UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

 

[X] Quarterly Report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

 

For the quarterly period ended December  31, 2013

 

 

[  ] 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)

 

 

        4120 Specialty Place, Longmont, Colorado 80504       

(Address of principal executive offices) (Zip code)

 

                              (303) 682-4900                                

(Registrant’s telephone number, including area code)

 

 

 

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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes    X     No          Not Applicable        .

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.   See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

 

 

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 number of shares outstanding (including shares held by affiliates) of the registrant’s common stock, par value $0.01 per share at January 28, 2014 was 37,548,959.    

 

 

 

 

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TABLE OF CONTENTS

 

 

 

 

 

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Part I – FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

UQM TECHNOLOGIES, INC. AND SUBSIDIARIES

Consolidated Condensed Balance Sheets 

 

 

 

 

 

See accompanying notes to consolidated condensed financial statements.

 

 

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Table of Contents 

UQM TECHNOLOGIES, INC. AND SUBSIDIARIES

Consolidated Condensed Balance Sheets, Continued

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated condensed financial statements.

 

 

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Table of Contents 

UQM TECHNOLOGIES, INC. AND SUBSIDIARIES

Consolidated Condensed Statements of Operations (unaudited)

 

 

See accompanying notes to consolidated condensed financial statements.

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Table of Contents 

 

UQM TECHNOLOGIES, INC. AND SUBSIDIARIES

Consolidated Condensed Statements of Cash Flows (unaudited)

See accompanying notes to consolidated condensed financial statements.

 

 

 

 

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Table of Contents 

UQM TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements

(unaudited)

 

 

 

 

(1)    The accompanying consolidated condensed financial statements are unaudited; however, in the opinion of management, all adjustments necessary for a fair presentation of the results for the interim periods have been made.  The results for the interim periods are not necessarily indicative of the results to be expected for the fiscal year.  The Notes contained herein should be read in conjunction with the Notes to our Consolidated Financial Statements filed on Form 10-K for the year ended March 31, 2013.

 

 

(2)   New Accounting Pronouncements

 

As of December  31, 2013, there were no new accounting pronouncements expected to significantly impact our consolidated financial statements, results of operations, or cash flows. 

 

 

 

 

(3)  At December  31, 2013 and March 31, 2013, the estimated period to complete contracts in process ranged from one to thirteen months and one to twenty-one months, respectively.  We expect to collect all related accounts receivable arising from these contracts within sixty days of billing. The following summarizes contracts in process:

 

 

 

 

(4)  Inventories at December 31, 2013 and March 31, 2013 consisted of:

 

 

 

 

Our inventories are subject to obsolescence and potential impairment due to bulk purchases in excess of customers’ requirements. We periodically assess our inventories for recovery of carrying value based on available information, expectations and estimates, and adjust inventory carrying values to the lower of cost or market for estimated declines in the realizable value. There was no impairment for obsolete inventory during the nine month periods ended December 31, 2013 and 2012.  

 

 

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(5)   Facility Held for Sale

 

We had listed our former facility in Frederick, Colorado for sale with a commercial real estate broker as of March 31, 2013. The facility was reclassified as a current asset and we had discontinued depreciating the asset pending the sale of the building.

 

On June 6, 2013, we closed on the sale the building.  The sales price was $1,650,000 and net proceeds were $1,565,032.

 

 

(6)   Government Grant

 

We have a grant (the “Grant”) with the U.S. Department of Energy (“DOE”) under the American Recovery and Reinvestment Act for reimbursements up to a maximum of $32.4 million. The Grant provides funds to facilitate the manufacture and deployment of electric drive vehicles, batteries and electric drive vehicle components in the United States. Pursuant to the terms of the Agreement, the DOE will reimburse us for 50 percent of qualifying costs for the purchase of facilities, tooling and manufacturing equipment, and for engineering related to product qualification and testing of our electric propulsion systems. The period of the Grant is through January 12, 2015. We recognize government grant reimbursements when it is probable that the Company will comply with the conditions attached to the grant arrangement and the grant money will be received.

 

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

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

 

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

 

During the second quarter of the current fiscal year, we changed our cumulative estimate of reimbursable rates under the Grant which resulted in an increase in our reimbursement of costs recorded for the nine month period ended December 31, 2013 of $958,000.  At December  31, 2013, we had received reimbursements from the DOE under the Grant totaling $24.0 million and had funds receivable under the Grant of $0.2 million.    

 

The application of grant funds to the recorded value of eligible capital asset purchases under the Grant as of December  31, 2013 and March 31, 2013 are as follows:

 

 

 

 

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(7)   Other current liabilities at December  31, 2013 and March 31, 2013 consist of:

 

 

 

 

 

 

 

 

 

In the third quarter of fiscal year 2013, we recorded a liability of $813,740 to accrue for potential import duties for products purchased from China. We appealed to the Department of Commerce and sought to have the duty fees reduced.  In December, 2013, the Department of Commerce issued a ruling that significantly reduced the amount of duties owed. Therefore, in the quarter ended December 31, 2013, we reduced our accrual for import duties by $726,640 to $87,100 reflecting the amount now owed.

 

 

(8)   Stock-Based Compensation

 

Stock Option Plans 

 

As of December 31, 2013, we had 1,100,000 shares of common stock authorized and 14,870 shares of common stock available for future grant to employees and consultants under our 2012 Equity Incentive Plan (“Plan”).    The term of the 2012 Plan is ten years. Under the 2012 Plan, the exercise price of each option is set at the fair value of the common stock on the date of grant and the maximum term of the option is ten years from the date of grant. Options granted to employees generally have a ten year term and vest ratably over a three-year period. The maximum number of options that may be granted to an employee under the Plan in any calendar year is 500,000 options. Forfeitures under the Plan are available for re-issuance at any time prior to expiration of the Plan in 2022. Options granted under the Plan to employees require the option holder to abide by certain Company policies, which restrict their ability to sell the underlying common stock. Prior to the adoption of the 2012 Plan, we issued stock options under our 2002 Equity Incentive Plan. Forfeitures under the 2002 Equity Incentive Plan may not be re-issued.

 

We also have a Stock Option Plan for Non-Employee Directors (“Directors Plan”) pursuant to which Directors may elect to receive stock options in lieu of cash compensation for their services as directors. As of December 31, 2013, we had 1,000,000 shares of common stock authorized and 224,173 shares of common stock available for future grant under the Directors Plan. Option terms range from three to ten years from the date of grant. Option exercise prices are equal to the fair value of the common shares on the date of grant. Options granted under the plan vest immediately. Forfeitures under the Directors Plan are available for re-issuance at a future date.

 

Stock Bonus Plan

 

We have a Stock Bonus Plan (“Stock Plan”) administered by the Board of Directors. As of December 31, 2013, we had 1,954,994 shares of common stock authorized and there were 47,149 shares of common stock available for future grant under the Stock Plan.    Under the Stock Plan, shares of common stock may be granted to employees, key consultants, and directors who are not employees as additional compensation for services rendered. Vesting requirements for grants under the Stock Plan, if any, are determined by the Board of Directors at the time of grant.

 

Stock Purchase Plan

 

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We have established a Stock Purchase Plan under which eligible employees may contribute up to 10 percent of their compensation to purchase shares of our common stock at 85 percent of the fair market value at specified dates.  At December 31, 2013, we had 700,000 shares of common stock authorized and 321,539 shares of common stock available for issuance under the Stock Purchase Plan.    

 

 

 

 

Share-Based Compensation Expense

 

We use the straight-line attribution method to recognize share-based compensation costs over the requisite service period of the award. The exercise price of options is equal to the market price of our common stock (defined as the closing price reported by the NYSE MKT) on the date of grant. We adjust share-based compensation on a quarterly basis for changes to the estimate of expected equity award forfeitures based on actual forfeiture experience.  The effect of adjusting the forfeiture rate for all expense amortization is recognized in the period the forfeiture estimate is changed. The effect of forfeiture adjustments in the quarters and nine month periods ended December 31, 2013 and 2012 were insignificant.

 

We use the Black-Scholes-Merton option pricing model for estimating the fair value of stock option awards. The expected volatility and the expected life of options granted are based on historical experience, and the risk free interest rate is obtained from the U.S. Department of the Treasury daily yield curve rates. There were no stock options granted during the quarter ended December 31, 2013.  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 quarter ended December 31, 2012 and the nine month periods ended December 31, 2013 and 2012, were based on estimates at the date of grant as follows: 

 

 

 

 

 

The table below shows total share-based compensation expense for the quarters and nine month periods ended December 31, 2013 and 2012 and the classification of these expenses:

 

 

 

 

 

Share-based compensation capitalized in inventories was insignificant as of December 31, 2013 and March 31, 2013.

 

 

 

 

Stock Option Plans Activity

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Additional information with respect to stock option activity during the nine month period ended December 31, 2013 under our Stock Option Plans is as follows:

 

 

 

 

 

Additional information with respect to stock option activity during the nine month period ended December 31, 2012 under our Stock Option Plans is as follows:

 

 

 

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A summary of the status of non-vested shares under our Stock Option Plans as of December 31, 2013 and 2012 and changes during the nine month periods ended December 31, 2013 and 2012 are presented below:

 

 

 

 

As of December 31, 2013, there was $351,378 of total unrecognized compensation costs related to stock options granted under our Stock Option Plans. The unrecognized compensation cost is expected to be recognized over a weighted-average period of seventeen months.  The total fair value of stock options that vested during the quarter and nine month period ended December 31, 2013 was $9,333 and $493,271, respectively.  The total fair value of stock options that vested during the quarter and nine month period ended December 31, 2012 was $77,058 and $885,916.

 

 

Cash received by us upon the exercise of stock options under our Stock Option Plans was $11,387 for the quarter and nine month period ended December 31, 2013 and zero for the quarter and nine month period ended December 31, 2012.  The source of shares of common stock issuable upon the exercise of stock options is from authorized and previously unissued common shares

 

Stock Bonus Plan Activity

 

Activity with respect to non-vested shares under the Stock Bonus Plan as of December 31, 2013 and 2012 and changes during the nine month periods ended December 31, 2013 and 2012 are presented below:

 

 

 

 

 

 

As of December 31, 2013, there was $571,609 of total unrecognized compensation costs related to common stock granted under our Stock Bonus Plan.  The unrecognized compensation cost at December 31, 2013 is expected to be recognized over a weighted-average period of twenty-six months. 

 

Stock Purchase Plan Activity

 

During the nine month periods ended December 31, 2013 and 2012, we issued 48,532 and 85,336 shares of common stock, respectively, under the Stock Purchase Plan.  Cash received by us upon the purchase of shares

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under the Stock Purchase Plan for the nine month periods ended December 31, 2013 and 2012 was $39,438 and $75,178, respectively.

 

(9)   Stockholders’ Equity

 

Changes in the components of stockholders’ equity during the quarters and nine month period ended December 31, 2013 were as follows: 

 

 

 

 

 

 

 

(10) Significant Customers 

 

We have historically derived significant revenue from a few key customers. The following table summarizes revenue and percent of total revenue from significant customers for the quarters and nine month periods ended December 31, 2013 and December 31, 2012: 

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The following table summarizes accounts receivable from significant customers as of December 31, 2013 and March 31, 2013:

 

 

 

 

 

(11)  Income Taxes

 

The Company currently has a full valuation allowance, as it is management’s judgment that it is more-likely-than-not that net deferred tax assets will not be realized to reduce future taxable income. 

 

We recognize interest and penalties related to uncertain tax positions in “Other Income,” net.  As of December 31, 2013 and 2012, we had no provisions for interest or penalties related to uncertain tax positions. 

 

The tax years 2009 through 2012 remain open to examination by both the Internal Revenue Service of the United States and by the various state taxing authorities where we file. 

 

(12)  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 December 31, 2013 and 2012, respectively, common shares issued under the Stock Bonus Plan but not yet earned totaling 640,979 and 358,855 were being held by the Company.  For the quarters and nine month periods ended December 31, 2013 and 2012 respectively, 213,943 and 34,793, and 92,779 and 26,519 shares, were potentially includable in the calculation of diluted loss per share under the treasury stock method but were not included, because to do so would be antidilutive.  At December 31, 2013 and 2012, options to purchase 3,605,526 and 4,496,168 shares of common stock, respectively, were outstanding.  For the quarters and nine month periods ended December 31, 2013 and 2012, respectively, options for 2,125,169 and 3,091,144 and 2,125,169 and 3,066,144 shares were not included in the computation of diluted loss per share because the option exercise price was greater than the average market price of the common stock.  In-the-money options determined under the treasury stock method to acquire 768,662 and 198,847, and 497,477 and 144,379 shares of common stock for the quarters and nine month periods ended December 31, 2013 and 2012, respectively, were potentially includable in the calculation of diluted loss per share but were not, because to do so would be antidilutive.

 

(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:

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

 

(14) Fair Value Measurements

 

Liabilities measured at fair value on a recurring basis as of December 31, 2013 are summarized below:

 

 

Liabilities measured at fair value on a recurring basis as of March 31, 2013 are summarized below:

 

 

Deferred compensation under executive employment agreements represents the future compensation potentially payable under the retirement and voluntary termination provisions of executive employment agreements.  The value of the Level 3 liability in the foregoing table was determined using a discounted cash flow model. The significant unobservable input used in the calculation is a discount rate of 14 percent, which is based on the expected cost of capital for the Company.  A 1 percent change in this discount rate would result in approximately a $2,000 change in the recorded value of the liability as of December 31, 2013.   

 

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

 

 

(15) Commitments and Contingencies

 

Employment Agreements

 

We have entered into employment agreements with five of our officers.  Messrs. Ridenour, Rosenthal, Lutz, Schaffer and Mitchell have agreed to serve in their present capacity for a term expiring on August 31, 2015. The aggregate future base salary payable to these five executive officers under the employment agreements over their remaining terms is $1,908,167.  In addition, we have recorded a liability of $162,165 and $627,412 at December 31, 2013 and March 31, 2013, respectively, representing the potential future compensation payable under the retirement and voluntary termination provisions of the employment agreements of the Company’s current and former officers.   

 

Litigation

 

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