed and produced by Proterra LLC, Golden, Colorado. The 37-foot composite body bus is being developed in both an all-electric battery and plug-in hybrid configuration. Proterra recently announced their plans to build a 200,000 square foot bus manufacturing facility in South Carolina.

There are a variety of specialty on-road manufacturers of conventional vehicles who represent an opportunity for us to further expand the deployment of our products, and we intend to continue to pursue the commercialization of our products for these applications.

Off-road vehicles - There are a wide-range of off-road vehicles sold in the United States each year. These vehicles range from small - wheelchairs, golf carts, fork trucks, riding lawn mowers, snowmobiles, all-terrain vehicles, etc., - to large construction, agricultural and mining equipment. The markets for small vehicles are typically characterized by relatively high volumes, low power levels and commodity pricing. We expect to continue to compete selectively in small off-road vehicle markets where the customer requires advanced technology or superior performance and where acceptable gross profit margins are obtainable.

The market for large equipment - tractors, construction, mining and other specialty equipment - possesses many of the same characteristics as the over-the-road truck market described above. In recent years, it is estimated that approximately 500,000 of these vehicles were sold in the United States annually. Accordingly, we expect these vehicle manufacturers to purchase products with similar specifications as those required in the over-the-road truck and bus markets from suppliers who have developed technologically advanced electric motors and power electronic energy management controls that can be applied to their vehicles. Although these vehicles are produced in relatively lower volumes, they nevertheless represent a substantial opportunity due to higher power levels, substantial technical complexity and therefore substantially higher product content and dollar value per vehicle. We have provided systems to several large off-road vehicle developers for both electric propulsion and under-the-hood auxiliary applications.

We have also developed electric power products for the aircraft and aerospace market and the boat and marine market. In the aerospace market, we have developed electric auxiliary motors and controllers used in aircraft air conditioning systems. We have also developed auxiliary power units for the generation of onboard power and propulsion systems for various boat applications. We believe that some of the fuel efficiency benefits of vehicle electrification can be realized in the boat and marine market. Although our focus is primarily on land applications, we will continue to leverage our technology and products in these potentially large niche markets as opportunities present themselves.

Military vehicles - The U.S. military purchases a wide-range of ground vehicles each year including combat vehicles such as tanks, self-propelled artillery and armored personnel carriers, as well as a variety of light, medium and heavy-duty trucks for convoy and supply operations and for the transport of fuel used on the battlefield. The military is particularly interested in the electrification of vehicles because the attributes that these vehicles possess offer exceptional potential for the military to achieve its long-term objectives of developing a highly mobile, lethal fighting force. Fuel economy improvements in military vehicles transfer into substantial savings in support infrastructure and transportation costs associated with transporting fuel to the battlefield, which is typically thousands of miles from the United States. For example, if fuel economy improvements of 25 percent are achieved in the average truck, a corresponding amount of fuel does not have to be transported and therefore a corresponding number of airplanes or tankers are not required in the transportation process. Also, the availability of onboard electrical power on military vehicles opens up new opportunities for the development of sophisticated surveillance, detection and battlefield monitoring equipment and for laser, microwave and electrical pulse weapon systems. It is estimated that the military purchases approximately 8,000 trucks per year and greater numbers during periods of armed conflict. As is the case with large off-road equipment, these vehicles are produced in relatively lower volumes, operate at higher power levels, have substantial technical complexity and therefore substantially higher product content and dollar value per vehicle. We have, over the last several years, been working with a number of military contractors and vehicle makers including DRS Technologies, AM General, BAE Systems, Boeing, General Dynamics and others, on prototype hybrid electric vehicles, high export power generators, electric auxiliaries, DC-to-DC converters and DC-to-AC inverters. Although this market has not yet emerged, we believe that it may begin to soon, driven by the availability of hybrid electric components in the commercial truck market that operate at similar power levels as those required by many military vehicles.

Vehicle to Grid Systems - There is also a developing industry initiative termed "vehicle-to-grid", or "V-to-G", to potentially make available for use on the electric utility grid, the large amount of energy in battery electric, hybrid electric, plug-in hybrid electric and fuel cell electric vehicles. Under this initiative, protocols, guidelines and electronic and software technologies are being developed to allow for the intelligent transfer of electric power from these vehicles to the electric power grid. There are different versions of the vehicle-to-grid concept: 1) A hybrid or fuel cell vehicle, which generates power from storable fuel, uses its generator to produce power for a utility at peak electricity usage times. Here the vehicles serve as a distributed power generation system; and 2) A battery-powered or hybrid vehicle which uses its excess rechargeable battery capacity to provide power to the electric grid during peak load times. These vehicles can then be recharged during off-peak hours at cheaper rates while helping to absorb excess nighttime generation. Here the vehicles serve as a distributed battery storage system to buffer power.

The V-to-G concept allows such vehicles to provide power to help load balance (valley fill and peak shave) localized grid segments during peak load periods when the selling price of electricity can be very high, and to buffer electricity, including in power outages.

We are currently developing inverter technology that we expect will be capable of functioning in this dynamic energy transfer environment when, and if, it develops into a commercial opportunity.

Marketing

We market our products in a variety of different ways depending on the end market and the complexity of the product. The majority of our opportunities come from customers who contact us directly as a result of our reputation, advertising, trade show attendance, web site or customer/partner word of mouth recommendations.

In the emerging markets for clean vehicles we market through the following channels:

  • Direct Sales

  • Vehicle Integrators - This marketing channel is characterized by the development of a relationship with companies that perform contract services for vehicle makers worldwide. Many of these companies have substantial autonomy to source vehicle components at the earliest stages of a vehicle development program. Through our multi-year relationships of supplying many of these companies with our products, we have been able to develop and foster within their organizations a confidence in the performance characteristics, ease of application and durability of our products that have led to additional early stage placements of our products in automakers vehicle development programs.

  • Cooperative Marketing Arrangements - These arrangements typically are characterized by nonexclusive marketing cooperation with other vehicle component developers and manufacturers where marketing partners introduce UQM® products to prospective customers who are considering a component being sold by our marketing partner and vice versa. For example, we currently have an active cooperative marketing arrangement with BorgWarner, who has developed a transaxle for all-electric and hybrid vehicles that is matched to our PowerPhase® 100 kW propulsion motor.

In existing markets, we identify potential opportunities primarily through the efforts of our National Sales Manager who seeks to identify motor and electronic product applications where our technology can reduce the size, enhance the performance or improve the efficiency or a combination of the foregoing at price points the same as or better than the prospective customers current supplier.

Funded development projects are typically secured through a technical selling process that encompasses the submission of an engineering proposal by our engineering staff in response to a request for proposal or from other methods designed to find and identify customer funded development opportunities within our area of expertise.

Our Opportunity

We have developed a range of products including electric propulsion motors, generators, power electronic controllers and other power electronic products that we believe are ideally suited to the emerging markets for electric, hybrid electric and fuel cell electric vehicles.

Hybrid electric passenger vehicle sales have grown substantially since their introduction in the North American market in 2000, with over one million units being sold. As a result, the fuel economy and emission benefits of hybrid electric technology are broadly understood by consumers worldwide. This, in concert with $25 billion of potential government grants and loans for the manufacture of clean vehicles under the Advanced Technology Vehicles Manufacturing Incentive Program, $2.4 billion of grants under the ARRA's Electric Drive Vehicle Battery and Component Manufacturing Initiative (under which we received a $45.1 million award), higher oil prices, tax credits for hybrid electric vehicle purchasers, stricter government emission regulations and growing environmental consciousness, has generated market demand for this class of vehicle.

Until recently, passenger vehicle makers have elected to develop their own electric and hybrid electric systems and components, either individually or in cooperation with Tier 1 automotive suppliers; however, we have supplied our propulsion systems to numerous international automotive manufacturers as part of their electric and hybrid electric vehicle development activities over the last eighteen months. Should any of these automakers elect to utilize our products in future model launches, it would have a material impact on our future rate of growth.

We believe that the launch of high volume manufacturing of our PowerPhase® 100 kW electric propulsion system for CODA Automotive later this calendar year will give us a substantial "first mover" advantage as a Tier 1 supplier to the clean vehicle market. Specifically, the introduction of our products that have been fully automotive qualified in commercial quantities will provide substantial economies of scale, permitting us to achieve production costs and pricing that will be difficult for others who have not launched similar high volume production to compete with. We expect that this pricing and product availability advantage will allow us to further expand the roster of automobile makers who select our propulsion systems for there future vehicle programs.

In addition to the passenger automobile market, vehicle makers of all types have been evaluating the potential of applying electric and hybrid electric technology to their vehicle platforms. Of these manufacturers, medium and heavy-duty truck and bus builders and military manufacturers have been the most active, driven by the performance and fuel economy advantages available from this technology, the availability of large amounts of onboard and exportable power and stricter diesel emission mandates.

International Truck and Engine Corporation, a Navistar Company, currently offers for sale a diesel electric medium-duty truck, the International® DuraStar™ Hybrid. Similarly, Peterbilt Motors Company, a division of PACCAR Inc., offers for sale its Model 330 and Model 335 medium-duty hybrid electric trucks, and Freightliner Trucks, a division of Daimler Trucks North America LLC has introduced its Business Class® M2e hybrid electric Truck. All of these truck manufacturers use the Eaton Corporation hybrid electric system. Our automotive certified DC-to-DC converter which we manufacture for Eaton Corporation is installed on many of these hybrid trucks. We believe that these industry developments signal the beginning of a potentially large-scale deployment of electric propulsion and related electronic products into markets other than mass-market passenger automobiles. Should these products receive broad customer acceptance, as we expect they will, additional opportunities will likely develop over time for our company.

The operating characteristics of electric motors for vehicle propulsion are different from those of more conventional industrial motors. Propulsion motors ideally deliver high levels of torque efficiently at slow rotational speeds and possess the ability to transition from high torque to high speed over a relatively constant power curve allowing, in many cases, the elimination of conventional transmissions. Our proprietary propulsion systems have been specifically developed for these applications and deliver exceptional torque and high rotational speeds in a compact, energy efficient machine. We believe that our portfolio of propulsion motors, generators, power electronic controllers and related electronic products has well positioned our company to compete effectively in these emerging markets. Electric and hybrid electric vehicle makers to-date have generally adopted a 340-volt electrical system to deliver the energy from the battery pack to the electric components and vice versa. Conventional gasoline vehicles generally have a 12-volt electrical system that operates dashboard instruments, lights, horns, etc. The higher electrical system voltages of electric and hybrid vehicles are creating opportunities for companies such as ours to enter the automotive market with a wide-range of under-the-hood auxiliaries including generators and motors to drive water, oil and power steering pumps, air conditioning compressors, and cooling fans, that operate at the new higher voltage.

We are currently investing substantial amounts of human resource and capital on establishing the manufacturing infrastructure to meet CODA Automotive's requirements as well as the potential production requirements of our other existing and future customers. As the markets for our customers' clean vehicles expand, we expect to make additional investments in support of our strategy to aggressively introduce automotive certified products to satisfy our customers' requirements.

We also expect to experience potentially rapid growth in our revenue coincident with the introduction of electric products by our customers. In parallel to these activities in emerging markets, we expect to continue to pursue additional production opportunities for our proprietary technology in existing markets where the performance of our products can provide our customers with a competitive advantage in the markets they serve.

Business Segments

At March 31, 2010, we had two reportable segments. These reportable segments are strategic business units that offer different products and services and are managed separately because of their different business strategies.

Technology Segment

Our technology segment encompasses the operations of our Engineering and Product Development Group. The Engineering and Product Development Group is equipped with research and development laboratories, prototype build and test facilities for electric motors, generators, power electronic controllers, software, and vehicle integration activities. In addition, we currently lease 6,000 square feet in a nearby facility where we perform vehicle integration activities. The technology segment conducts customer funded and internally-funded research and engineering activities directed toward: 1) the development of new motors, generators, and power electronic controllers to meet the requirements of customers' specific product applications; 2) integration of our motors, generators and power electronic controllers into customers' products; and 3) support of our power products segment and the low volume manufacture of motors, generators and power electronic controllers.

Power Products Segment

Our power products segment encompasses the operations of our wholly-owned subsidiary, UQM Power. UQM Power is the manufacturer of our proprietary products in higher volumes. UQM Power is an ISO 9001:2000 quality certified manufacturer of motors and electronic products designed by the company.

Competition

All of the markets in which we operate are highly competitive. The markets served by the technology segment are additionally characterized by rapid changes due to technological advances that can render existing technologies and products obsolete.

The technology segment has developed advanced electric propulsion systems and components which we hope to market to vehicle OEMs and their Tier 1 suppliers throughout the world for use in electric, hybrid electric, plug-in hybrid electric and fuel cell electric vehicles. In recent years, the market for hybrid electric automobiles has begun to emerge, led by the introduction and market success of hybrid electric vehicles manufactured by Toyota, Lexus, Honda, Ford and General Motors. In the larger vehicle markets, International Truck and Engine Corporation, Freightliner Trucks and Peterbilt Motors Company offer hybrid electric medium-duty trucks and Caterpillar, Inc. produces a belt-less engine/electric tracked bulldozer. As a result, additional vehicle makers in both on-road and off-road markets are expected to develop and introduce a variety of hybrid electric and all-electric vehicles as the market acceptance of these vehicles continues to grow. We cannot assure that we will be able to compete successfully in this market or any other market that now exists or may develop in the future. There are numerous companies developing products that do or soon will compete with our systems. Some of these companies possess significantly greater financial, personnel and other resources than we do, including established supply arrangements and volume manufacturing operations. We believe our principal competitors include Toyota, Honda, General Motors, Hitachi, Toshiba, Siemens, Delphi, Danaher, Enova, Continental, Magna, Remy, Bosh and Azure Dynamics.

The power products segment competes primarily in the automotive, heavy equipment, military, aerospace and medical products industries. Each of these industries is extremely competitive. We face substantial competition on a continuing basis from numerous companies, many of whom possess longer operating histories, significantly greater financial resources and marketing, distribution and manufacturing capability. We believe our principal competitors include Advanced DC Motors, General Electric, Rockwell International, Hitachi, Hyundai, Toshiba, Siemens, Delphi, Danaher,  L-3 Communications, Enova, Continental, Magna, Remy, Bosh and Azure Dynamics.

Patents

We hold several groups or families of patents.

U.S. Patent Nos. 5,311,092 and 5,319,844 disclose and claim a lightweight high-power electromagnetic transducer and method of making the same. Corresponding applications have been filed and issued in several foreign countries.

U.S. Patent No. 5,592,731 and U.S. Patent No. 5,382,859 relate to a stator for high-power density electric motors and generators, and a method of constructing the same. Corresponding applications have been filed and issued in several foreign countries.

U.S. Patent No. 5,677,605 discloses and claims a brushless motor and drive system using phase timing advancement. Corresponding applications have been filed and issued in several foreign countries.

U.S. Patent No. 5,982,063 discloses and claims an electric motor having an internal brake. Corresponding applications have been filed and issued in several foreign countries.

U.S. Patent No. 6,522,130 discloses and claims a method for controlling a brushless electric motor having a rotor, and relates to an accurate method for sensing rotor position and detecting rotational speed over a broad range of speeds. U.S. Patent No. 6,693,422 is a related U.S. patent entitled "Accurate Rotor Position Sensor and Method Using Magnet and Sensors Mounted Adjacent to the Magnet and Motor". Corresponding applications have been filed and issued in several foreign countries.

In 2007, we filed patent applications for a stator design in the United States, Canada, and Europe. These applications are currently pending.

In 2007, we filed patent applications for a permanent magnet rotor geometry for permanent magnet electric motors in the United States, Canada, and Europe. The United States application issued as U.S. Patent No. 7,598,645. The Canadian and European applications are currently pending.

In January 2009, we filed a U.S. patent application for a distributed generation power system having an integrated electric utility meter and inverter system, including the physical design, placement and interconnection of the integrated electric utility and inverter system.

In November 2009, we filed a US patent application for a rotor for a permanent magnet electric machine. This application is pending. We may file corresponding applications for this invention in one or more foreign countries.

In 1994, we executed an agreement with Alcan Aluminium Limited ("Alcan") in which Alcan assigned to us all of its rights, title and interests in certain motor technology developed under a program funded by Alcan.  This agreement further provides that we shall pay to Alcan royalties of one-half of one percent on revenue derived from the manufacture and sale of products or processes embodying the related technology. Royalty payments under this agreement for the fiscal years ended March 31, 2010, 2009 and 2008 were $25,349, $39,850 and $32,988, respectively.

We also intend to rely on the unpatented proprietary know-how we have developed and now utilize in our products. We cannot provide assurance that others will not independently develop, acquire or obtain access to our technology. Although we protect our unpatented proprietary rights by executing confidentiality agreements with our management, employees and others with access to our technology, these measures may not be adequate to protect us from disclosure or misappropriation of our proprietary information.

Trademarks

We have registered the letters "UQM" in the U.S. Patent and Trademark Office. Counterpart applications have been filed in numerous countries throughout the world, most of which have granted registrations or indicated them to be allowable. We own three U.S. Trademark Registrations for "UQM" (International Class 7 for power transducers, Class 12 for utility land vehicles, and Class 16 for publications). The foreign trademark registrations and applications include major markets where we are doing business or establishing business contacts.

We have also registered the trademark "POWERPHASE" which we use in conjunction with certain of our propulsion systems. The trademark is registered in the European Community and several other foreign countries.

Backlog

Our technology segment had unperformed service contracts from customers, which will provide future revenue upon completion totaling approximately $1.1 million, and an order backlog for prototype motors and controllers of approximately $1.9 million at April 30, 2010, compared to $0.7 million and $2.0 million, respectively at April 30, 2009. All such service contracts are subject to amendment, modification or cancellation. We expect to complete all unperformed service contracts over the next fourteen months and ship motor and controller backlog products over the next twelve months.

Our power products segment had an order backlog of approximately $3.1 million at April 30, 2010 compared to $3.0 million at April 30, 2009. Many orders are issued to us as blanket purchase orders subject to the issuance of subsequent release orders which direct the number and timing of actual deliveries. Substantially all of the backlog amounts at April 30, 2010 and 2009 are subject to amendment, modification or cancellation. We expect to ship all backlog products within the next twelve months.

Customers and Suppliers

We have historically derived significant revenue from a few key customers. Revenue from Lippert Components, Inc., which is also a customer of our power products segment, was $821,509, $635,144, and $1,271,502 for the fiscal years ended March 31, 2010, 2009 and 2008, respectively, representing 9.5 percent, 7.3 percent and 16.9 percent of consolidated total revenue, respectively. This customer also represented 17.4 percent and nil of consolidated total accounts receivable at March 31, 2010 and 2009, respectively. Inventories consisting of raw materials, work-in-process and finished goods for Lippert Components, Inc. were 6.8 percent and 26.7 percent of consolidated total inventories at March 31, 2010 and 2009, respectively. Revenue from the Denver Regional Transportation District, which is a customer of our Power Products segment, was $82,976, $3,337, and $864,540 for the fiscal years ended March 31, 2010, 2009 and 2008, respectively; representing 1.0 percent, nil, and 11.5 percent of consolidated total revenue, respectively. This customer also represented 0.9 percent and nil of total accounts receivable at March 31, 2010 and 2009, respectively. We did not have any raw materials, work-in-process or finished goods inventory for the Denver Regional Transportation District at March 31, 2010 and 2009. Revenue from Quantum Fuel Systems Technologies Worldwide Inc., which is also a customer of our power products segment, was $13,115, $1,360,909, and $256,393 for the fiscal years ended March 31, 2010, 2009 and 2008, respectively, representing 0.2 percent, 15.6 percent, and 3.4 percent of consolidated total revenue, respectively. This customer also represented 2.6 percent and 15.8 percent of total accounts receivable at March 31, 2010 and 2009, respectively. We did not have any raw materials, work-in-process or finished goods inventory for Quantum Fuel Systems Technologies Worldwide Inc. at March 31, 2010 and 2009.

When we begin delivery of electric propulsion systems to CODA under our ten year supply agreement, currently projected for late 2010, CODA is expected to become a significant customer.

Principal raw materials and components purchased by us include iron, steel, electronic components, magnets and copper wire. Most of these items are available from several suppliers. Certain components used by us are custom designs and if our current supplier no longer made them available to us, we could experience production delays.

U.S. Government Contracts

Revenue derived from contracts with agencies of the U.S. Government and from subcontracts with U.S. Government prime contractors was $2,488,321, or approximately 28.6 percent of our consolidated total revenue, for the year ended March 31, 2010, $1,989,872 or approximately 22.8 percent of our consolidated total revenue, for the year ended March 31, 2009 and $2,329,248, or approximately 31.0 percent of consolidated total revenue, for the year ended March 31, 2008. Accounts receivable from government-funded contracts represented 7.6 percent and 5.6 percent of total accounts receivable as of March 31, 2010 and 2009, respectively. Of these amounts, revenue derived from subcontracts with AM General LLC totaled $1,807,063, $434,181 and $565,663 which represented 20.8 percent, 5.0 percent and 7.5 percent of our consolidated total revenue for the fiscal years ended March 31, 2010, 2009 and 2008, respectively. This customer also represented 7.6 percent and nil of consolidated total accounts receivable at March 31, 2010 and 2009, respectively. Inventories consisting of raw materials, work-in-process and finished goods for AM General LLC were 12.8 percent and 2.7 percent of consolidated total inventories at March 31, 2010 and 2009, respectively.

Some of our business with the U.S. Government was performed on a cost plus fixed fee basis. These contracts provide for reimbursement of costs, to the extent allocable and allowable under applicable regulations, and payment of a fee. Certain other contracts with the U.S. Government provide for the reimbursement of costs on a 50 percent cost-sharing basis based on not-to-exceed billing rates negotiated between the U.S. Government and us. Other U.S. Government business is performed under firm fixed price contracts. On "cost-share" and "firm fixed price" contracts, we can incur an actual loss in the performance thereof if incurred costs exceed the contract amount. All of our U.S. Government contracts are subject to modification or cancellation at the convenience of the Government.

On January 13, 2010 (the "Grant Date"), we executed an Assistance Agreement (the "Agreement") for a $45,145,534 grant (the "Grant") with the U.S. Department of Energy ("DOE") under the American Recovery and Reinvestment Act (the "Stimulus Act"). The Grant provides funds to facilitate the manufacture and deployment of electric drive vehicles, batteries and electric drive vehicle components in the United States. Pursuant to the terms of the Agreement, the DOE will reimburse us for 50 percent of qualifying costs incurred on or after August 5, 2009 for the purchase of facilities, tooling and manufacturing equipment, and for engineering related to product qualification and testing of our electric propulsion systems and other products. The period of the Grant is through January 12, 2013.

Funding for qualifying project costs incurred during the period commencing August 5, 2009 through June 26, 2010 is initially limited to $8.1 million until the following conditions are satisfied: 1) review and approval of our accounting system by the DCAA; and 2) mutual agreement by the parties on an updated total estimated cost of the project. In the event either condition is not satisfied by June 26, 2010, the Grant may be terminated. In addition, we are required, no later than January 12, 2011, to provide DOE with an additional updated total estimated cost of the project along with evidence of firm commitments for our 50 percent share of the total estimated cost of the project. If all such funds have not been secured, we must submit, by such date, a funding plan to obtain the remainder of such funds, which is acceptable to the DOE.

If we dispose of assets acquired using Grant funding, we may be required to reimburse the DOE upon such sale date if the fair value of the asset on the date of disposition exceeds $5,000. The amount of any such reimbursement shall be equal to 50 percent of the fair value of the asset on the date of disposition.

At March 31, 2010 we had received reimbursements from the DOE under the Stimulus Grant for facilities and equipment totaling $3.6 million and had approximately $1.6 million of contingently reimbursable engineering costs related to product qualification and testing which we expect to receive in the first quarter of fiscal 2011. Further, we expect to record in the quarter the contingency is removed a reduction in expenses for a corresponding amount.

Employee and Labor Relations

As of April 30, 2010, we had 69 total employees, of whom 68 are full-time employees. We have entered into employment contracts with four of our executive officers. All of these contracts expire on August 22, 2012. None of our employees are covered by a collective bargaining agreement. 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 2010 Annual Report on Form 10-K, Annual Report to Shareholders, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, all amendments to those reports and other documents, filed with the SEC at the public reference section of the SEC at 100 F Street, NE, Room 1580, Washington, D.C. 20549. These documents also may be obtained, free of charge, by: contacting our Investor Relations office by e-mail at investor@uqm.com; by phone at (303) 682-4900; writing to UQM Technologies, Inc., Investor Relations, PO Box 439, Frederick, CO 80530-0439; or accessing our website at www.uqm.com. We make our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, available on our website as soon as reasonably practicable after we file or furnish the materials electronically with the SEC. To obtain any of this information, go to www.uqm.com, select "Investor Relations" and "SEC Filings." 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.

ITEM 1A.

RISK FACTORS

TOC

Our business is subject to a number of risks and uncertainties, many of which are outside of our control.

We have incurred significant losses and may continue to do so.

We have incurred significant net losses as shown in the following tables:

   
 

                           Fiscal Year Ended March 31,                         

 

      2010      

      2009     

     2008      

       

Net loss

$   4,140,872 

$   4,402,019 

$   4,586,105 

As of March 31, 2010 we had accumulated deficit of $73,566,111.

In the future, we plan to make additional investments in product development, facilities and equipment and other costs related to the commercialization of our products. As a result, we expect to continue to incur net losses at least through March 31, 2011 and potentially beyond.

Our operating losses, anticipated capital expenditures and working capital requirements in the longer term may exceed our current cash balances.

Our net loss for the fiscal year ended March 31, 2010 was $4,140,872 versus a net loss for the fiscal years ended March 31, 2009 and 2008 of $4,402,019 and $4,586,105, respectively. At March 31, 2010, our cash and short-term investments totaled $30,148,783. We expect our losses to continue through at least March 31, 2011 and potentially beyond. Our existing cash resources, together with funding expected from our ARRA grant should be sufficient to complete our business plan for at least the next eighteen months. Should those resources be insufficient, we may need to secure additional debt or equity funding, which may not be available on terms acceptable to us, if at all.

If we do not satisfy the terms of our U.S. Department of Energy grant, we may not receive all or any portion of the $45.1 million grant we were awarded and may be required to return amounts already paid to us under the grant.

On January 13, 2010, we finalized a $45.1 million award under the American Recovery and Reinvestment Act's Electric Drive Vehicle Battery and Component Manufacturing Initiative with the U.S. Department of Energy. This Award is subject to terms and conditions specified in the agreement between us and the DOE. We are required to make a cash investment on a dollar-for-dollar matching basis to receive funds under this Award. If we are unable to match the total amount of the $45.1 million award with funding from non-Federal sources, we will be unable to take advantage of the entire Award, and could become ineligible for continued participation in the program. The payment of the incurred costs under the award has been limited to $8.1 million through June 26, 2010 until various conditions are satisfied. These conditions include 1) DOE's review and approval of our accounting system; and 2) mutual agreement of an updated total estimated cost of the project. In the event either condition is not satisfied by June 26, 2010 the grant may be terminated. In addition, we are required within one year after the effective date of the award to provide DOE with an additional updated total estimated cost of the project along with firm commitments for our 50 percent share of the total estimated cost of the project. We have already obtained $32 million as proceeds from our October 2009 stock offering that may be used for the project. If all such funds have not been secured, we must submit by such a date, a funding plan to obtain the remainder of such funds that is acceptable to the DOE. In the event we do not satisfy the foregoing contingencies, the award may be terminated. In addition, the award may be terminated at any time at the convenience of the government. Although we expect to satisfy the contingencies contained in the award, we can not assure that the contingencies will be satisfied and the contract will not be terminated prior to receiving all of the proceeds.

CODA's manufacturing partner may not purchase from us all or any portion of the 20,000 systems provided for under its supply agreement.

We have executed a supply agreement with CODA that provides a framework for CODA's manufacturing partner to purchase from us 20,000 electric propulsion systems for use in automobiles to be manufactured by CODA during the initial two-year term of the agreement. Under the terms of this agreement, CODA's manufacturing partner, HaFei, will issue blanket purchase orders covering their annual purchase requirements and specifying the timing of delivery for such units, with the nearest 60-day delivery schedule considered to be "firm" and noncancellable. HaFei has not yet issued any purchase orders under the CODA supply agreement. If HaFei does not purchase at least 15,000 units under the CODA supply agreement, CODA may be required to make specific payments to us. For example, if CODA is unsuccessful in the development of its electric automobile, HaFei would not be obligated to purchase electric propulsion systems from us, but CODA would then be obligated to make the payments specified in the contract to us. While these specific payments would cover much of our costs in preparing to supply electric propulsion systems to CODA, the payments are substantially less than the amount we would receive for sales of systems under the supply agreement. In addition, CODA may not have adequate funds to make any such payments to us or may otherwise contest its obligation to pay, and as a result it is possible that we may never receive any such funds. CODA may also terminate the supply agreement for any number of reasons.

We may experience challenges in launching production of electric propulsion systems on the scale envisioned under the CODA supply agreement.

We have not to date produced electric propulsion systems on the scale we intend to manufacture to fulfill our obligations under the CODA supply agreement, although we have several years of experience manufacturing motors and electronics that are smaller and operate at lower power levels. We will also need to hire additional personnel, as well as acquire new equipment and tooling to launch production for CODA, which will require significant time and expense. We may not sell a sufficient number of systems to CODA or other customers to cover these expenses.

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 and intensify as we begin production under the CODA supply agreement. CODA may become the source of a substantial portion of our revenue in at least the near-term. The magnitude of this revenue is dependent on CODA's ability to introduce and sell its passenger vehicle in commercial volumes.

Our customer arrangements generally are non-exclusive, have no long-term volume commitments and are often done on a purchase order basis. We cannot be certain that customers that have accounted for significant revenue in past periods will continue to purchase our products. Accordingly, our revenue and results of operations may vary substantially from period to period. We are also subject to credit risk associated with the concentration of our accounts receivable from our customers. If one or more of our significant customers were to cease doing business with us, significantly reduce or delay its purchases from us or fail to pay us on a timely basis, our business, financial condition and results of operations could be materially adversely affected.

Our business relies on third parties, whose success we cannot predict.

As a manufacturer of motors, generators, and other component parts, our business model depends on the ability of third parties in our industry to develop, produce and market products that include or are compatible with our technology and then to sell these products into the marketplace. Our ability to generate revenue depends significantly on the commercial success of our customers and partners. Failure of these third parties to achieve significant sales of products incorporating our products and fluctuations in the timing and volume of such sales could have a material adverse effect on our business, financial condition and results of operations.

Our electric propulsion systems use rare earth minerals and unavailability or limited supply of these minerals could prevent us from manufacturing our products in production quantities or increase our costs.

Neodymium, a rare earth mineral, is a key ingredient used in the production of magnets that are a component of our electric propulsion systems. Neodymium is currently sourced primarily from China, and China recently indicated its intent to retain more of this mineral for the use of Chinese companies, rather than exporting it. To the extent that we buy magnets as a finished product from a Chinese supplier, these potential limitations on neodymium ore may not impact us. Although neodymium iron boron magnets are available from other sources, these alternative sources are currently more costly. Reduced availability of neodymium from China could adversely affect our ability to obtain magnets in sufficient quantities, or in a timely manner, to meet our production plans. In the event that China's actions cause us to seek alternate sources of supply for magnets, it could cause an increase in our production costs thereby reducing our profit margin on electric propulsion systems if we are unable to pass the increase in our production costs on to our customers.

A prolonged downturn in global economic conditions may materially adversely affect our business.

Our business and results of operations are affected by international, national and regional economic conditions. Financial markets in the United States, Europe and Asia have experienced extreme disruption over the last year, including, among other things, extreme volatility in security prices, severely diminished liquidity and credit availability, ratings downgrades of certain investments and declining values of others. The global economy has entered a recession. We are unable to predict the likely duration and severity of the current disruptions in financial markets, credit availability, and adverse economic conditions throughout the world. These economic developments affect businesses such as ours and those of our customers and suppliers in a number of ways that could result in unfavorable consequences to us. Current economic conditions or declining economic conditions in the United States and elsewhere, including in the automobile industry, may cause our current or potential customers to delay or reduce purchases which could, in turn, result in reductions in sales of our products, materially and adversely affecting our results of operations and cash flows. Volatility and disruption of global financial markets could limit our customers' ability to obtain adequate financing to maintain operations and proceed with planned or new capital spending initiatives, leading to a reduction in sales volume that could materially and adversely affect our results of operations and cash flow. In addition, a decline in our customers' ability to pay as a result of the economic downturn may lead to increased difficulties in the collection of our accounts receivable, higher levels of reserves for doubtful accounts and write-offs of accounts receivable, and higher operating costs as a percentage of revenues.

Some of our contracts can be cancelled with little or no notice and could restrict our ability to commercialize our technology.

Our contracts with government agencies are subject to the risk of termination at the convenience of the contracting agency and in some cases grant "march-in" rights to the government. March-in rights are the right of the United States government or the applicable government agency, under limited circumstances, to exercise a non-exclusive, royalty-free, irrevocable worldwide license to any technology developed under contracts funded by the government to facilitate commercialization of technology developed with government funding. March-in rights can be exercised if we fail to commercialize the developed technology. The exercise of march-in rights by the government or an agency of the government could restrict our ability to commercialize our technology.

Some of our orders for the future delivery of products are placed under blanket purchase orders which may be cancelled by our customers at any time. The amount payable to us, if any, upon cancellation by the customer varies by customer. Accordingly, we may not recognize as revenue all or any portion of the amount of outstanding order backlog we have reported.

We face intense competition and may be unable to compete successfully.

In developing electric motors for use in vehicles and other applications, we face competition from very large domestic and international companies, including the world's largest automobile manufacturers. Many of our competitors have far greater resources to apply to research and development efforts than we have, and they may independently develop motors that are technologically more advanced than ours. These competitors also have much greater experience in and resources for marketing their products. For these reasons, potential customers may choose to purchase electric motors from our competitors rather than from us. In addition, the U.S. government has awarded substantial financial grants under the stimulus bill to several large companies who compete with us. To the extent that some of these competitors received awards under the stimulus bill in amounts greater than we have, could adversely impact our ability to compete.

Our business depends, in part, on the expansion of the market for hybrid electric vehicles and the future introduction and growth of a market for all-electric vehicles.

Although our electric propulsion systems may be used in a wide variety of products, the market for electric and hybrid vehicles is fairly new. At the present time, batteries used to power electric motors have limited life and require several hours to charge, and charging stations for electric motors are not widely available. Electric and hybrid vehicles also tend to be priced higher than comparable gasoline-powered vehicles. As a result, consumers may experience concerns about driving range limitations, battery charging time and higher purchase costs of electric or hybrid automobiles. If consumer preferences shift to vehicles powered by other alternative methods, or if concerns about the availability of charging stations cannot be overcome, the market for all-electric cars, and therefore our electric propulsion systems, may be limited. In addition, our electric propulsion systems are incorporated in buses used for mass transit in several U.S. cities. If passenger traffic in these mass transit systems declines, 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. The recent downturn in the world economy also has severely impacted the automotive industry, slowing the demand for vehicles generally and reducing consumers' willingness to pay more for environmentally friendly technology.

If our products do not achieve market acceptance, our business may not grow.

Although we believe our proprietary systems are suited for a wide-range of vehicle electrification applications, our business and financial plan relies heavily on the introduction of new products that have limited testing in the marketplace. We are currently making substantial investments in human resources, manufacturing facilities and equipment, production and application engineering, among other things, to ramp up our production capacity in order to capitalize on the anticipated expansion in demand for electric propulsion systems and generators in the automobile and light truck markets. Our sales of electric propulsion systems and generators in the automobile and light truck markets to date have consisted of limited quantities of evaluation and field test units. We are not certain that our existing products will achieve broad market acceptance, or that we will be able to develop new products or product enhancements that will achieve broad market acceptance.

Changes in environmental policies could hurt the market for our products.

The market for electric and other alternative fuel vehicles and equipment and the demand for our products are influenced, to a degree, by federal, state and local regulations relating to air quality, greenhouse gases and pollutants. These laws and regulations may change, which could result in transportation or equipment manufacturers abandoning or delaying their interest in electric or hybrid electric vehicles or equipment. In addition, a failure by authorities to enforce current laws and regulations or to adopt additional environmental laws or regulations could limit the demand for our products.

Although many governments have identified as a significant priority the development of alternative energy sources, governments may change their priorities, and any change they make could materially affect our revenue or the development of our products.

If we are unable to protect our patents and other proprietary technology, we will be unable to prevent third parties from using our technology, which would impair our competitiveness and ability to commercialize our products. In addition, the cost of enforcing our proprietary rights may be expensive and result in increased losses.

Our ability to compete effectively against other companies in our industry will depend, in part, on our ability to protect our proprietary technology. Although we have attempted to safeguard and maintain our proprietary rights, we do not know whether we have been or will be successful in doing so. We have historically pursued patent protection in the United States and a limited number of foreign countries where we believe significant markets for our products exist or where potentially significant competitors have operations. It is possible that a substantial market could develop in a country where we have not received patent protection and under such circumstances our proprietary products would not be afforded legal protection in these markets. Further, our competitors may independently develop or patent technologies that are substantially equivalent or superior to ours. We cannot assure that additional patents will be issued to us or, if they are issued, as to the scope of their protection. Patents granted may not provide meaningful protection from competitors. Even if a competitor's products were to infringe patents owned by us, it would be costly for us to pursue our rights in an enforcement action, it would divert funds and resources which otherwise could be used in our operations and we may not be successful in enforcing our intellectual property rights. In addition, effective patent, trademark, service mark, copyright and trade secret protection may not be available in every country where we may operate or sell our products in the future. If third parties assert technology infringement claims against us, the defense of the claims could involve significant legal costs and require our management to divert time and attention from our business operations. If we are unsuccessful in defending any claims of infringement, we may be forced to obtain licenses or to pay royalties to continue to use our technology. We may not be able to obtain any necessary licenses on commercially reasonable terms or at all. If we fail to obtain necessary licenses or other rights, or if these licenses are costly, our results of operations may suffer either from reductions in revenues through our inability to serve customers or from increases in costs to license third-party technologies.

Use of our motors in vehicles could subject us to product liability claims or product recalls, and product liability insurance claims could cause an increase in our insurance rates or could exceed our insurance limits, which could impair our financial condition, results of operations and liquidity.

The automotive industry experiences significant product liability claims. As a supplier of electric propulsion systems or other products to vehicle OEMs, we face an inherent business risk of exposure to product liability claims in the event that our products, or the equipment into which our products are incorporated, malfunction and result in personal injury or death. We may be named in product liability claims even if there is no evidence that our systems or components caused an accident. Product liability claims could result in significant losses as a result of expenses incurred in defending claims or the award of damages. The sale of systems and components for the transportation industry entails a high risk of these claims, which may increase as our production and sales increase. In addition, we may be required to participate in recalls involving these systems if any of our systems prove to be defective, or we may voluntarily initiate a recall or make payments related to such claims as a result of various industry or business practices or the need to maintain good customer relationships.

We carry product liability insurance of $10 million covering most of our products. If we were to experience a large insured loss, it might exceed our coverage limits, or our insurance carriers could decline to further cover us or raise our insurance rates to unacceptable levels, any of which could impair our financial position and results of operations. Any product liability claim brought against us also could have a material adverse effect on our reputation.

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.

ITEM 1B.

UNRESOLVED STAFF COMMENTS

 TOC

None.

 

ITEM 2.

PROPERTIES

 TOC

We own or lease our offices and manufacturing facilities and believe these facilities to be well maintained, adequately insured and suitable for their present and intended uses. Information concerning our facilities as of March 31, 2010 is set forth in the table below:

 
   

Ownership or

 

                 Location                   

Square Feet

Expiration Date of Lease

                          Use                            

Longmont, Colorado

129,304

Own

Manufacturing, laboratories and offices

Frederick, Colorado

28,000

Own

Manufacturing, laboratories and offices

Frederick, Colorado

6,000

Month-to-Month

Vehicle integration

   

 

ITEM 3.

LEGAL PROCEEDINGS

 TOC

Litigation

 

In November 2007, we filed an arbitration claim with the American Arbitration Association ("AAA") against Phoenix MC, Inc., as successor by merger to Phoenix Motorcars, Inc. ("Phoenix") seeking damages for Phoenix's breach of the Purchase and Supply Agreement between Phoenix and UQM Technologies, Inc. dated January 12, 2007. The matter was heard by an AAA arbitration panel (the "Panel") in December 2008. On February 24, 2009, the AAA notified us of the Panel's findings that Phoenix had materially breached the Agreement and awarded monetary damages to us in the amount of $5,309,649. In addition, the Panel awarded us post-award interest at the rate of 10 percent per annum on the unpaid amount of the award subsequent to February 6, 2009. On April 27, 2009, Phoenix filed a Chapter 11 bankruptcy petition with the U.S. Bankruptcy Court. On May 17, 2010 we received a distribution from the U.S. Bankruptcy Court of $265,140. We expect this payment to be our final recovery in this matter.

We are involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, and based on current available information, the ultimate disposition of these matters is not expected to have a material adverse effect on our financial position, results of operations or cash flow, although adverse developments in these matters could have a material impact on a future reporting period.

 

 

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 TOC

There were no matters submitted to a vote of security holders of the Company during the quarter ended March 31, 2010.

 

PART II

 

 TOC

ITEM 5.

MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 TOC

Our common stock trades on the NYSE Amex, Chicago, Pacific Stock, Frankfurt and Berlin Stock Exchanges. The high and low trade prices, by fiscal quarter, as reported by the NYSE Amex Stock Exchange for the last two fiscal years are as follows:

2010

 High

 Low

Fourth Quarter

$7.13

$3.46

Third Quarter

$7.45

$4.27

Second Quarter

$6.55

$2.30

First Quarter

$2.64

$1.42

     

2009

 High

 Low

Fourth Quarter

$2.49

$1.25

Third Quarter

$2.85

$1.20

Second Quarter

$2.90

$1.50

First Quarter

$2.82

$1.23

     

 

On May 20, 2010 the closing price of our common stock, as reported on the NYSE Amex, was $3.53 per share and there were 668 holders of record of our common stock.

 

We have not paid any cash dividends on our common stock since inception and we intend for the foreseeable future to retain any earnings to finance the growth of our business. Future dividend policy will be determined by the Board of Directors based upon consideration of our earnings, capital needs and other factors then relevant.

 

PERFORMANCE GRAPH2

The following graph represents the yearly percentage change in the cumulative total return on the common stock of UQM Technologies, Inc., the group of companies comprising the S&P Electrical Equipment Index, and those companies comprising the S&P 500 Index for the five year period from 2004 through 2009:

 

2 The stock price performance graph depicted is not "soliciting material," is not deemed "filed" with the SEC, and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation contained in such filing.

 

ITEM 6.

SELECTED CONSOLIDATED FINANCIAL DATA

 TOC

The selected consolidated financial data presented below should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this document.

 

UQM Technologies, Inc.

 

Selected Consolidated Financial Data

   

                                                  Years Ended March 31,                                              

        2010     

        2009     

       2008     

     2007     

     2006     

Contract services revenue

$   1,384,599 

2,717,246 

2,591,939 

2,907,536 

   2,502,098 

Product sales

$   7,307,354 

6,011,065 

4,916,383 

3,745,658 

   1,820,468 

Loss before other income

(expense)

$ (4,201,091)

(4,479,743)

 (4,995,242)

 (3,800,722)

 (3,039,659)

Net loss

$ (4,140,872)

(4,402,019)

(4,586,105)

(3,431,357)

 (2,784,970)

           

Net loss per common share -

         
 

basic and diluted

$     (0.13)     

 (0.17)     

(0.18)     

(0.14)     

(0.11)     

       

       

        

    

    

Total assets

$ 42,682,573 

12,422,832 

16,402,546 

14,012,607 

 14,796,088 

           

Long-term obligations (1)

$   1,155,416 

1,490,472 

1,520,798 

1,167,224 

      924,559 

           

Cash dividend declared per

         
 

common share

$        -0-       

-0-       

-0-       

-0-       

-0-       

           

(1) Includes current portion of long-term obligations.

 

ITEM 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 TOC

This Report contains statements that constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. These statements appear in a number of places in this Report and include statements regarding our plans, beliefs or current expectations; including those plans, beliefs and expectations of our officers and directors with respect to, among other things, orders to be received under our supply agreement with CODA, our ability to successfully expand our manufacturing facilities, the ability to sell the company's existing facility on terms satisfactory to the company and the continued growth of the electric-powered vehicle industry. Important Risk Factors that could cause actual results to differ from those contained in the forward-looking statements are listed above in Part I, Item 1A. Risk Factors.

Introduction

We generate revenue from two principal activities: 1) research, development and application engineering services that are paid for by our customers; and 2) the sale of motors, generators and electronic controls. The sources of engineering revenue typically vary from year to year and individual projects may vary substantially in their periods of performance and aggregate dollar value. Our product sales consist of both prototype low volume sales, which are generally sold to a broad range of customers, and annually recurring higher volume production. During the fiscal year ended March 31, 2010 our product sales increased 21.6 percent to $7,307,354, driven primarily by an increase in demand for propulsion systems.

During fiscal 2010 a number of critical events occurred that we believe have positioned the company for substantial participation in the emerging market for all-electric and hybrid electric vehicles.

In June 2009 we entered into a ten year Supply Agreement with CODA Automotive to supply UQM® PowerPhase® electric propulsion systems to CODA Automotive's production partner, HaFei. Initial shipments of production systems under the agreement are expected to begin later this calendar year and ramp up prior to scheduled deliveries of CODA's all-electric four-door sedan in the California market in the fall of 2010. CODA hopes to sell 14,000 vehicles in calendar year 2011 reaching an annual run rate of 20,000 vehicles, which, if achieved, would result in annual revenue to us well in excess of $50 million.

The CODA all-electric sedan was developed by CODA's internal team of engineers working with multiple external engineering partners, including Porsche Engineering. The vehicle is propelled by a 100 kW UQM® PowerPhase® electric propulsion system and is expected to carry a 5-star crash worthiness rating and sell in the mid $30,000s after a $7,500 Federal tax credit. Powered by a 33.8 kWh lithium-ion battery, the vehicle is expected to have a range between charges of 90 to 120 miles depending on individual driving habits. The onboard charger plugs into a 110V or a 220V outlet and can charge for a 40-mile commute in approximately two hours (full charge in less than six hours) at 220V.

The CODA electric sedan chassis will be assembled and tested, incorporating the UQM® power-train on an existing large-scale assembly line operated by CODA's manufacturing and assembly partner, HaFei. Hafei is one of the premier production and R&D companies in China and is China's third largest automobile manufacturer. Hafei has over 575,000 square meters of production facilities and 11,000 employees.

CODA announced that the battery system is being supplied by a joint venture between CODA Automotive and Tianjin Lishen Battery Co. ("Lishen"). Lishen is one of the world's largest manufacturers of lithium-ion cells and a key supplier to Apple, Motorola, Samsung and Vodafone, among others. In March 2010, the CODA-Lishen joint venture announced that it had secured $100 million in committed equity capital and received a commitment for a $294 million line of credit from the Bank of Tianjin Joint-Stock Co., Ltd. CODA is working to establish U.S. based manufacturing of their joint venture batteries.

We understand that CODA is also working to establish final vehicle assembly in southern California where at a minimum the battery system would be installed in the chassis produced by Hafei. It is likely, that over time, the UQM propulsion system and other US- sourced components would be assembled into the vehicle in Southern California, rather than China.

CODA advertises that the CODA sedan is backed by a three-year/36,000 mile warranty and an eight-year/100,000 mile battery warranty.

Other suppliers to the CODA program include: Continental (electronic stability control); Delphi (DC to DC converter and electric power steering); BorgWarner (transaxle); Hella (electric vacuum pump); Energy CS (battery management system); Lear (battery charger); OMITEC (main controller); and Mitsubishi (electric AC compressor).

In August 2009 we were awarded a $45.1 million Grant from the U.S. DOE under the American Recovery and Reinvestment Act ("ARRA") to accelerate the manufacturing and deployment of electric vehicles, batteries and components in the United States. The Grant, which was finalized in January 2010, provides for a 50 percent cost-share by the Company raising the total value of the project to $90.2 million. Capital expenditures for facilities, tooling and manufacturing equipment and the qualification and testing of products associated with the launch of volume production for CODA Automotive are expected to qualify for reimbursement under the DOE program. The Grant also provides for the reimbursement of qualifying pre-award expenditures incurred after August 5, 2009. Expected reimbursements under this provision for production engineering expenditures incurred through March 31, 2010 totaled approximately $1.6 million and are expected to be recorded during the first quarter of fiscal 2011 as a reduction of production engineering expense. Reimbursements received from the DOE through March 31, 2010 for capital assets acquired totaled $3.6 million, which were recorded as a reduction in the cost basis of the assets acquired.

In September 2009 we entered into a marketing collaboration with BorgWarner on electric powertrain products for all-electric and hybrid electric passenger automobiles. We expect BorgWarner's global presence will bring a higher level of visibility to our electric propulsion system products and result in additional business opportunities with automobile customers worldwide.

In October 2009 we completed a public offering of 8.625 million shares of its common stock. Net cash proceeds to the Company from the offering were approximately $32 million. Proceeds from the offering will be used for matching contributions under the DOE ARRA grant, working capital and general corporate purposes.

In December 2009 we completed the purchase of a 129,304 square foot facility on a 30 acre site in Longmont, Colorado to support our expected growth in manufacturing operations. The facility, which includes approximately 30,000 square feet of office space, will house the company's engineering, vehicle integration and headquarters staff in addition to the company's high volume motor and electronic manufacturing operations. Approximately 15 acres of the site are available for future facility expansion. The purchase price of the facility was $7,624,729, of which $3,438,365 was funded under the DOE ARRA grant. We expect to sell our existing 28,000 square foot facility once we complete the relocation of our operations to the new facility this summer. The new facility was acquired to accommodate our planned expansion of high volume manufacturing operations for CODA Automotive's all-electric passenger vehicle program and future growth arising from the expected launch of additional production programs.

We expect to invest over the next several quarters an additional $7.2 million for facility upgrades, tooling, and manufacturing equipment to launch a high volume production cell for the electric propulsion system being supplied under the CODA Supply Agreement. We expect to use amounts under the DOE ARRA grant for up to 50% of these investments. Similarly, following the launch of deliveries under the CODA Supply Agreement, we expect to devote substantial financial resources to meet the working capital requirements associated with these production activities, potentially as much as $20 million.

Throughout the fiscal year we experienced broad demand for our electric propulsion systems and related products from a wide-range of customers worldwide. We believe that the increased demand is due, in part, to an expansion in the number of all-electric and hybrid electric vehicle platforms being developed for potential introduction in the passenger automobile market and the amount of government grants and loans available to encourage the development and introduction of clean vehicles. In the truck market, we are continuing to supply DC-to-DC converters to Eaton Corporation as part of their hybrid electric propulsion system which powers medium duty hybrid trucks manufactured by International Truck and Engine Corporation, Peterbilt Motors Company and Freightliner Trucks. We expect to see further improvements in deliveries to these markets as the global economy continues to improve. In addition, we expect that demand for our electric propulsion system and generator products will remain strong for the foreseeable future as vehicle makers continue to focus on the development and introduction of electric and hybrid electric vehicles as part of the restructuring of the global automotive industry to provide a broader selection of highly fuel efficient vehicles to consumers.

During fiscal 2010 we were granted United States patent number 7,598,645 entitled "Stress distributing permanent magnet rotor geometry for electric machines". The patent covers a novel rotor geometry that minimizes magnet content and maximizes the speed capability of the motor. The reduction in the amount of magnet material enabled under this patent is expected to result in lower production costs for electric propulsion systems for passenger automobiles.

Product sales revenue for the fiscal year ended March 31, 2010 was $7,307,354 versus $6,011,065 last fiscal year. The increase is due to stronger demand for electric propulsion systems and generators.

Revenue from funded engineering activities for the fiscal year ended March 31, 2010 declined 49 percent to $1,384,599 versus $2,717,246 last fiscal year. The decrease is primarily due to the allocation of otherwise billable engineering resources to support production launch activities for the CODA program.

Gross profit margins on product sales for the fiscal year improved to 30.5 percent versus 22.1 percent last fiscal year. Gross contribution dollars for the fiscal year ended March 31, 2010 increased to $2,717,133 versus $1,765,644 last fiscal year. The improvement is attributable to improved overhead absorption and reduced production costs associated with higher volumes and improvements in supply chain management.

Net loss for the fiscal year ended March 31, 2010 decreased to $4,140,872, or $0.13 per common share on total revenue of $8,691,953, versus a net loss of $4,402,019, or $0.17 per common share on total revenue of $8,728,311 for the previous fiscal year. The decrease in net loss is primarily attributable to improved contract services and product sales margins.

Our liquidity throughout the fiscal year was sufficient to meet our operating requirements. At March 31, 2010 we had cash and short-term investments totaling $30,148,783. Net cash used in operating activities and capital expenditures for property and equipment for the fiscal year were $2,428,007 and $5,636,172 versus $3,065,281 and $570,986 last fiscal year.

As the markets for electrified vehicles continue to emerge and expand into additional vehicle platforms over the next several years, we expect to experience potentially rapid growth in our revenue coincident with the introduction of electric products for our customers. Should these expectations be realized, our existing cash and short-term investments may not be adequate to fund our anticipated growth and, as a result, we may need to raise additional capital to fund the higher than currently anticipated growth in our business.

Financial Condition

Cash and cash equivalents and short-term investments at March 31, 2010 were $30,148,783 and working capital (the excess of current assets over current liabilities) was $31,001,650 compared with $5,793,666 and $6,640,877, respectively, at March 31, 2009. The increase in cash and short-term investments and working capital is primarily attributable to the proceeds of a public offering of our stock and higher levels of accounts payable which were partially offset by operating losses and investments in property and equipment and the repayment of debt.

Accounts receivable increased $778,539 to $1,695,638 at March 31, 2010 from $917,099 at March 31, 2009. The increase is primarily attributable to higher levels of billings arising principally from billings under our DOE ARRA stimulus grant as of March 31, 2010. Substantially all of our customers are large well-established companies of high credit quality. Although we have not established an allowance for bad debts at March 31, 2010 and no allowance for bad debts was deemed necessary at March 31, 2009, in light of current economic conditions we may need to establish an allowance for bad debts in the future.

Costs and estimated earnings on uncompleted contracts increased $37,648 to $680,746 at March 31, 2010 versus $643,098 at March 31, 2009. The increase is due to less favorable billing terms on certain contracts in process at March 31, 2010 versus March 31, 2009. Estimated earnings on contracts in process increased to $544,417 or 11.8 percent of contracts in process of $4,607,545 at March 31, 2010 compared to estimated earnings on contracts in process of $194,861 or 4.2 percent of contracts in process of $4,609,747 at March 31, 2009. The increase in estimated margins on contracts in process is attributable to improved pricing on certain contracts in process at March 31, 2010.

Inventories decreased $15,845 to $1,291,326 at March 31, 2010 as compared to $1,307,171 at March 31, 2009 principally due to decreased levels of raw materials and finished goods inventories which were partially offset by increased work-in-process inventories. Raw materials and finished goods inventory decreased, $282,091 and $59,009, respectively; reflecting lower levels of inventory on hand for vehicle auxiliary actuator motors. Work-in-process inventory increased $325,255 reflecting higher levels of low volume product builds in process at March 31, 2010.

Prepaid expenses and other current assets increased to $140,285 at March 31, 2010 from $117,768 at March 31, 2009 primarily due to higher levels of a range of prepaid items at the end of the current fiscal year versus the prior fiscal year end.

We invested $5,636,172 for the acquisition of property and equipment during the fiscal year compared to $570,986 last fiscal year. The increase in capital expenditures is primarily due to the purchase of a new facility, renovation costs for the new facility and purchases of manufacturing equipment during fiscal 2010.

Patent and trademark costs decreased $17,743 to $420,441 at March 31, 2010 as compared to $438,184 at March 31, 2009 due to systematic amortization of patent issuance costs, which was partially offset by the costs associated with the filing of a new patent application.

Other assets increased $567,541 to $643,984 at March 31, 2010 from $76,443 at March 31, 2009 due to higher levels of prepayments on capital equipment purchases at the end of the current fiscal year versus the prior fiscal year end.

Accounts payable increased $770,650 to $1,421,779 at March 31, 2010 from $651,129 at March 31, 2009, primarily due to renovation costs on our new facility.

Other current liabilities increased $448,571 to $1,049,243 at March 31, 2010 from $600,672 at March 31, 2009. The increase is primarily attributable to higher levels of accrued property taxes and higher levels of unearned revenue associated with customer prepayments.

Current portion of long-term debt was zero at March 31, 2010 as compared to $416,923 at March 31, 2009, reflecting the payoff of the mortgage debt for our Frederick, Colorado facility.

Short-term deferred compensation under executive employment agreements increased to $432,554 at March 31, 2010 as compared to $397,834 at March 31, 2009 reflecting periodic accruals of future severance obligations under executive employment agreements.

Billings in excess of costs and estimated earnings on uncompleted contracts decreased $19,815 to $51,552 at March 31, 2010 from $71,367 at March 31, 2009 reflecting decreased levels of billings on certain engineering contracts in process at the end of the fiscal year ended March 31, 2010 in advance of the performance of the associated work versus the prior fiscal year.

Long-term deferred compensation under executive employment agreements increased $47,147 to $722,862 at March 31, 2010 from $675,715 at March 31, 2009 reflecting periodic accruals of future severance obligations under executive employment agreements.

Common stock and additional paid-in capital increased to $359,467 and $112,211,227, respectively, at March 31, 2010 compared to $267,277 and $78,767,154 at March 31, 2009. The increase in common stock and additional paid-in capital was primarily attributable to a follow-on public offering and share issuances under our employee stock purchase plan, equity incentive plan and upon the exercise of warrants.

Results of Operations

Operations for the fiscal year ended March 31, 2010, resulted in a net loss of $4,140,872, or $0.13 per common share, compared to a net loss of $4,402,019, or $0.17 per common share, and $4,586,105, or $0.18 per common share, for the fiscal years ended March 31, 2009 and 2008, respectively. The reduction in the current year net loss is primarily attributable to higher levels of product sales revenue, improved gross profit margins on product sales, and lower selling, general and administrative expenses.

Revenue from contract services decreased $1,332,647, or 49.0 percent, to $1,384,599 for the fiscal year ended March 31, 2010 versus $2,717,246 for the fiscal year ended March 31, 2009. The decrease is primarily attributable to the application of engineering resources from the contract services group to support production engineering, low volume production and internally funded research and development activities. Revenue from contract services increased 4.8 percent to $2,717,246 for the fiscal year ended March 31, 2009 compared to $2,591,939 for the fiscal year ended March 31, 2008. The increase in the fiscal year ended March 31, 2009 is primarily attributable to higher levels of material purchases for billable programs versus fiscal year 2008.

Product sales this fiscal year increased 21.6 percent to $7,307,354 compared to $6,011,065 for the fiscal year ended March 31, 2009. Product sales for the fiscal year ended March 31, 2009 increased 22.3 percent to $6,011,065 compared to $4,916,383 for the fiscal year ended March 31, 2008. Power products segment revenue for the current fiscal year decreased to $2,455,776 versus $3,272,377 for fiscal year ended March 31, 2009 due to reduced shipments of DC-to-DC converters and higher volume electric propulsion systems. Power products segment revenue for the year ended March 31, 2009 increased $155,268, or 5.0 percent, to $3,272,377 compared to $3,117,109 for fiscal year ended March 31, 2008 due to increased shipments of DC-to-DC converters and the shipment of higher volume electric propulsion systems. Technology segment product revenue for this fiscal year increased $2,112,890, or 77.1 percent, to $4,851,578 compared to $2,738,688 for fiscal year ended March 31, 2009 due to increased shipments of low volume propulsion systems. Technology segment product revenue for the fiscal year ended March 31, 2009 increased $939,414 or 52.2 percent to $2,738,688 compared to $1,799,274 for fiscal year ended March 31, 2008 due to increased shipments of low volume electric propulsion systems.

Gross profit margins for the current fiscal year increased to 31.3 percent compared to 20.2 percent for the fiscal year ended March 31, 2009. Gross profit margins for the fiscal year ended March 31, 2009 increased to 20.2 percent compared to 14.3 percent for the fiscal year ended March 31, 2008. Gross profit margins on contract services increased to 35.5 percent this fiscal year compared to 16.1 percent for the fiscal year ended March 31, 2009 due to improved pricing on certain engineering contracts in process during the current fiscal year. Gross profit margins on contract services decreased to 16.1 percent for the fiscal year ended March 31, 2009 compared to 21.3 percent for the fiscal year ended March 31, 2008 due to higher incurred costs than planned on certain engineering contracts in process during the fiscal year ended March 31, 2009. Gross profit margins on product sales this fiscal year increased to 30.5 percent compared to 22.1 percent for fiscal 2009. The improvement is primarily due to lower material costs and improved overhead absorption arising from higher production levels during the fiscal year. Gross profit margins on product sales for the fiscal year ended March 31, 2009 increased to 22.1 percent compared to 10.7 percent for the fiscal year ended March 31, 2008. The improvement is primarily due to lower material costs and improved overhead absorption arising from higher production levels during the fiscal year ended March 31, 2009.

Research and development expenditures for the fiscal year ended March 31, 2010 were $576,341 compared to $593,209 and $461,791 for the fiscal years ended March 31, 2009 and 2008, respectively. The decrease in research and development expenditures for the fiscal year ended March 31, 2010 compared to the prior fiscal year was primarily due to reduced levels of internally funded programs. The increase in research and development expenditures for fiscal 2009 versus fiscal 2008 was primarily due to increased levels of internally funded software development programs.

Production engineering costs were $2,908,334 for the fiscal year ended March 31, 2010 versus $1,869,848 and $1,706,978 for the prior two fiscal years. The increase for the current fiscal year versus fiscal year 2009 is primarily attributable to higher sample costs and the utilization of engineering resources from our contract services group on production engineering activities and expansion of the group and its activities in preparation for the launch of higher volume manufacturing operations for the CODA program. The increase for the fiscal year ended March 31, 2009 versus fiscal 2008 is primarily attributable to engineering activities associated with the design and installation of a new production cell for our larger propulsion motors and production design activities on our motor and controller products.

Selling, general and administrative expense this fiscal year was $3,433,549 compared to $3,782,840 and $3,905,495 for the fiscal years ended March 31, 2009 and 2008, respectively. The decrease for this fiscal year is primarily attributable to lower levels of legal expenses. The decrease for fiscal 2009 versus fiscal 2008 is primarily attributable to lower levels of equity based compensation and lower deferred compensation expense recorded partially offset by increased legal fees for litigation.

Interest income declined to $64,916 for the current fiscal year compared to $198,947 and $463,248 for the fiscal years ended March 31, 2009 and 2008, respectively. The decrease for fiscal 2010 versus fiscal 2009 is attributable to lower yields on invested balances. The decrease for fiscal 2009 versus fiscal 2008 is attributable to lower invested balances and lower yields during the fiscal year ended March 31, 2009.

Interest expense decreased to $15,697 for the year ended March 31, 2010 compared to $33,387 and $40,652 for the fiscal years ended March 31, 2009 and 2008, respectively. The decrease is due to lower average mortgage borrowings outstanding throughout the fiscal year as compared to the prior fiscal year.

Liquidity and Capital Resources

Our cash balances and liquidity throughout the fiscal year ended March 31, 2010 were adequate to meet operating needs. At March 31, 2010, we had working capital (the excess of current assets over current liabilities) of $31,001,650 compared to $6,640,877 at March 31, 2009.

For the year ended March 31, 2010, net cash used in operating activities was $2,428,007 compared to net cash used in operating activities of $3,065,281 and $2,511,723 for the years ended March 31, 2009 and 2008, respectively. The decrease in cash used for the year ended March 31, 2010 is primarily attributable to lower operating losses, higher levels of accounts payable, partially offset by increased levels of accounts receivable. The increase in cash used in operating activities in fiscal 2009 is primarily attributable to higher levels of inventories, increased levels of billings in excess of costs on uncompleted contracts partially offset by lower operating losses, increased depreciation and amortization and impairment expense.

Net cash used in investing activities for the fiscal year ended March 31, 2010 was $14,793,339 compared to cash provided by investing activities of $2,620,118 for the previous fiscal year and cash used in investing activities of $1,446,752 for fiscal 2008, respectively. The increase in net cash used in investing activities for fiscal 2010 was primarily due to increased levels of short term investments and higher levels of capital expenditures associated with the establishment of high volume manufacturing capability and capacity for the CODA vehicle launch later this calendar year. The change in fiscal year 2009 versus 2008 fiscal year was primarily due to higher levels of maturities of short-term investments offset by lower expenditures for building improvements and manufacturing equipment.

Net cash provided by financing activities was $32,458,947 for the fiscal year ended March 31, 2010 versus cash used in financing activities of $228,922 and cash provided by financing activities of $5,182,382 for the fiscal years ended March 31, 2009 and 2008, respectively. The change in fiscal 2010 versus 2009 is attributable to the completion of a follow-on public offering in the third quarter of fiscal 2010, which resulted in cash proceeds of $31,664,373. The change for fiscal year 2009 versus fiscal year 2008 is attributable to the purchase of treasury stock in fiscal year 2009, and to the completion of a private placement in the first quarter of fiscal 2008, which resulted in cash proceeds of $5,183,677.

We expect to fund our operations over the next year from existing cash and short-term investment balances and from available bank financing, if any. We may need to invest substantially greater financial resources during fiscal 2011 on the commercialization of our products in emerging markets, including a significant increase in human resources, and increased expenditures for equipment, tooling and facilities. These capital requirements may be substantially reduced by the funding of 50 percent of qualified capital expenditures from the Company's grant from the U.S. DOE under the ARRA. Although we expect to manage our operations and working capital requirements to minimize the future level of operating losses and working capital usage consistent with the execution of our business plan, our planned working capital requirements may consume a substantial portion of our cash reserves at March 31, 2010. If customer demand accelerates substantially, our losses over the short-term may increase together with our working capital requirements. If our existing financial resources are not sufficient to execute our business plan, we may issue equity or debt securities in the future, 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 operation with then available financial resources.

Contractual Obligations

The following table presents information about our contractual obligations and commitments as of March 31, 2010:

 
 

                              Payments due by Period                           

 

 

              

       Total  

 

 Less Than

    1 Year  

 

 

2 - 3 Years

 

 

4 - 5 Years

More than 

  5 Years   

Purchase obligations

2,523,855  

2,523,855   

-         

-         

-         

Executive employment agreements (1)

1,155,416  

   432,554   

680,160   

      -         

42,702   

Total

3,679,271  

2,956,409   

680,160   

      -         

42,702   

Includes severance pay obligations under executive employment agreements contingently payable upon six months notice by two officers of the company, but not annual cash compensation under the agreements.

 

Off-Balance Sheet Arrangements

None.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, assumptions and estimates that affect the dollar values reported in the consolidated financial statements and accompanying notes. Note 1 to the consolidated financial statements describes the significant accounting policies and methods used in preparation of the consolidated financial statements. Estimates are used for, but not limited to, allowance for doubtful accounts receivables, costs to complete contracts, the recoverability of inventories and the fair value of financial and long-lived assets. Actual results could differ materially from these estimates. The following critical accounting policies are impacted significantly by judgments, assumptions and estimates used in preparation of the consolidated financial statements.

Accounts Receivable

Our trade accounts receivable are subject to credit risks associated with the financial condition of our customers and their liquidity. We evaluate all customers periodically to assess their financial condition and liquidity and set appropriate credit limits based on this analysis. As a result, the collectibility of accounts receivable may change due to changing general economic conditions and factors associated with each customer's particular business. Because substantially all of our customers are large well-established companies with excellent credit worthiness, we have not established a reserve at March 31, 2010 and 2009 for potentially uncollectible trade accounts receivable. In light of current economic conditions we may need to establish an allowance for bad debts in the future. It is also reasonably possible, that future events or changes in circumstances could cause the realizable value of our trade accounts receivable to decline materially, resulting in material losses.

Inventories

We maintain raw material inventories of electronic components, motor parts and other materials to meet our expected manufacturing needs for proprietary products and for products manufactured to the design specifications of our customers. Some of these components may become obsolete or impaired due to bulk purchases in excess of customer requirements. Accordingly, we periodically assesses our raw material inventory for potential impairment of value based on then available information, expectations and estimates and establish impairment reserves for estimated declines in the realizable value of our inventories. The actual realizable value of our inventories may differ materially from these estimates based on future occurrences. It is reasonably possible that future events or changes in circumstances could cause the realizable value of our inventories to decline materially, resulting in additional material impairment losses. During the fiscal years ended March 31, 2010, 2009 and 2008, we recorded inventory impairments of $26,714, $41,613 and zero, respectively.

Percentage of Completion Revenue Recognition on Long-term Contracts: Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts

We recognize revenue on development projects funded by our customers using the percentage-of-completion method. Under this method, contract services revenue is based on the percentage that costs incurred to date bear to management's best estimate of the total costs to be incurred to complete the project. Many of these contracts involve the application of our technology to customers' products and other applications with demanding specifications. Management's best estimates have sometimes been adversely impacted by unexpected technical challenges requiring additional analysis and redesign, failure of electronic components to operate in accordance with manufacturers published performance specifications, unexpected prototype failures requiring the purchase of additional parts and a variety of other factors that may cause unforeseen delays and additional costs. It is reasonably possible that total costs to be incurred on any of the projects in process at March 31, 2010 could be materially different from management's estimates, and any modification of management's estimate of total project costs to be incurred could result in material changes in the profitability of affected projects or result in material losses on any affected projects.

Fair Value Measurements and Asset Impairment

Some of our assets and liabilities may be subject to analysis as to whether the asset or liability should be marked to fair value and some assets may be evaluated for potential impairment in value. Fair value estimates and judgments may be required by management for those assets that do not have quoted prices in active markets. These estimates and judgments may include fair value determinations based upon the extrapolation of quoted prices for similar assets and liabilities in active or inactive markets, for observable items other than the asset or liability itself, for observable items by correlation or other statistical analysis, or from our assumptions about the assumptions market participants would use in valuing an asset or liability when no observable market data is available. Similarly, management evaluates both tangible and intangible assets for potential impairments in value. In conducting this evaluation, management may rely on a number of factors to value anticipated future cash flows including operating results, business plans and present value techniques. Rates used to value and discount cash flows may include assumptions about interest rates and the cost of capital at a point in time. There are inherent uncertainties related to these factors and management's judgment in applying them to the analysis of asset impairment. Changes in any of the foregoing estimates and assumptions or a change in market conditions could result in a material change in the value of an asset or liability resulting in a material adverse change in our operating results.

New Accounting Pronouncements

In October 2009, the FASB issued new standards for revenue recognition with multiple deliverables. These new standards impact the determination of when the individual deliverables included in a multiple-element arrangement may be treated as separate units of accounting. Additionally, these new standards modify the manner in which the transaction consideration is allocated across the separately identified deliverables by no longer permitting the residual method of allocating arrangement consideration. These new standards are required to be adopted in the first quarter of FY 2012; however, early adoption is permitted. We do not expect these new standards to significantly impact our consolidated financial statements, results of operations, or cash flows.

In October 2009, the FASB issued new standards for the accounting for certain revenue arrangements that include software elements. These new standards amend the scope of pre-existing software revenue guidance by removing from the guidance non-software components of tangible products and certain software components of tangible products. These new standards are required to be adopted in the first quarter of FY 2012; however, early adoption is permitted. We do not expect these new standards to significantly impact our consolidated financial statements, results of operations, or cash flows.

In January 2010, the FASB issued amended standards that require additional fair value disclosures. These amended standards require disclosures about inputs and valuation techniques used to measure fair value as well as disclosures about significant transfers, beginning in the first quarter of 2010. Additionally, these amended standards require presentation of disaggregated activity within the reconciliation for fair value measurements using significant unobservable inputs (Level 3), beginning in the first quarter of FY 2012. We do not expect these new standards to significantly impact our consolidated financial statements, results of operations, or cash flows.

 

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 TOC

Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency exchange and interest rates. We do not use financial instruments to any degree to manage these risks and do not hold or issue financial instruments for trading purposes. All of our product sales, and related receivables are payable in U.S. dollars. We are not subject to interest rate risk on our debt obligations.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered
Public Accounting Firm

 TOC

Board of Directors and

Shareholders of UQM Technologies, Inc.

We have audited the accompanying consolidated balance sheets of UQM Technologies, Inc. (a Colorado Corporation) and subsidiaries (collectively, "UQM") as of March 31, 2010 and 2009, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended March 31, 2010. These financial statements are the responsibility of UQM's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of UQM Technologies, Inc. and subsidiaries as of March 31, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2010 in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), UQM Technologies, Inc. and subsidiaries' internal control over financial reporting as of March 31, 2010, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated May 24, 2010, expressed an unqualified opinion.

 

/s/ GRANT THORNTON LLP

Denver, Colorado

May 24, 2010

Report of Independent Registered
Public Accounting Firm

Board of Directors and

Shareholders of UQM Technologies, Inc.

 

We have audited UQM Technologies, Inc. (a Colorado Corporation) and subsidiaries' (collectively, "UQM") internal control over financial reporting as of March 31, 2010, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). UQM's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express an opinion on UQM's internal control over financial reporting 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 effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed 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. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, UQM Technologies, Inc. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of March 31, 2010, based on criteria established in Internal Control-Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of UQM Technologies, Inc. and subsidiaries as of March 31, 2010 and 2009, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended March 31, 2010, and our report dated May 24, 2010, expressed an unqualified opinion.

 

/s/ GRANT THORNTON LLP

Denver, Colorado

May 24, 2010

 

 

UQM TECHNOLOGIES, INC.

AND SUBSIDIARIES

 TOC

Consolidated Balance Sheets

 

 

March 31, 2010 

March 31, 2009

Assets

   
     

Current assets:

   
 

Cash and cash equivalents

$   17,739,600 

2,501,999 

 

Short-term investments

12,409,183 

3,291,667 

 

Accounts receivable

1,695,638 

917,099 

 

Costs and estimated earnings in excess of billings on

   
   

uncompleted contracts

680,746 

643,098 

 

Inventories

1,291,326 

1,307,171 

 

Prepaid expenses and other current assets

     140,285 

     117,768 

     
     

Total current assets 

33,956,778 

  8,778,802 

     

Property and equipment, at cost:

   
 

Land

1,825,968 

181,580 

 

Building

5,402,176 

2,464,213 

 

Machinery and equipment

  4,524,188 

  4,040,406 

 

11,752,332 

6,686,199 

 

Less accumulated depreciation

(4,090,962)

(3,556,796)

     
     

Net property and equipment

  7,661,370 

  3,129,403 

     

Patent and trademark costs, net of accumulated amortization

   
 

of $789,325 and $733,594

420,441 

438,184 

     

Other assets

     643,984 

       76,443 

     

Total assets

42,682,573 

12,422,832 

 

 

 

   

(Continued)

 

See accompanying notes to consolidated financial statements.

 

Consolidated Balance Sheets, Continued

 

March 31, 2010 

March 31, 2009 

Liabilities and Stockholders' Equity

   
     

Current liabilities:

   
 

Accounts payable

$      1,421,779 

651,129 

 

Other current liabilities

1,049,243 

600,672 

 

Current portion of long-term debt

-       

416,923 

 

Short-term deferred compensation under executive employment

   
   

agreements

432,554 

397,834 

 

Billings in excess of costs and estimated earnings on

   
   

uncompleted contracts

         51,552 

       71,367 

     
     

Total current liabilities

    2,955,128 

  2,137,925 

     
     

Long-term deferred compensation under executive employment agreements

      722,862 

     675,715 

 

      722,862 

     675,715 

     
     

Total liabilities

   3,677,990 

  2,813,640 

     

Commitments and contingencies

   
     

Stockholders' equity:

   
 

Common stock, $0.01 par value, 50,000,000 shares

   

authorized; 35,946,738 and 26,727,694 shares

issued and outstanding

359,467 

267,277 

Additional paid-in capital

112,211,227 

78,767,154 

 

Accumulated deficit

(73,566,111)

(69,425,239)

     

Total stockholders' equity

  39,004,583 

  9,609,192 

     
     

Total liabilities and stockholders' equity

$    42,682,573 

12,422,832 

 

See accompanying notes to consolidated financial statements.

 

Consolidated Statements of Operations

 TOC

 

Year Ended   

Year Ended   

Year Ended   

 

March 31, 2010

March 31, 2009

March 31, 2008

Revenue:

     
 

Contract services

$   1,384,599   

2,717,246   

 2,591,939   

 

Product sales

  7,307,354   

  6,011,065   

  4,916,383   

 

  8,691,953   

  8,728,311   

  7,508,322   

Operating costs and expenses:

 

Costs of contract services

892,649   

2,279,956   

2,039,017   

 

Costs of product sales

5,082,171   

4,682,711   

4,392,442   

 

Research and development

576,341   

593,209   

461,791   

 

Production engineering

2,908,334   

1,869,848   

1,706,978   

 

Selling, general and administrative

3,433,549   

3,782,840   

3,905,495   

 

Gain on disposal of assets

           -         

          (510)  

        (2,159)  

12,893,044   

13,208,054   

 12,503,564   

           
   

Loss before other income (expense)

(4,201,091)  

(4,479,743)  

(4,995,242)  

           

Other income (expense):

     
 

Interest income

64,916   

198,947   

463,248   

 

Interest expense

(15,697)  

(33,387)  

(40,652)  

 

Impairment of investment

-         

(89,369)  

-         

 

Other

       11,000   

         1,533   

     (13,459)  

   

       60,219   

       77,724   

     409,137   

         
   

Net loss

(4,140,872)  

(4,402,019)  

  (4,586,105)  

   

 

 

 
   

Net loss per common share-basic and diluted:

$(0.13)       

(0.17)       

(0.18)       

   

 

 

    

Weighted average number of shares of common

     

stock outstanding - basic and diluted

30,720,368   

26,651,130   

26,196,278   

See accompanying notes to consolidated financial statements.

 

 

Consolidated Statements of Stockholders' Equity

 TOC

 

Number of

       
 

common  

 

Additional 

 

Total       

 

shares    

Common 

paid-in   

Accumulated 

stockholders'

 

    issued    

    stock    

    capital    

     deficit       

     equity      

Balances at April 1, 2007

25,176,889 

$ 251,769 

 71,376,462 

(60,437,115)

11,191,116 

Issuance of common stock in follow-on

offering, net of offering costs

1,250,000 

12,500 

5,171,177 

-       

5,183,677 

Issuance of common stock under

employee stock purchase plan

14,664 

146 

40,644 

-       

40,790 

Issuance of common stock upon

exercise of employee options

24,362 

244 

56,431 

-       

56,675 

Issuance of common stock under

stock bonus plan

60,822 

608 

46,623 

-       

47,231 

Compensation expense from

employee and director stock

option and common stock grants

-       

-       

1,127,704 

-       

1,127,704 

Net loss

          -       

       -       

            -       

 (4,586,105)

 (4,586,105)

Balances at March 31, 2008

26,526,737 

265,267 

77,819,041 

(65,023,220)

13,061,088 

Issuance of common stock under

employee stock purchase plan

22,268 

223 

33,994 

-       

34,217 

Purchase of treasury stock

(70,269)

(703)

(156,434)

-       

(157,137)

Issuance of common stock under

stock bonus plan

248,958 

2,490 

(2,490)

-       

-       

Compensation expense from

employee and director stock

option and common stock grants

-       

-       

1,073,043 

-       

1,073,043 

Net loss

          -       

      -       

            -       

 (4,402,019)

 (4,402,019)

Balances at March 31, 2009

26,727,694 

   267,277 

  78,767,154 

(69,425,239)

   9,609,192 

Issuance of common stock in follow-on

offering, net of offering costs

8,625,000 

86,250 

31,578,123 

-       

31,664,373 

Issuance of common stock under

employee stock purchase plan

61,362 

613 

106,000 

-       

106,613 

Purchase of treasury stock

(38,750)

(388)

(159,787)

-       

(160,175)

Issuance of common stock upon exercise

of employee options

374,349 

3,743 

1,081,120 

-       

1,084,863 

Issuance of common stock upon exercise

of warrants

70,142 

701 

179,495 

-       

180,196 

Issuance of common stock under

stock bonus plan

126,941 

1,271 

(1,271)

-       

-       

Compensation expense from

employee and director stock

option and common stock grants

-       

-       

660,393 

-       

660,393 

Net loss

          -       

     -       

            -       

 (4,140,872)

 (4,140,872)

Balances at March 31, 2010

35,946,738 

359,467

112,211,227 

(73,566,111)

39,004,583 

See accompanying notes to consolidated financial statements.

 

Consolidated Statements of Cash Flows

 TOC

 

Year Ended   

Year Ended   

Year Ended    

 

March 31, 2010 

March 31, 2009 

March 31, 2008 

Cash flows from operating activities:

     
 

Net loss

$(4,140,872)

(4,402,019)

(4,586,105)

 

Adjustments to reconcile net loss to net cash used in

     
   

operating activities:

     
     

Depreciation and amortization

603,095 

546,843 

437,799 

Gain on disposal of assets

-       

(510)

(13,314)

     

Impairment of long-lived assets

-       

-       

11,155 

     

Impairment of investment

-       

89,369 

-       

     

Impairment of inventories

26,714 

41,613 

-       

     

Non-cash equity based compensation

660,393 

1,073,043 

1,174,935 

     

Change in operating assets and liabilities:

     
       

Accounts receivable and costs and estimated

     
         

earnings in excess of billings on

     
         

uncompleted contracts

(816,187)

393,612 

(255,113)

       

Inventories

(10,869)

(387,295)

(61,604)

       

Prepaid expenses and other current assets

(22,517)

1,879 

159,696 

       

Other assets

(9,037)

-       

2,101 

       

Accounts payable and other current liabilities

1,219,221 

138,989 

(228,918)

       

Billings in excess of costs and estimated

     
         

earnings on uncompleted contracts

(19,815)

       (636,481)

       395,311 

       

Deferred compensation under executive

     
         

employment agreements

        81,867 

     75,676 

    452,334 

           

Net cash used in operating activities

  (2,428,007)

(3,065,281)

(2,511,723)

       

Cash flows from investing activities:

     
 

Maturities (purchases) of short-term investments

(9,117,516)

3,208,772 

       (607,980)

 

Increase in other long-term assets

(1,664)

(2,122)

(2,217)

 

Prepayments on property and equipment

       (662,072)

       (188,427)

       (186,633)

 

Acquisition of property and equipment

(4,974,100)

(382,559)

(616,488)

 

Increase in patent and trademark costs

(37,987)

(16,056)

(51,099)

 

Proceeds from sale of assets

          -       

          510 

     17,665 

           

Net cash provided by (used in) investing activities

$ (14,793,339

2,620,118 

(1,446,752)

                     
       
       
       
       
       

 

Consolidated Statements of Cash Flows, Continued

 

Year Ended

Year Ended     

Year Ended

 

March 31, 2010

March 31, 2009  

March 31, 2008

Cash flows from financing activities:

     
 

Repayment of debt

$     (416,923)

(106,002)

(98,760)

 

Issuance of common stock in follow-on offering,

     
   

net of offering costs

31,664,373 

-       

5,183,677 

 

Issuance of common stock upon exercise of

     
   

employee options

1,084,863 

-       

56,675 

 

Purchase of treasury stock

(160,175)

(157,137)

-       

 

Issuance of common stock upon exercise of warrants

180,196 

-       

-       

 

Issuance of common stock under employee stock

     

purchase plan

     106,613 

     34,217 

     40,790 

Net cash provided by (used in) financing activities

32,458,947 

  (228,922)

5,182,382 

       

Increase (decrease) in cash and cash equivalents

15,237,601 

(674,085)

1,223,907 

       

Cash and cash equivalents at beginning of year

  2,501,999 

3,176,084 

1,952,177 

       

Cash and cash equivalents at end of year

17,739,600 

2,501,999 

3,176,084 

       

Supplemental Cash Flow Information:

Interest paid in cash during the year

       17,075 

     33,738 

     40,979 

 

See accompanying notes to consolidated financial statements.

 

Notes to Consolidated Financial Statements

 TOC

(1)  Summary of Significant Accounting Policies

(a)  Description of Business

UQM Technologies, Inc. and our wholly-owned subsidiary UQM Power Products, Inc. are engaged in the research, development and manufacture of permanent magnet electric motors and the electronic controls for such motors. Our facility is located in Frederick, Colorado. Our revenue is derived primarily from product sales to customers in the automotive, agriculture, industrial, medical and aerospace markets, and from contract research and development services. We are impacted by other factors such as the continued receipt of contracts from industrial and governmental parties, our ability to protect and maintain the proprietary nature of our technology, continued product and technological advances and our ability together with our partners, to commercialize our products and technology.

(b)  Principles of Consolidation

The consolidated financial statements include the accounts of UQM Technologies, Inc. and those of all majority-owned or controlled subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

(c)  Cash and Cash Equivalents and Short-term Investments

We consider cash on hand and investments with original maturities of three months or less to be cash and cash equivalents. Investments with original maturities of greater than three months and less than one year from the balance sheet date are classified as short-term.

Although the amount of credit exposure to any one institution may exceed federally insured amounts, we limit our cash and cash equivalents and investments to high quality financial institutions in order to minimize our credit risk.

(d)  Investments

We have an investment policy approved by the Board of Directors that governs the quality, acceptability and dollar concentration of our investments. Investments are comprised of marketable securities and consist primarily of commercial paper, asset-backed and mortgage-backed notes and bank certificates of deposits with original maturities beyond three months. All marketable securities are held in our name at two major financial institutions who hold custody of the investments. All of our investments are held-to-maturity investments as we have the positive intent and ability to hold until maturity. These securities are recorded at amortized cost.

The amortized cost and unrealized gain or loss of our investments were:

 

 

            March 31, 2010          

           March 31, 2009           

 

Amortized Cost

Gain (Loss) 

Amortized Cost

Gain (Loss) 

Short-term investments:

       

U.S. government and government agency

       
 

securities

$   4,994,624

576 

2,055,176

2,755 

Commercial paper, corporate and foreign bonds

1,656,875

(2,389)

137,418

(3,454)

Certificates of deposit

5,757,684

  -       

1,099,073

  -       

12,409,183

  (1,813)

3,291,667

  (699)

Long-term investment:

Certificates of deposit (included in other assets)

      58,701

   -       

     57,038

  -       

12,467,884

(1,813)

3,348,705

  (699)

The time to maturity of held-to-maturity securities were:

   

                      March 31,             

   

    2010    

           2009    

 

Three to six months

$   1,349,290

         -      

 

Six months to one year

11,059,893

3,291,667

 

Over one year

       58,701

     57,038

12,467,884

3,348,705

(e)  Accounts Receivable

We extend unsecured credit to most of our customers following a review of the customers' financial condition and credit history. We establish an allowance for doubtful accounts based upon a number of factors including the length of time trade receivables are past due, the customer's ability to pay its obligation to us, the condition of the general economy, estimates of credit risk, historical trends and other information. We write off accounts receivable when they become uncollectible against our allowance for uncollectible accounts receivable. At March 31, 2010 and 2009, no allowance for uncollectible accounts receivable was deemed necessary. Accounts receivable are deemed to be past due when they have not been paid by their contractual due dates.

(f)  Inventories

Inventories are stated at the lower of cost or market. Cost is determined by the first-in, first-out method. We charge directly to expense slow moving or obsolete inventory items during the period we assess the value of such inventory to be impaired. For the fiscal years ended March 31, 2010 and 2009 we impaired inventory of $26,714 and $41,613, respectively.

(g)  Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range from three to five years, except for buildings, which are depreciated over 27.5 years. Maintenance and repairs are charged to expense as incurred. Depreciation expense for the fiscal years ended March 31, 2010, 2009 and 2008 was $547,365, $491,206 and $382,162, respectively.

(h)  Patent and Trademark Costs

Patent and trademark costs consist primarily of legal expenses, and represent those costs incurred by us for the filing of patent and trademark applications. Amortization of patent and trademark costs is computed using the straight-line method over the estimated useful life of the asset, typically 17 years for patents, and 40 years for trademarks. Amortization expense for the fiscal years ended March 31, 2010, 2009 and 2008 was $55,730, $55,637, and $55,637, respectively.

( i)  Impairment of Long-Lived Assets

We periodically evaluate whether circumstances or events have affected the recoverability of long-lived assets including intangible assets with finite useful lives. The assessment of possible impairment is based on our ability to recover the carrying value of the asset or groups of assets from expected future cash flows (undiscounted and without interest charges) estimated by management. If expected future cash flows are less than the carrying value, an impairment loss is recognized to adjust the asset to fair value as determined by expected discounted future cash flows.

( j)  Product Warranties

Our warranty policy generally provides three months to three years of coverage depending on the product. We record a liability for estimated warranty obligations at the date products are sold. The estimated cost of warranty coverage is based on our actual historical experience with our current products or similar products. For new products, the required reserve is based on historical experience of similar products until sufficient historical data has been collected on the new product. Adjustments are made as new information becomes available.

(k)  Revenue and Cost Recognition

We manufacture proprietary products and other products. Revenue from sales of products are generally recognized at the time title to the goods and the benefits and risks of ownership passes to the customer which is typically when products are shipped based on the terms of the customer purchase agreement.

Revenue relating to long-term fixed price contracts is recognized using the percentage of completion method. Under the percentage of completion method, contract revenues and related costs are recognized based on the percentage that costs incurred to date bear to total estimated costs.

Changes in job performance, estimated profitability and final contract settlements may result in revisions to cost and revenue, and are recognized in the period in which the revisions are determined.

Contract costs include all direct materials, subcontract and labor costs and other indirect costs. Selling, general and administrative costs are charged to expense as incurred. At the time a loss on a contract becomes known, the entire amount of the estimated loss is accrued.

The aggregate of costs incurred and estimated earnings recognized on uncompleted contracts in excess of related billings is shown as a current asset, and billings on uncompleted contracts in excess of costs incurred and estimated earnings is shown as a current liability.

Government Grants

The Company recognizes government grants when there is reasonable assurance that the Company will comply with the conditions attached to the grant arrangement and the grant will be received. Government grants are recognized in the consolidated statements of operations on a systematic basis over the periods in which the Company recognizes the related costs for which the government grant is intended to compensate. Specifically, when government grants are related to reimbursements for cost of revenues or operating expenses, the government grants are recognized as a reduction of the related expense in the consolidated statements of operations. For government grants related to reimbursements of capital expenditures, the government grants are recognized as a reduction of the basis of the asset and recognized in the consolidated statements of operations over the estimated useful life of the depreciable asset as reduced depreciation expense.

The Company records government grants receivable in the consolidated balance sheets in accounts receivable.

(m)  Income Taxes

The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The valuation of deferred tax assets may be reduced if future realization is not assured. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

(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

Basic earnings per share is computed by dividing income or loss available to common stockholders by the weighted average number of common shares outstanding during the periods presented. Diluted earnings per share is computed by dividing income or loss available to common stockholders by all outstanding and potentially dilutive shares during the periods presented, unless the effect is antidilutive. At March 31, 2010, 2009 and 2008, respectively, issued but not yet earned common shares of 98,929, 225,870, and 283,480 were being held in safekeeping by the Company. For the fiscal years 2010, 2009, and 2008, shares in the amount of 26,260, zero, and 7,887, respectively, were potentially included in the calculation of diluted loss per share under the treasury stock method but were not included, because to do so would be antidilutive. At March 31, 2010, 2009 and 2008, options to purchase 2,637,875, 2,995,214, and 2,679,740 shares of common stock, respectively, and warrants to purchase zero, zero, and 85,267 shares of common stock, respectively, were outstanding. For the fiscal years ended March 31, 2010, 2009 and 2008, respectively, options and warrants for 678,815, 2,957,734, and 1,400,051 shares were not included in the computation of diluted loss per share because the option or warrant exercise price was greater than the average market price of the common stock. In-the-money options and warrants determined under the treasury stock method to acquire 612,807 shares, 3,554 shares, and 335,477 shares of common stock for the fiscal years ended March 31, 2010, 2009 and 2008, respectively, were potentially includable in the calculation of diluted loss per share but were not included, because to do so would be antidilutive.

(p)  Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

(q)  Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

New Accounting Pronouncements

In October 2009, the FASB issued new standards for revenue recognition with multiple deliverables. These new standards impact the determination of when the individual deliverables included in a multiple-element arrangement may be treated as separate units of accounting. Additionally, these new standards modify the manner in which the transaction consideration is allocated across the separately identified deliverables by no longer permitting the residual method of allocating arrangement consideration. These new standards are required to be adopted in the first quarter of FY 2012; however, early adoption is permitted. We do not expect these new standards to significantly impact our consolidated financial statements.

In October 2009, the FASB issued new standards for the accounting for certain revenue arrangements that include software elements. These new standards amend the scope of pre-existing software revenue guidance by removing from the guidance non-software components of tangible products and certain software components of tangible products. These new standards are required to be adopted in the first quarter of FY 2012; however, early adoption is permitted. We do not expect these new standards to significantly impact our consolidated financial statements.

In January 2010, the FASB issued amended standards that require additional fair value disclosures. These amended standards require disclosures about inputs and valuation techniques used to measure fair value as well as disclosures about significant transfers, beginning in the first quarter of 2010. Additionally, these amended standards require presentation of disaggregated activity within the reconciliation for fair value measurements using significant unobservable inputs (Level 3), beginning in the first quarter of FY 2012. We do not expect these new standards to significantly impact our consolidated financial statements.

(2)  Stock Based Compensation

Stock Option Plans

As of March 31, 2010 we had 619,202 shares of common stock available for future grant to employees, consultants and key suppliers under our 2002 Equity Incentive Plan ("Plan"). Under the Plan, the exercise price of each option is set at the fair value of the common stock on the date of grant and the maximum term of the option is 10 years from the date of grant. Options granted to employees generally vest ratably over a three-year period. The maximum number of options that may be granted to an employee under the Plan in any calendar year is 500,000 options. Forfeitures under the Plan are available for re-issuance at any time prior to expiration of the Plan in 2013. Options granted under the Plan to employees require the option holder to abide by certain Company policies, which restrict their ability to sell the underlying common stock. Prior to the adoption of the Plan, we issued stock options under our 1992 Incentive and Non-Qualified Option Plan, which expired by its terms in 2002. Forfeitures under the 1992 Incentive and Non-Qualified Option Plan may not be re-issued.

Non-Employee Director Stock Option Plan

In February 1994 our Board of Directors ratified a Stock Option Plan for Non-Employee Directors ("Directors Plan") pursuant to which Directors may elect to receive stock options in lieu of cash compensation for their services as directors. As of March 31, 2010, we had 150,768 shares of common stock available for future grant under the Directors Plan. Option terms range from 3 to 10 years from the date of grant. Option exercise prices are equal to the fair value of the common shares on the date of grant. Options granted under the plan generally vest immediately. Forfeitures under the Directors Plan are available for re-issuance at a future date.

Stock Purchase Plan

We have established a Stock Purchase Plan under which eligible employees may contribute up to 10 percent of their compensation to purchase shares of our common stock at 85 percent of the fair market value at specified dates. As of March 31, 2010 we had 506,607 shares of common stock available for issuance under the Stock Purchase Plan. During the years ended March 31, 2010, 2009 and 2008, respectively, 61,362, 22,268, and 14,664 shares of common stock were issued under the Stock Purchase Plan. Cash received by us upon the issuance of shares under the Stock Purchase Plan for the years ended March 31, 2010, 2009 and 2008, was $106,613, $34,217, and $40,790, respectively.

Stock Bonus Plan

We have a Stock Bonus Plan ("Stock Plan") administered by the Board of Directors. As of March 31, 2010 there were 6,794 shares of common stock available for future grant under the Stock Plan. Under the Stock Plan, shares of common stock may be granted to employees, key consultants, and directors who are not employees as additional compensation for services rendered. Vesting requirements for grants under the Stock Plan, if any, are determined by the Board of Directors at the time of grant. There were zero, and 191,348 shares granted under the Stock Plan during the years ended March 31, 2010, and March 31, 2009, respectively.

We use the straight-line attribution method to recognize share-based compensation costs over the requisite service period of the award. Options granted by us generally expire ten years from the grant date. Options granted to existing and newly hired employees generally vest over a three-year period from the date of the grant. The exercise price of options is equal to the market price of our common stock (defined as the closing price reported by the NYSE Amex) on the date of grant.

We use the Black-Scholes-Merton option pricing model for estimating the fair value of stock option awards. Total share-based compensation expense and the classification of these expenses for the last three fiscal years were as follows:

 

Year Ended     

Year Ended     

Year Ended     

 

March 31, 2010  

March 31, 2009  

March 31, 2008  

Cost of contract services

$    84,331      

$     110,329      

113,507      

Cost of product sales

76,809      

84,875      

60,933      

Research and development

29,606      

37,903      

25,652      

Production engineering

103,669      

128,553      

132,494      

Selling, general and administrative

365,978      

   711,383      

   842,349      

       

$  660,393      

$  1,073,043      

1,174,935      

 

Share-based compensation capitalized in inventories was insignificant as of March 31, 2010 and 2009.

We adjust share-based compensation on a quarterly basis for changes to the estimate of expected equity award forfeitures based on actual forfeiture experience. The effect of adjusting the forfeiture rate for all expense amortization is recognized in the period the forfeiture estimate is changed. The effect of forfeiture adjustments during the years ended March 31, 2010, 2009 and 2008 was insignificant.

All options granted under the Non-Employee Director Stock Option Plan are vested. A summary of the status of non-vested shares under the Equity Incentive Plan as of March 31, 2010, 2009 and 2008, and changes during the years ended March 31, 2010, 2009 and 2008 are presented below:

 

 

Year Ended

Year Ended

Year Ended

 

March 31, 2010

March 31, 2009

March 31, 2008

   

Weighted-

 

Weighted-

 

Weighted-

 

Shares

Average

Shares

Average

Shares

Average

 

Under

Grant Date

Under

Grant Date

Under

Grant Date

 

 Option 

Fair Value

 Option 

Fair Value

 Option 

Fair Value

Non-vested at March 31

283,454   

    $ 1.40

337,888   

    $ 1.85

554,940   

    $ 1.71

Granted

-         

    $   -    

-         

    $   -    

-         

    $   -    

Vested

-         

    $   -    

(10,000)  

    $ 2.10

(10,000)  

    $ 2.10

Forfeited

      -         

    $   -    

   (2,000)  

    $ 1.61

   (2,387)  

    $ 2.01

Non-vested at June 30

283,454   

    $ 1.40

325,888   

    $ 1.84

542,553   

    $ 1.70

Granted

-         

    $   -    

381,615   

    $ 1.08

106,159   

    $ 1.89

Vested

(128,471)  

    $ 1.47

(72,588)  

    $ 1.69

(39,702)  

    $ 1.52 

Forfeited

  (5,873)  

    $ 1.58

   (1,500)  

    $ 1.61

    (2,000)  

    $ 1.61

Non-vested at September 30

149,110   

    $ 1.35

633,415   

    $ 1.40

 607,010   

    $ 1.75

Granted

193,304   

    $ 2.38

-         

    $   -   

-         

    $   -   

Vested

-         

    $   -   

(346,294)  

    $ 1.39

(246,455)  

    $ 1.63

Forfeited

      -         

    $   -   

      -         

    $   -   

    (2,000)  

    $ 1.61

Non-vested at December 31

342,414   

    $ 1.93

287,121   

    $ 1.41

358,555   

    $ 1.83

Granted

-         

    $   -   

-         

    $   -   

6,000   

    $ 1.03 

Vested

(3,667)  

    $ 1.78

(3,667)  

    $ 1.78

(26,667)  

    $ 1.41

Forfeited

-         

    $   -   

-         

    $   -   

     -         

    $   -   

Non-vested at March 31

338,747   

    $ 1.93

283,454   

    $ 1.40

337,888   

    $ 1.85

As of March 31, 2010, there was $298,000 of total unrecognized compensation cost 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 19 months. The total fair value of stock options that vested during the years ended March 31, 2010, 2009 and 2008 was $194,945, $633,106, and $519,978, respectively.

A summary of the non-vested shares under the Stock Bonus Plan as of March 31, 2010 and 2009 and changes during the years ended March 31, 2010, 2009 and 2008 is presented below:

 

 

Year Ended

Year Ended

Year Ended

 

March 31, 2010

March 31, 2009

March 31, 2008

   

Weighted-

 

Weighted-

 

Weighted-

 

Shares

Average

Shares

Average

Shares

Average

 

Under

Grant Date

Under

Grant Date

Under

Grant Date

 

Contract

Fair Value

Contract

Fair Value

Contract

Fair Value

Non-vested at March 31

225,870   

    $ 3.08

283,480   

    $ 3.34

136,035   

    $ 3.20

Granted

-         

    $   -    

-         

    $   -    

-         

    $   -    

Vested

-         

    $   -    

-         

    $   -    

-         

    $   -    

Forfeited

      -         

    $   -    

      -         

    $   -    

      -         

    $   -    

Non-vested at June 30

225,870   

    $ 3.08

283,480   

    $ 3.34

136,035   

    $ 3.20

Granted

-         

    $   -    

191,348   

    $ 2.18

-         

    $   -    

Vested

(45,342)  

    $ 3.20

(184,692)  

    $ 2.43

(45,349)  

    $ 3.20 

Forfeited

      -         

    $   -    

      -         

    $   -    

      -         

    $   -    

Non-vested at September 30

180,528   

    $ 3.05

290,136   

    $ 3.15

 90,686   

    $ 3.20

Granted

-         

    $   -   

-         

    $   -   

204,558   

    $ 3.40 

Vested

(81,599)  

    $ 3.14

(64,266)  

    $ 3.40

(11,764)  

    $ 3.40 

Forfeited

      -         

    $   -   

      -         

    $   -   

      -         

    $   -    

Non-vested at December 31

98,929   

    $ 2.97

225,870   

    $ 3.08

283,480   

    $ 3.34

Granted

-         

    $   -   

-         

    $   -   

-         

    $   -    

Vested

-         

    $   -   

-         

    $   -   

-         

    $   -    

Forfeited

      -         

    $   -   

      -         

    $   -   

     -         

    $   -   

Non-vested at March 31

  98,929   

    $ 2.97

225,870   

    $ 3.08

283,480   

    $ 3.34

 

As of March 31, 2010 there was $85,918 of total unrecognized compensation cost related to common stock granted under our Stock Bonus Plan. The unrecognized compensation cost is expected to be recognized over a weighted average period of 13 months. The total fair value of common stock granted under the Stock Bonus Plan that vested during the years ended March 31, 2010, 2009 and 2008 was $401,384, $667,384, and $185,114, respectively.

During the years ended March 31, 2010, 2009 and 2008 options to acquire 246,840, 550,358, and 201,060 shares of common stock, respectively, were granted under our Equity Incentive and Non-Employee Director Stock Option Plans. The weighted average estimated values of employee and director stock option grants, as well as the weighted average assumptions that were used in calculating such values during the years ended March 31, 2010, 2009 and 2008, were based on estimates at the date of grant as follows:

 

 
 

                             Year Ended March 31,                            

 

  2010  

  2009  

  2008    

Weighted average estimated

     

      fair value of grant

$  2.35 Per option

$  2.19 Per option

3.41 Per option

Expected life (in years)

3.2 years        

3.4 years        

3.3 years        

Risk free interest rate

2.18 %             

3.20 %             

4.17 %             

Expected volatility

75.89 %             

60.56 %             

60.03 %             

Expected dividend yield

0.0 %             

0.0 %             

0.0 %             

Expected volatility is based on historical volatility. The expected life of options granted prior to January 1, 2008 was based on the simplified calculation of expected life described in the U.S. Securities and Exchange Commission's Staff Accounting Bulletin 107 ("SAB 107"). In addition, options granted to members of the board of directors and executives on July 23, 2008 with option terms of less than ten years utilize the simplified calculation of expected life described by SAB 107 because we do not have sufficient historical experience for option grants with option terms of less than ten years. The expected life of all other options granted subsequent to December 31, 2007 are based on historical experience.

Additional information with respect to stock option activity during the year ended March 31, 2010 under our Equity Incentive Plan is as follows:

 

     

Weighted

 
   

Weighted

    Average

 
 

    Shares

Average

Remaining

Aggregate

 

    Under

Exercise

Contractual

Intrinsic

 

      Option  

   Price  

      Life      

   Value   

Outstanding at March 31, 2009

2,740,815     

     $ 3.66

4.7 years

$          -         

Granted

-           

     $   -    

Exercised

-           

     $   -    

         -         

Forfeited

         -           

     $   -    

Outstanding at June 30, 2009

2,740,815     

     $ 3.66

4.4 years

$    341,705   

Granted

-           

     $   -    

Exercised

(254,094)    

     $ 2.71

   535,449   

Forfeited

     (5,873)    

     $ 2.66

Outstanding at September 30, 2009

2,480,848     

     $ 3.76

4.0 years

$ 5,803,280   

Granted

193,304     

     $ 4.73

Exercised

(79,009)    

     $ 3.55

   722,353   

Forfeited

         (667)    

     $ 3.57

Outstanding at December 31, 2009

2,594,476     

     $ 3.84

3.9 years

$ 8,237,679 

Granted

-           

     $   -    

Exercised

(21,444)    

     $ 2.39

         -         

Forfeited

  (195,957)    

     $ 8.75

Outstanding at March 31, 2010

2,377,075     

     $ 3.45

3.9 years

2,509,155

Exercisable at March 31, 2010

2,038,328     

     $ 3.40

3.7 years

2,257,051

Vested and expected to vest at March 31, 2010

2,362,503     

     $ 3.40

3.9 years

2,494,713 

 

Additional information with respect to stock option activity during the year ended March 31, 2009 under our incentive and non-qualified stock option plans is as follows:

 

     

Weighted

 
   

Weighted

    Average

 
 

    Shares

Average

Remaining

Aggregate

 

    Under

Exercise

Contractual

Intrinsic

 

      Option  

   Price  

      Life      

   Value   

Outstanding at March 31, 2008

2,543,306     

     $ 3.94

5.2 years

   $       -         

Granted

-           

     $   -    

Exercised

-           

     $   -    

   $       -         

Forfeited

     (2,000)    

     $ 3.57

Outstanding at June 30, 2008

2,541,306     

     $ 3.94

5.0 years

   $     3,060   

Granted

381,615     

     $ 2.18

Exercised

-           

     $   -    

   $       -         

Forfeited

     (1,500)    

     $ 3.57

Outstanding at September 30, 2008

2,921,421     

     $ 3.71

4.9 years

   $ 584,914   

Granted

-           

     $   -    

Exercised

-           

     $   -    

   $       -         

Forfeited

         -           

     $   -    

Outstanding at December 31, 2008

2,921,421     

     $ 3.71

4.6 years

   $       -         

Granted

-           

     $   -    

Exercised

-           

     $   -    

   $       -         

Forfeited

  (180,606)    

     $ 4.38

Outstanding at March 31, 2009

2,740,815     

     $ 3.66

4.7 years

   $       -         

Exercisable at March 31, 2009

2,457,361     

     $ 3.78

4.5 years

   $       -         

Vested and expected to vest at March 31, 2009

2,726,859     

     $ 3.67

4.6 years

   $       -         

 

Additional information with respect to stock option activity during the year ended March 31, 2008 under our incentive and non-qualified stock option plans is as follows:

     

Weighted

 
   

Weighted

    Average

 
 

Shares

Average

Remaining

Aggregate

 

Under

Exercise

Contractual

Intrinsic

 

  Option  

   Price  

      Life      

   Value   

Outstanding at March 31, 2007

2,692,400     

     $ 4.33

5.7 years

$ 1,972,876   

Granted

-           

     $   -    

Exercised

(1,599)    

     $ 2.41

       2,942   

Forfeited

     (3,579)    

     $ 2.68

Outstanding at June 30, 2007

2,687,222     

     $ 4.33

5.4 years

$ 2,070,665   

Granted

106,159     

     $ 3.57

Exercised

(4,245)    

     $ 2.41

       8,193   

Forfeited

     (2,000)    

     $ 3.57

Outstanding at September 30, 2007

2,787,136     

     $ 4.30

5.2 years

$ 1,343,718   

Granted

-           

     $   -    

Exercised

-           

     $   -    

         -         

Forfeited

     (2,000)    

     $ 3.57

Outstanding at December 31, 2007

2,785,136     

     $ 4.30

5.0 years

$ 1,006,016   

Granted

6,000     

     $ 1.69

Exercised

-           

     $   -    

         -         

Forfeited

  (247,830)    

     $ 8.00

Outstanding at March 31, 2008

2,543,306     

     $ 3.94

5.2 years

         -         

Exercisable at March 31, 2008

2,205,418     

     $ 3.99

4.9 years

         -         

Vested and expected to vest at March 31, 2008

2,523,959     

     $ 3.94

5.2 years

         -         

 

Additional information with respect to stock option activity during the year ended March 31, 2010 under our non-employee director stock option plan is as follows:

 

     

Weighted

 
   

Weighted

    Average

 
 

    Shares  

Average

Remaining

Aggregate

 

    Under  

Exercise

Contractual

Intrinsic

 

      Option    

   Price  

      Life      

   Value   

Outstanding at March 31, 2009

222,919       

     $ 2.77

2.7 years

 $       -

Granted

     -            

     $   -    

Exercised

      -            

     $   -    

 $       -      

Forfeited

      -            

     $   -    

Outstanding at June 30, 2009

222,919       

     $ 2.77

2.5 years

 $   48,096

Granted

      -            

     $   -    

Exercised

 (19,802)      

     $ 3.20

 $   13,861

Forfeited

      -            

     $   -    

Outstanding at September 30, 2009

203,117       

     $ 2.73

2.5 years

 $ 614,947

Granted

53,536       

     $ 4.73

Exercised

      -            

     $   -    

 $       -      

Forfeited

      -            

     $   -    

Outstanding at December 31, 2009

256,653       

     $ 3.15

2.9 years

 $ 950,797

Granted

      -            

     $   -    

Exercised

         -            

     $   -    

 $       -      

Forfeited

      -            

     $   -    

Outstanding at March 31, 2010

256,653       

     $ 3.15

2.6 years

 $ 303,651

Exercisable at March 31, 2010

256,653       

     $ 3.15

2.6 years

 $ 303,651

Vested and expected to vest at March 31, 2010

256,653       

     $ 3.15

2.6 years

 $ 303,651

 

Additional information with respect to stock option activity during the year ended March 31, 2009 under our non-employee director stock option plan is as follows:

 

     

Weighted

 
   

Weighted

    Average

 
 

    Shares  

Average

Remaining

Aggregate

 

    Under  

Exercise

Contractual

Intrinsic

 

      Option    

   Price  

      Life      

   Value   

         

Outstanding at March 31, 2008

131,644       

     $ 3.33

2.7 years

   $     -

Granted

     -            

     $   -    

Exercised

      -            

     $   -    

   $     -      

Forfeited

      -            

     $   -    

Outstanding at June 30, 2008

131,644       

     $ 3.33

2.4 years

   $   1,736

Granted

109,302       

     $ 2.18

Exercised

      -            

     $   -    

   $     -      

Forfeited

(18,027)      

     $ 3.22

Outstanding at September 30, 2008

222,919       

     $ 2.77

3.2 years

   $ 71,345

Granted

59,441       

     $ 3.39

Exercised

      -            

     $   -    

   $     -      

Forfeited

 (59,441)      

     $ 3.39

Outstanding at December 31, 2008

222,919       

     $ 2.77

3.0 years

   $     -

Granted

      -            

     $   -    

Exercised

         -            

     $   -    

   $     -      

Forfeited

      -            

     $   -    

Outstanding at March 31, 2009

222,919       

     $ 2.77

2.7 years

   $     -      

Exercisable at March 31, 2009

222,919       

     $ 2.77

2.7 years

   $     -      

Vested and expected to vest at March 31, 2009

222,919       

     $ 2.77

2.7 years

   $     -      

 

Additional information with respect to stock option activity during the year ended March 31, 2008 under our non-employee director stock option plan is as follows:

 

     

Weighted

 
   

Weighted

Average

 
 

Shares

Average

Remaining

Aggregate

 

Under

Exercise

Contractual

Intrinsic

 

  Option  

   Price  

      Life      

  Value  

         

Outstanding at March 31, 2007

70,520        

     $ 2.91

1.4 years

$ 87,911    

Granted

     -             

     $   -    

   

Exercised

      -             

     $   -    

 

$       -        

Forfeited

      -             

     $   -    

   
         

Outstanding at June 30, 2007

70,520        

     $ 2.91

1.2 years

$ 92,083    

Granted

24,039        

     $ 3.57

   

Exercised

(18,518)       

     $ 2.30

 

21,111    

Forfeited

(9,259)       

     $ 2.30

   
         

Outstanding at September 30, 2007

66,782        

     $ 3.40

2.0 years

$ 21,111    

Granted

57,918        

     $ 3.40

   

Exercised

      -             

     $   -    

 

$       -        

Forfeited

      -             

     $   -    

   
         

Outstanding at December 31, 2007

124,700        

     $ 3.40

2.8 years

$   7,614    

Granted

6,944        

     $ 1.95

   

Exercised

         -             

     $   -    

 

$       -        

Forfeited

      -             

     $   -    

   

Outstanding at March 31, 2008

131,644        

     $ 3.33

2.7 years

$       -        

         

Exercisable at March 31, 2008

131,644        

     $ 3.33

2.7 years

$       -        

         

Vested and expected to vest at March 31, 2008

131,644        

     $ 3.33

2.7 years

$       -        

 

Cash received by us upon the exercise of stock options for the years ended March 31, 2010, 2009 and 2008 was $1,084,863, zero, and $56,675, respectively. The source of shares of common stock issuable upon the exercise of stock options is from authorized and previously unissued common shares.

 

(3)   Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts and Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts        

At March 31, 2010, the estimated period to complete contracts in process ranged from one to fourteen months, and we expect to collect substantially all related accounts receivable arising therefrom within sixty days of billing.

The following summarizes contracts in process:

 

 

March 31, 2010

March 31, 2009

Costs incurred on uncompleted contracts

$ 4,063,128 

4,414,886 

Estimated earnings

   544,417 

   194,861 

4,607,545 

4,609,747 

Less billings to date

(3,978,351)

(4,038,016)

 

   629,194 

   571,731 

 

 

 

Included in the accompanying balance sheets as follows:

   
 

Costs and estimated earnings in excess of billings on

   
   

uncompleted contracts

$    680,746 

   643,098 

Billings in excess of costs and estimated earnings on

   

uncompleted contracts

   (51,552)

   (71,367)

   629,194 

   571,731 

 

(4)    Inventories

Inventories consist of:

 

March 31, 2010

March 31, 2009

Raw materials

$    512,572 

794,663 

Work-in-process

744,525 

419,270 

Finished products

       34,229 

       93,238 

 

1,291,326 

1,307,171 

Our raw material inventory is subject to obsolescence and potential impairment due to bulk purchases in excess of customers' requirements. We periodically assess our inventory for recovery of its carrying value based on available information, expectations and estimates, and adjust inventory carrying-value to the lower of cost or market for estimated declines in the realizable value. For the fiscal year ended March 31, 2010 we impaired obsolete inventory with a carrying value of $26,714.

(5) Government Grants

We have a $45,145,534 grant with the DOE under the Stimulus Act. The Grant provides funds to facilitate the manufacture and deployment of electric drive vehicles, batteries and electric drive vehicle components in the United States. Pursuant to the terms of the Agreement, the DOE will reimburse us for 50 percent of qualifying costs incurred on or after August 5, 2009 for the purchase of facilities, tooling and manufacturing equipment, and for engineering related to product qualification and testing of our electric propulsion systems and other products. The period of the Grant is through January 12, 2013.

Funding for qualifying project costs incurred during the period commencing August 5, 2009 through June 26, 2010 is initially limited to $8.1 million until the following conditions are satisfied: 1) review and approval of our accounting system by the DCAA; and 2) mutual agreement by the parties on an updated total estimated cost of the project. In the event either condition is not satisfied by June 26, 2010, the Grant may be terminated. In addition, we are required, no later than January 12, 2011, to provide DOE with an additional updated total estimated cost of the project along

with evidence of firm commitments for our 50 percent share of the total estimated cost of the project. If all such funds have not been secured, we must submit, by such date, a funding plan to obtain the remainder of such funds, which is acceptable to the DOE.

The Grant is also subject to our compliance with certain reporting requirements. The Stimulus Act imposes minimum construction wage and labor standards for projects funded by the Grant.

If we dispose of assets acquired using Grant funding, we may be required to reimburse the DOE upon such sale date if the fair value of the asset on the date of disposition exceeds $5,000. The amount of any such reimbursement shall be equal to 50 percent of the fair value of the asset on the date of disposition.

While UQM has exclusive patent ownership rights for any technology developed with Grant funds, we are required to grant the DOE a non-exclusive, non-transferable, paid-up license to use such technology.

At March 31, 2010 we had received reimbursements from the DOE under the Stimulus Grant for facilities and equipment totaling $3.6 million and had grant funds receivable of $524,208. We also had approximately $1.6 million of contingently reimbursable engineering costs related to product qualification and testing which will be recognized as a reduction of expense in the period the contingencies described above are satisfied.

The application of grant funds to eligible capital asset purchases under the DOE Grant as of March 31, 2010 is as follows:

 

 

Purchase Cost

Grant Funding

Recorded Value

Land

$    896,388  

448,194  

448,194  

Building

6,772,314  

3,386,157  

3,386,157  

Machinery and Equipment

   470,936  

   235,468  

   235,468  

8,139,638  

4,069,819  

4,069,819  

(6)    Impairment of Long-Lived Assets

During the fiscal years ended March 31, 2010, 2009 and 2008, we recorded total impairment charges of zero, zero, and $11,155, respectively, for obsolete equipment and abandoned patent applications.

Average annual depreciation expense for the equipment impaired during the fiscal year ended March 31, 2008 for years preceding the year of impairment was $4,308.

(7)    Patents and Trademarks

Intangible assets, which consist entirely of patents and trademarks owned by the Company, had a gross carrying amount of $1,209,766 and $1,171,778, accumulated amortization of $789,325 and $733,594, and a net carrying amount of $420,441 and $438,184, at March 31, 2010 and 2009, respectively. Amortization expense for the years ended March 31, 2010, 2009 and 2008, was $55,730, $55,637, and $55,637, respectively. Patents and trademarks are amortized on a straight-line basis over a period of 17 years and 40 years, respectively.

Estimated future amortization of these intangible assets is as follows:

2011

$   49,524 

2012

42,354 

2013

40,817 

2014

  36,675 

2015

27,952 

Thereafter

223,119 

420,441 

(8)    Other Current Liabilities

Other current liabilities consist of:

 

March 31, 2010    

March 31, 2009  

     

Accrued payroll and employee benefits

$    175,579 

165,221 

Accrued personal property and real estate taxes

354,807 

82,396 

Accrued warranty costs

75,903 

84,445 

Unearned revenue

356,596 

149,355 

Accrued royalties

34,515 

73,773 

Other

     51,843 

  45,482 

 

1,049,243 

600,672 

(9)    Long-Term Debt

Long-term debt consists of:

 

 

March 31, 2010

March 31, 2009

Note payable to bank, payable in monthly installments

   
 

with interest at 7.0%; paid in full November 2009;

   

secured by land and building

       -       

416,923 

 

(10)   Income Taxes

Income tax benefit attributable to loss from operations differed from the amounts computed by applying the U.S. federal income tax rate of 34 percent as a result of the following:

 

 

Year Ended   

Year Ended   

Year Ended   

March 31, 2010

March 31, 2009

March 31, 2008

       

Computed "expected" tax benefit

$(1,407,897)  

(1,497,208)  

(1,554,700)  

Increase (decrease) in taxes resulting from:

     
 

Adjustment of expiring net operating loss

     
   

carry-forwards

447,958   

1,450,222   

1,124,302   

 

Adjustment to deferred tax assets and liabilities

     
   

for prior period corrections

-         

-         

(104,562)  

 

Increase (decrease) in valuation allowance for

     
   

net deferred tax assets

812,511   

(67,423)  

588,902   

 

Other, net

   147,428   

   114,409   

   (53,942)  

       

Income tax benefit

         -         

        -         

        -          

 

The tax effects of temporary differences that give rise to significant portions of the net deferred tax asset are presented below:

 

 

March 31, 2010

March 31, 2009

     

Deferred tax assets:

   

      Research and development credit carry-forwards

$       63,609   

113,471   

      Net operating loss carry-forwards

20,766,816   

20,050,531   

      Deferred compensation

446,441   

397,835   

      Property and equipment

354,290   

333,382   

      Intangible assets

     26,529   

     6,180   

      Stock compensation

      482,173   

      383,514   

      Other

       84,224   

     126,658   

             Total deferred tax assets

22,224,082   

21,411,571   

     

Deferred tax liabilities:

   

      Intangible assets

           -         

           -         

             Total deferred tax liabilities

-         

-         

     

             Net deferred tax assets

22,224,082   

21,411,571   

     
     

      Less valuation allowance

(22,224,082)  

(21,411,571)  

     

             Net deferred tax assets, net of valuation allowance

$             -         

           -         

As of March 31, 2010 we had net operating loss carry-forwards (NOL) of approximately $61.3 million for U.S. income tax purposes that expire in varying amounts through 2030. Approximately $5.2 million of the net operating loss carry-forwards are attributable to stock options, the benefit of which will be credited to additional paid-in capital if realized. However, due to the provisions of Section 382 of the Internal Revenue Code, the utilization of a portion of these NOLs may be limited. Future ownership changes under Section 382 could occur that would result in additional Section 382 limitations, which could further restrict the use of NOLs. In addition, any Section 382 limitation could reduce our ability for utilization to zero if we fail to satisfy the continuity of business enterprise requirement for the two-year period following an ownership change.  

The valuation allowance for deferred tax assets of $22.2 million and $21.4 million at March 31, 2010 and March 31, 2009, respectively, relates principally to the uncertainty of the utilization of certain deferred tax assets, primarily net operating loss carry forwards in various tax jurisdictions. The Company continually assesses both positive and negative evidence to determine whether it is more-likely-than-not that the deferred tax assets can be realized prior to their expiration. Based on the Company's assessment it has determined the deferred tax assets are not currently realizable.

We have not recorded any potential liability for uncertain tax positions taken on our tax returns.

We may, from time to time, be assessed interest or penalties by major tax jurisdictions, although any such assessments historically have been minimal and immaterial to our financial results. Penalties are recorded in selling, general and administrative expenses and interest paid or received is recorded in interest expense or interest income, respectively, in the consolidated statements of operations.

 

(11)   Stockholders' Equity

In October 2009 we completed a follow-on offering of 8,625,000 shares of our common stock. Cash proceeds, net of offering costs, were $31,664,373.

In June 2007 we completed a private placement of 1,250,000 shares of our common stock to two institutional investors. Cash proceeds, net of offering costs, were $5,183,677.

In November 2004 we completed a follow-on offering of 3,600,000 shares of our common stock. The placement agent was issued five-year warrants to acquire 360,000 shares of common stock at an exercise price of $2.58 per share, which were recorded at fair value. Warrants to acquire zero and 85,268 shares of our common stock were outstanding at March 31, 2010 and 2009, respectively.

 

(12)  Significant Customers

We have historically derived significant revenue from a few key customers. Revenue from Quantum Fuel Systems Technologies Worldwide Inc. totaled $13,115, $1,360,909, and $256,393 for the years ended March 31, 2010, 2009 and 2008, respectively, which was nil, 16 percent, and 3 percent of total consolidated revenue, respectively. Revenue from Lippert Components, Inc. totaled $821,504, $635,144, and $1,271,502 for the years ended March 31, 2010, 2009 and 2008, respectively, which was 9 percent, 7 percent, and 17 percent of total revenue, respectively. Revenue from the Denver Regional Transportation District totaled $82,976, $3,337, and $864,540 for the years ended March 31, 2010, 2009 and 2008, respectively, which was 1 percent, nil, and 12 percent of total revenue, respectively.

Trade accounts receivable from Quantum Fuel Systems Technologies Worldwide Inc. were 3 percent and 16 percent of total accounts receivable as of March 31, 2010 and 2009, respectively. Inventories consisting of raw materials, work-in-progress and finished goods for this customer totaled zero as of March 31, 2010 and 2009. Trade accounts receivable from Lippert Components, Inc. were 17 percent and nil of total accounts receivable as of March 31, 2010 and 2009, respectively. Inventories consisting of raw materials, work-in-progress and finished goods for this customer totaled $87,654 and $349,066 as of March 31, 2010 and 2009, respectively. Trade accounts receivable from the Denver Regional Transportation District were 1 percent and nil of total accounts receivable as of March 31, 2010 and 2009, respectively. Inventories consisting of raw materials, work-in-progress and finished goods for this customer totaled zero as of March 31, 2010 and 2009.

Revenue derived from contracts with agencies of the U.S. Government and from subcontracts with U.S. Government prime contractors totaled $2,488,321, $1,989,872, and $2,329,248 for the years ended March 31, 2010, 2009 and 2008, respectively, which was 29 percent, 23 percent, and 31 percent of total consolidated revenue, respectively. Accounts receivable from government-funded contracts represented 8 percent and 6 percent of total accounts receivable as of March 31, 2010 and 2009, respectively. Of these amounts, revenue derived from subcontracts with AM General LLC totaled $1,807,063, $434,181 and $565,663 which represented 21 percent, 5 percent and 8 percent of our consolidated total revenue for the fiscal years ended March 31, 2010, 2009 and 2008, respectively. This customer also represented 8 percent and nil of total accounts receivable at March 31, 2010 and 2009, respectively. Inventories consisting of raw materials, work-in-process and finished goods for AM General LLC were 13 percent and 3 percent of consolidated total inventories at March 31, 2010 and 2009, respectively.

 

(13)  Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

Cash and cash equivalents, certificates of deposit, accounts receivable and accounts payable:

The carrying amounts approximate fair value because of the short maturity of these instruments.

Investments:

The carrying value of these instruments is the amortized cost of the investments which approximates fair value. See Note 1(d).

Long-term debt:

The carrying amount of our long-term debt approximates fair value because the interest rate on this debt approximates the interest rate currently available on similar financing offering comparable security to the lender.

 

Fair Value Measurements

Liabilities measured at fair value on a recurring basis as of March 31, 2010 are summarized below:

 

 Fair Value Measurements at Reporting Date Using  

   

Quoted Prices

   
   

In Active

Significant

 
   

Markets

Other

Significant

   

For Identical

Observable

Unobservable

   

Liabilities

Inputs

Inputs

 

     Total     

      (Level 1)      

  (Level 2)  

   (Level 3)   

Deferred Compensation under

       
 

executive employment agreements (1)

$ 42,702     

-

-

42,702        

           

Note (1)     Included in long term liabilities on our consolidated balance sheets as of March 31, 2010.

Liabilities measured at fair value on a recurring basis as of March 31, 2009 are summarized below:

 

 

 Fair Value Measurements at Reporting Date Using  

   

Quoted Prices

   
   

In Active

Significant

 
   

Markets

Other

Significant

   

For Identical

Observable

Unobservable

   

Liabilities

Inputs

Inputs

 

     Total     

      (Level 1)      

  (Level 2)  

   (Level 3)   

Deferred Compensation under

       
 

executive employment agreements (1)

$ 21,715     

-

-

21,715        

           

Note (1)     Included in long term liabilities on our consolidated balance sheet as of March 31, 2009.

 

Deferred compensation under executive employment agreements represents the future compensation potentially payable under the retirement and voluntary termination provisions of executive employment agreements (see also note 17). The value of the Level 3 liability in the foregoing table was determined under the income approach, using inputs that are both unobservable and significant to the value of the obligation including changes in the Company's credit worthiness and changes in interest rates.

A summary of the liability measured at fair value on a recurring basis using significant unobservable inputs (Level 3) follows:

 

Fair Value Measurements Using Significant

 

Unobservable Inputs

 

(Level 3) for the

 

                 Fiscal Year Ended                   

 

March 31, 2010

March 31, 2009

 

Deferred

Deferred

 

Compensation

Compensation

 

On Executive

On Executive

 

Employment

Employment

 

   Agreements   

   Agreements   

Balance at beginning of fiscal year

$ 21,715            

5,873              

 

Total gains or losses (realized and unrealized):

   
   

Included in earnings

20,987            

15,842              

   

Included in other comprehensive income

-                  

-                    

 

Purchases, sales, issuances, and settlements, net

-                  

-                    

 

Transfers in (out) of Level 3

    -                  

    -                    

Balance at the end of fiscal year

42,702            

21,715              

     

Loss for the period included in earnings attributable

   
 

to the Level 3 liability still held at the end of the period

20,987            

15,842              

 

(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 who have been employed by us at least six months are eligible to participate in the 401K Plan. At the direction of the participants, contributions are invested in several investment options offered by the 401K Plan. We currently match 33 percent of participants' contributions, subject to certain limitations. These matching contributions vest ratably over a three-year period. Matching contributions to the 401K Plan were $84,262, $82,355, and $75,028, for the years ended March 31, 2010, 2009, and 2008, respectively.

(16)  Segments

At March 31, 2010, we had two reportable segments: technology and power products. Our reportable segments are strategic business units that offer different products and services. They are managed separately because each business requires different business strategies. The technology segment encompasses our technology-based operations including core research to advance our technology, application and production engineering and product development and job shop production of prototype components. The power products segment encompasses the manufacture and sale of permanent magnet motors and electronic controllers. Salaries of the executive officers and corporate general and administrative expense are allocated to our segments annually based on factors established at

the beginning of each fiscal year. The percentage allocated to the technology segment and power products segment for the fiscal year ended March 31, 2010 was 82 percent and 18 percent, respectively. The percentage allocated to the technology segment and power products segment for the fiscal years ended March 31, 2009, and 2008 were 76 percent and 24 percent, and 75 percent and 25 percent, in each year, respectively. Intersegment sales or transfers, which were eliminated upon consolidation, were $522,925, $970,277, and $710,416 for the years ended March 31, 2010, 2009, and 2008, respectively.

The technology segment leases office, production and laboratory space in a building owned by the power products segment, based on a negotiated rate for the square footage occupied. Intercompany lease payments, were $183,600, $174,000, and $169,562 for the years ended March 31, 2010, 2009, and 2008, respectively, and were eliminated upon consolidation.

The following table summarizes significant financial statement information after deducting intersegment eliminations of each of the reportable segments as of and for the year ended March 31, 2010:

   

Power    

 
 

Technology

  Products  

   Total      

       

Revenue

$    6,236,177 

 2,455,776 

 8,691,953 

Interest income

$         62,141

2,775 

64,916 

Interest expense

$           -

(15,697)

(15,697)

Depreciation and amortization

$      (389,725)

(213,370)

(603,095)

Impairment of long-lived assets

$            -

-       

-       

Impairment of inventories

$        (26,714)

-       

(26,714)

Impairment of investment

$            -

-       

-       

Segment loss

$   (3,681,599)

(459,273)

(4,140,872)

Total assets

$  34,214,998 

8,467,575 

 42,682,573 

Expenditures for long-lived segment assets

$      (578,073)

(5,096,086)

(5,674,159)

       

 

The following table summarizes significant financial statement information after deducting intersegment eliminations of each of the reportable segments as of and for the year ended March 31, 2009:

 

   

Power    

 
 

Technology

  Products  

   Total      

       

Revenue

$   5,455,934 

3,272,377 

  8,728,311 

Interest income

$      194,384 

4,563 

198,947 

Interest expense

$            -       

 (33,387)

 (33,387)

Depreciation and amortization

$     (312,154)

(234,689)

(546,843)

Impairment of long-lived assets

$            -       

-       

-       

Impairment of inventories

$       (28,546)

(13,067)

(41,613)

Impairment of investment

$       (89,369)

-       

(89,369)

Segment loss

$  (4,123,174)

(278,845)

(4,402,019)

Total assets

$   8,840,077

3,582,755 

12,422,832 

Expenditures for long-lived segment assets

$     (579,932)

   (7,110)

   (587,042)

       

 

The following table summarizes significant financial statement information after deducting intersegment eliminations of each of the reportable segments as of and for the year ended March 31, 2008:

   

Power    

 
 

Technology

  Products  

   Total      

       

Revenue

$    4,391,213 

3,117,109 

7,508,322 

Interest income

$       454,466 

8,782 

463,248 

Interest expense

$           -

(40,652)

(40,652)

Depreciation and amortization

$     (223,815)

(213,984)

(437,799)

Impairment of long-lived assets

$           ( 820)

(10,335)

(11,155)

Impairment of inventories

$            -

-       

-       

Impairment of investment

$            -

-       

-       

Segment loss

$  (3,874,639)

(711,466)

(4,586,105)

Total assets

$  12,511,384 

 3,891,162 

16,402,546 

Expenditures for long-lived segment assets

$     (610,303) 

(243,917)

(854,220)

       

 

(17)  Commitments and Contingencies

Employment Agreements

The Company has entered into Employment Agreements with Messrs. Rankin, French, Burton and Lutz pursuant to which each has agreed to serve in his present capacity for a five year term expiring on August 22, 2012. Pursuant to the Employment Agreements, Messrs. Rankin, French, Burton and Lutz shall receive an annual base salary of $340,080, $225,680, $201,825 and $183,195, respectively. Each executive also receives the use of an automobile and may receive bonuses, stock awards and stock options.

Messrs. Rankin and French's Employment Agreements provide that if employment is terminated by the Company or the executive without cause during or after the term of the agreement upon attaining twenty years of service as an officer, or upon retirement after attaining age 62 1/2, the officer shall receive 24 months salary. If the officer voluntarily terminates his employment after attaining twenty years of service as an officer and provides at least six months notice, he shall receive one month of pay for each year of service as an officer up to a maximum payment of 24 months pay. If the executive has less than twenty years of service or does not provide at least six months notice, he shall receive three months salary, unless the Company is in default under the Agreement, which shall be considered termination by the Company without cause.

Messrs. Burton and Lutz's Employment Agreements provide that if employment is terminated by the Company or the executive without cause during or after the term of the agreement, the officer shall receive the greater of six months pay or one month of pay for each year of service as an officer. If the officer voluntarily terminates his employment and provides at least six months notice, he shall receive six months pay. If the executive does not provide at least six months notice, he shall receive two months salary, unless the Company is in default under the Agreement, which shall be considered termination by the Company without cause. If the Executive provides at least six months notice of his voluntary retirement after attaining 62 1/2 years of age, executive shall receive a total payment consisting of one month of pay for each year of service as an officer plus six months of pay, up to a maximum total payment of 24 months pay.

Messrs. Rankin, French, Burton and Lutz's Employment Agreements provide that upon termination by the Company following a hostile change of control of the Company, the officer shall receive twice the payment due on a termination by the Company. If an officer dies during employment, his estate shall receive three months compensation. If the officer elects to retire at 62 1/2 years of age or upon attaining 20 years of service with the Company, the officer shall be entitled to continue to participate in the Company's group health insurance plan (at the same cost as employees) until attaining age 65.

The employment agreements further provide that the Company shall maintain at its expense, life insurance coverage on Messrs. Rankin, French, Burton and Lutz payable to their designees in an amount equal to three times the annual compensation payable to each executive.

The aggregate future base salary payable to these four executive officers under the Employment Agreements over their remaining twenty-nine month term is $2,297,718. In addition, the Company has recorded a liability of $1,155,416 representing the potential future compensation payable to Messrs. Rankin, French, Burton and Lutz under the retirement and voluntary termination provisions of their Employment Agreements.

Lease Commitments

At March 31, 2010 there were no operating leases with initial non-cancelable terms in excess of one year.

Rental expense for the years ended March 31, 2010, 2009 and 2008, respectively, was $62,827, $59,648, and $59,400.

 

Litigation

In November 2007, we filed an arbitration claim with the American Arbitration Association ("AAA") against Phoenix MC, Inc., as successor by merger to Phoenix Motorcars, Inc. ("Phoenix") seeking damages for Phoenix's breach of the Purchase and Supply Agreement between Phoenix and UQM Technologies, Inc. dated January 12, 2007. The matter was heard by an AAA arbitration panel (the "Panel") in December 2008. On February 24, 2009, the AAA notified us of the Panel's findings that Phoenix had materially breached the Agreement and awarded monetary damages to us in the amount of $5,309,649. In addition, the Panel awarded us post-award interest at the rate of 10 percent per annum on the unpaid amount of the award subsequent to February 6, 2009. On April 27, 2009, Phoenix filed a Chapter 11 bankruptcy petition with the U.S. Bankruptcy Court. On May 17, 2010 we received a distribution from the U.S. Bankruptcy Court of $265,140. We expect this payment to be our final recovery in this matter.

We are involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, and based on current available information, the ultimate disposition of these matters is not expected to have a material adverse effect on our financial position, results of operations or cash flow, although adverse developments in these matters could have a material impact on a future reporting period.

 

(18)  Interim Financial Data (Unaudited)

                                             Quarters Ended                                    

 

  June 30    

September 30

December 31

 March 31  

         

Fiscal year 2010

       

Sales

     $  2,129,319 

  2,270,542  

  2,007,214  

  2,284,878  

Gross profit

     $     604,161 

     817,816  

     642,391  

     652,765  

Net loss

     $   (629,116)

 (496,037) 

 (1,984,469) 

 (1,031,250) 

         

Net loss per common share basic and diluted:

$(0.02)   

(0.02)    

(0.06)    

(0.03)     

         

 

 

                                             Quarters Ended                                    

 

  June 30    

September 30

December 31

 March 31  

         

Fiscal year 2009

       

Sales

    $  1,793,355 

2,277,331  

2,873,595  

1,784,030   

Gross profit

    $     194,260 

415,114   

863,560  

292,710   

Net loss

    $   (999,715)

(1,538,111) 

(764,101) 

(1,100,092)  

         

Net loss per common share basic and diluted:

$(0.04)   

(0.06)    

(0.03)    

(0.04)    

         

 

 

                                             Quarters Ended                                    

 

  June 30    

September 30

December 31

 March 31  

         

Fiscal year 2008

       

Sales

    $  1,454,452 

1,990,591  

1,714,858  

2,348,421   

Gross profit

    $       28,903 

     363,902  

     273,570  

410,488   

Net loss

    $ (1,128,751)

 (1,139,894) 

   (1,306,996) 

(1,010,464)  

         

Net loss per common share basic and diluted:

$(0.05)   

(0.04)    

(0.05)    

(0.04)     

         

 

(19)  Valuation and Qualifying Accounts

                                          Additions                                    

 

Balance at 

Charged to

   Charged

 

Beginning 

Costs and 

to Other

 

Balance at End

    of Year   

  Expenses 

Accounts

  Deductions 

    of Year    

           

Year ended March 31, 2010

         

  Not deducted from asset accounts:

         
 

Accrued warranty cost

$     84,445 

158,723 

-       

167,265 (A)

    75,903     

           

Year ended March 31, 2009

         

Not deducted from asset accounts:

         
 

Accrued warranty cost

$   117,645 

121,776 

-       

154,976 (A)

    84,445     

           

Year ended March 31, 2008

         

Not deducted from asset accounts:

         
 

Accrued warranty cost

$     74,850 

98,434 

-       

55,639 (A)

    117,645     

           

Note (A)     Represents actual warranty payments for units returned under warranty.

 

 

(20)  Subsequent Event

On May 17, 2010 we received a distribution from the U.S. Bankruptcy Court in the matter of the bankruptcy petition of Phoenix Motor Cars, Inc. Although there is an additional hearing scheduled for June 10, 2010, we expect this payment to be our final recovery in this matter.

 

ITEM 9.

CHANGE IN AND DISAGREEMENTS WITH INDEPENDENT ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.

CONTROLS AND PROCEDURES

 TOC

Controls Evaluation

We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2010 under the supervision and with the participation of management, including our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO").

Based on their evaluation as of March 31, 2010, our CEO and CFO have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) were effective to ensure that the information required to be disclosed by our management in the reports that it files or submits under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and (ii) accumulated and communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosure.

Management Report on Internal Control Over Financial Reporting

Our management is responsible for all aspects of the business, including the preparation of the consolidated financial statements in this annual report. Management prepared the consolidated financial statements using accounting principles generally accepted in the United States. Management has also prepared the other information in this annual report and is responsible for its accuracy and consistency with the consolidated financial statements.

Management is responsible for establishing and maintaining an adequate system of internal control over financial reporting, including safeguarding of assets against unauthorized acquisition, use or disposition. This system is designed to provide reasonable assurance to management and the board of directors regarding preparation of reliable published financial statements and safeguarding of our assets. This system is supported with written policies and procedures and contains self-monitoring mechanisms. Appropriate actions are taken by management to correct deficiencies as they are identified. All internal control systems have inherent limitations, including the possibility of circumvention and overriding of controls, and, therefore, can provide only reasonable assurance as to the reliability of financial statement preparation and such asset safeguarding.

Management has assessed the effectiveness of our internal control over financial reporting as of March 31, 2010. In making this assessment, it used the criteria described in "Internal Control-Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on this assessment, management has concluded that, as of March 31, 2010, our internal control over financial reporting is effective. Management reviewed the results of its assessment with the Audit Committee of our Board of Directors who oversees the financial reporting process.

The consolidated financial statements have been audited by the independent registered public accounting firm, Grant Thornton LLP, who independently assessed the effectiveness of the company's internal control over financial reporting. Grant Thornton LLP has issued its report on the effectiveness of our internal control over financial reporting, which is included above in Part II, Item 8 of this Form 10-K.

Changes in Internal Control Over Financial Reporting

There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended March 31, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

May 21, 2010

 

/s/ WILLIAM G. RANKIN

/s/ DONALD A. FRENCH

William G. Rankin

 

Donald A. French

Chairman of the Board, President

 

Treasurer, Secretary and

and Chief Executive Officer

 

Chief Financial Officer

 

ITEM 9B.

OTHER INFORMATION

 

 TOC

 

None.

 

 

PART III

 TOC

 

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 TOC

Additional information required by Item 10 is incorporated by reference from and contained under the headings "Election of Directors", "Management" "Section 16(a) Beneficial Ownership Reporting Compliance" and "Code of Ethics" in our Definitive Proxy Statement for the Annual Meeting of Shareholders' to be held August 4, 2010.

 

ITEM 11.

EXECUTIVE COMPENSATION

 TOC

The information required by Item 11 is incorporated by reference from and contained under the headings "Executive Compensation", "Option Grants during Fiscal Year 2010" and "Aggregate Option Exercises During Fiscal Year 2010 and Option Values at the End of Fiscal Year 2010 in our definitive Proxy Statement for the Annual Meeting of Shareholders' to be held August 4, 2010.

 

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 TOC

The information required by Item 12 is incorporated by reference from and contained under the heading "Security Ownership of Certain Owners and Management" in our definitive Proxy Statement for the Annual Meeting of Shareholders' to be held August 4, 2010.

 

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

 TOC

The information required by Item 13 is incorporated by reference from and contained under the headings "Compensation Committee Interlocks and Insider Participation" and "Certain Relationships and Related Transactions" in our definitive Proxy Statement for the Annual Meeting of Shareholders' to be held August 4, 2010.

 

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES.

 TOC

The information required by Item 14 is incorporated by reference from and contained under the heading "Ratification of Selection of Independent Auditors" in our definitive Proxy Statement for the annual meeting of shareholders to be held August 4, 2010.

 

PART IV

 TOC

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

   

  TOC

(a)

1.

Financial Statements

     
   

UQM Technologies, Inc. (included in Part II):

     
   

Reports of Independent Registered Public Accounting Firm.

     
   

Consolidated Balance Sheets, March 31, 2010 and March 31, 2009.

     
   

Consolidated Statements of Operations for the Years Ended March 31, 2010, 2009, and 2008.

     
   

Consolidated Statements of Stockholders' Equity and Comprehensive Loss for the Years Ended March 31, 2010, 2009, and 2008.

     
   

Consolidated Statements of Cash Flows for the Years Ended March 31, 2010, 2009 and 2008.

     
   

Notes to Consolidated Financial Statements.

     
 

2.

Financial Statement Schedules:

     
   

Valuation and Qualifying Accounts. See note 19 to the Consolidated Financial Statements above.

     
 

3.

Reports on Form 8-K

     
   

Report regarding Modification Number One of the Assistance Agreement with the DOE filed on May 17, 2010

     
   

Report regarding completion of an Assistance Agreement with the DOE filed January 20, 2010

     
   

Report regarding purchase of a new manufacturing facility filed December 15, 2009

     
   

Report regarding completion of a follow-on public offering filed October 28, 2009

     

(b)

 

Exhibits:

     

1.1

 

Common Stock Purchase Agreement. Reference is made to Exhibit 1.1 of our Current Report on Form

8-K filed on October 28, 2009 (No. 0-9146), which is incorporated herein by reference.

     

3.1

 

Bylaws. Reference is made to Exhibit 3.1 of our Annual Report on Form 10-K for the year ended March 31, 2005 (No. 0-9146), which is incorporated herein by reference.

     

3.2

 

Restated Articles of Incorporation. Reference is made to Exhibit 3.2 of our Annual Report on Form 10-K for the year ended October 31, 1993 (No. 0-9146), which is incorporated herein by reference.

     

4.1

 

Specimen Stock Certificate. Reference is made to Exhibit 3.1 of our Registration Statement on Form 10 dated February 27, 1980 (No. 0-9146), which is incorporated herein by reference.

     

10.1

 

UQM Technologies, Inc. Employee Stock Purchase Plan. Reference is made to Exhibit 4.1 to the Company's Registration Statement on Form S-8 (No. 333-164705) filed on February 5, 2010, which is incorporated herein by reference.

     

10.2

UQM Technologies, Inc. Stock Option Plan for Non-Employee Directors. Reference is made to Exhibit 10.39 of the Company's Annual Report on Form 10-K (No. 0-9146) for the year ended October 31, 1993, which is incorporated herein by reference.

10.3

 

UQM Technologies, Inc. Amended 2002 Equity Incentive Plan. Reference is made to Exhibit 10.1 of our Current Report on Form 8-K filed on August 12, 2005, which is incorporated herein by reference.

     

10.4

 

Stock Bonus Plan. Reference is made to Exhibit 10.2 of our Current Report on Form 8-K filed on August 12, 2005, which is incorporated herein by reference.

     

10.5

 

Form of Incentive Stock Option Agreement. Reference is made to Exhibit 10.6 of our Annual Report on Form 10-K filed on May 22, 2008, which is incorporated herein by reference.

     

10.6

 

Form of Non-Qualified Stock Option Agreement. Reference is made to Exhibit 10.7 of our Annual Report on Form 10-K filed on May 22, 2008, which is incorporated herein by reference.

     

10.7

 

Form of Restricted Stock Agreement. Reference is made to Exhibit 10.8 of our Annual Report on Form 10-K filed on May 22, 2008, which is incorporated herein by reference.

     

10.8

 

Employment Agreement with William G. Rankin dated May 5, 2008. Reference is made to Exhibit 10.9 of our Annual Report on Form 10-K filed on May 22, 2008, which is incorporated herein by reference.

     

10.9

 

Employment Agreement with Donald A. French dated May 5, 2008. Reference is made to Exhibit 10.10 of our Annual Report on Form 10-K filed on May 22, 2008, which is incorporated herein by reference.

     

10.10

 

Employment Agreement with Ronald M. Burton dated September 17, 2007. Reference is made to Exhibit 10.11 of our Annual Report on Form 10-K filed on May 22, 2008, which is incorporated herein by reference.

     

10.11

 

Employment Agreement with Jon Lutz dated September 17, 2007. Reference is made to Exhibit 10.12 of our Annual Report on Form 10-K filed on May 22, 2008, which is incorporated herein by reference.

     

10.12

 

Form of Indemnification Agreement. Reference is made to Exhibit 10.18 of our Annual Report on Form 10-K for the year ended March 31, 2005 (No. 1-10869), which is incorporated herein by reference.

     

10.13

 

Sale - Purchase Agreement between the Company and Holden Properties Colorado II, LLC. Reference is made to Exhibit 10.1 of our Current Report on Form 8-K filed on December 15, 2009 (No. 0-9146), which is incorporated herein by reference.

     

10.14

 

First Amendment to Sale - Purchase Agreement between the Company and Holden Properties Colorado II, LLC. Reference is made to Exhibit 10.2 of our Current Report on Form 8-K filed on December 15, 2009 (No. 0-9146), which is incorporated herein by reference.

     

10.15

 

Assistance Agreement between the Company and the U.S. DOE/NETL. Reference is made to Exhibit 10.1 of our Current Report on Form 8-K filed on January 20, 2010 (No. 0-9146), which is incorporated herein by reference.

     

10.16

 

Modification Number One to the Assistance Agreement between the Company and the U.S. DOE/NETL. Reference is made to Exhibit 10.1 of our Current Report on Form 8-K, filed on May 17, 2010 (No. 0-9146), which is incorporated herein by reference.

     

21.1

 

Subsidiaries of the Company.

     

23.1

 

Consent of Grant Thornton LLP.

     

31.1

 

Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

     

31.2

 

Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

     

32.1

 

Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act 2002.

     

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, UQM Technologies, Inc. has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in Frederick, Colorado on the 21st day of May, 2010.

 

UQM TECHNOLOGIES, INC.,

a Colorado Corporation

 

   

By:

/s/WILLIAM G. RANKIN

     

  William G. Rankin

     

  Chairman of the Board of Directors

       

 

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

Date

/s/WILLIAM G. RANKIN    

  William G. Rankin

Chairman of the Board of Directors and President (Principal Executive Officer)

May 21, 2010

/s/DONALD A. FRENCH     

  Donald A. French

Treasurer and Secretary (Principal Financial and Accounting Officer)

May 21, 2010

/s/STEPHEN J. ROY              

  Stephen J. Roy

Director

May 21, 2010

/s/JEROME H. GRANRUD    

  Jerome H. Granrud

Director

May 21, 2010

/s/DONALD W. VANLANDINGHAM

  Donald W. Vanlandingham

Director

May 21, 2010

/s/JOSEPH P. SELLINGER      

  Joseph P. Sellinger

Director

May 21, 2010

 

 

 

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