Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
UQM > SEC Filings for UQM > Form 10-Q on 25-Oct-2012All Recent SEC Filings

Show all filings for UQM TECHNOLOGIES INC

Form 10-Q for UQM TECHNOLOGIES INC


25-Oct-2012

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Report contains statements that constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. These statements appear in a number of places in this Report and include statements regarding our plans, beliefs or current expectations; including those plans, beliefs and expectations of our officers and directors with respect to, among other things, future orders to be received, future shipments and payments under our Supply Agreement with CODA, future financial results 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 II, Item 1A Risk Factors.

Introduction

We are a developer and manufacturer of power dense, high efficiency electric motors, generators and power electronic controllers for the automotive, commercial truck, bus and military markets. Our primary focus is incorporating our advanced technology into products for clean vehicles including propulsion systems for clean vehicles including electric, hybrid-electric, plug-in hybrid-electric and fuel cell electric vehicles.

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 second quarter this fiscal year we completed a memorandum of understanding with a major Chinese company for the development and marketing of UQM electric propulsion systems for New Energy Vehicles in China. This agreement expands the global reach of UQM to China, and represents the initial step in our strategy to penetrate the Chinese market with our leading electric propulsion products. Under the agreement, we will work collaboratively with our China-based partner to introduce UQM products into the Chinese market for use in New Energy Vehicles. Our Chinese partner, with over $45 billion RMB (approximately $7 billion USD) in annual revenue, has a substantial footprint throughout China and we believe is well-positioned to introduce our products into the country's developing New Energy Vehicle market. This agreement is an important step in our strategic plan to enter the Chinese market with our highly efficient electric propulsion systems and related products.

Also during the second quarter we announced that our PowerPhase ProŽ 100 electric propulsion system is powering the new all-electric Mylne Bolt 18 yacht tender, which debuted in September at the 2012 Monaco Yacht Show. Mylne has been making distinctive yachts since 1896, and the Bolt 18 is the company's first all-electric vessel designed as a yacht tender. The Bolt 18 can hold a crew of six and tow water-skiers and wake boarders. Additionally, Mylne is developing all-electric yachts which will also use UQM PowerPhase systems, further expanding UQM product offerings in the marine market.

We have entered into a ten year supply agreement with CODA Automotive ("CODA") to supply UQM PowerPhase Pro 100 electric propulsion systems to CODA for their all-electric passenger automobile. CODA introduced its passenger vehicle in the state of California in March 2012 and has announced dealers in three regions of California.

The CODA vehicle, excluding the battery pack, is assembled in China by Harbin Haifei Automotive Industry Group Co. Ltd. and shipped to CODA's facility in Benicia, California where the battery packs are installed and final vehicle test activities are performed prior to shipment of finished vehicles to CODA dealers. Our terms of sale under the supply agreement are FOB China port. As a result, we recognize revenue on shipments to CODA when the units are delivered to a port in China, which is typically 4 to 5 weeks following the date the units are shipped from our Longmont, Colorado facility.


We began deliveries of production qualified PowerPhase Pro 100 systems under our supply agreement with CODA in October 2011. CODA's production and delivery of vehicles to its dealers since introduction of the vehicle has been at a reduced rate versus initial CODA forecasts. CODA has announced that they have opted for a slow production acceleration in order to ensure flawless execution at every step of their operating system, which includes component supply from four continents, manufacturing operations at two locations in China and one location in the U.S., logistic pipeline and dealer delivery process. Due to the slower launch rate, we suspended production for CODA to properly balance our inventories. CODA has also announced that they are seeking additional capital. However, current conditions in the capital markets have caused many small companies, including CODA, to experience difficulty and delays in raising substantial amounts of new capital. As a result of these factors, we did not produce and ship any propulsion systems to CODA during the quarter and six month period ended September 30, 2012. At September 30, 2012 we had trade accounts receivable and inventories associated with the CODA production program totaling $14,473,809. At September 30, 2012 CODA was delinquent in the payment of trade account receivables due to us. The timing of the utilization of inventories and the shipment of additional propulsion systems to CODA and the collection of existing and future trade accounts receivable will be dependent on CODA's ability to raise capital to fund on-going operations, their future vehicle production rate, and the rate of delivery of vehicles to its dealer network. If CODA does not honor its financial obligations to us under the Supply Agreement, it could have a material adverse effect on our financial position, liquidity and results of operations.

In September, CODA announced that they have customer orders for 1,000 vehicles, they intend to add 40 new dealerships by the summer of 2013, including 10 by the end of calendar year 2012 and they are pursuing an additional $150 million in capital to fund their ongoing operations. CODA has also announced an agreement with Great Wall Motors Company, Baoding, China, to co-develop an all-electric vehicle for worldwide distribution. The joint effort is intended to blend CODA battery technology and knowledge of the U.S. market with the expertise of one of China's fastest growing automotive producers. We understand that under the arrangement, vehicles will be sub-assembled in Great Wall's manufacturing facilities in Baoding. Final assembly of vehicles destined for delivery in the U.S. will take place at CODA's facility in the U.S. CODA has stated that the goal of its Great Wall joint venture is to co-develop and introduce the most affordable electric vehicle on the market, comparable in price to entry-level internal combustion engine vehicles after government incentives. We believe the CODA/Great Wall collaboration provides us with a pathway for our technology into China, Eastern Europe and other areas of the world. We are working with CODA on the details for a propulsion system for this program and hope to secure the future volume production business.

We also supply electric propulsion systems to Proterra, Inc. ("Proterra"), a developer and manufacturer of all-electric composite transit buses, and Electric Vehicles International ("EVI") and Boulder EV ("BEV"), developers and manufacturers of all-electric medium-duty delivery trucks. EVI has announced orders from UPS for 100 all-electric delivery vans and from Frito Lay for delivery trucks, and BEV has announced orders from Federal Express for delivery vans, all of which are powered by our electric propulsion systems. Deliveries for these programs are ongoing.

We also 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, PACCAR and Freightliner Trucks. Deliveries for these programs are ongoing.

We have a $45.1 million Grant from the U.S. Department of Energy ("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 provides for a 50 percent cost-share by the Company. 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, Proterra, EVI, BEV and other customers are eligible for reimbursement under the DOE program. The term of the Grant is through January 12, 2015. We recorded reimbursements under the DOE Grant through September 30, 2012 for capital assets acquired of $9.1 million, which were recorded as a reduction in the cost basis of the assets acquired. We also recorded reimbursements of product qualification and testing costs under the Grant, for the quarter ended September 30, 2012 of $1.0 million. Total reimbursements of product qualification and testing costs through September 30, 2012 were $9.5 million.

We have listed our former facility in Frederick, Colorado for sale with a commercial broker. As a result, the carrying value of the facility has been classified as a current asset and listed under the caption facility held for sale.

We expect demand for our electric propulsion system and generator products to 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. This demand is due, in part, to an expansion in the number of all-electric and hybrid electric vehicle platforms being developed for potential introduction in the passenger automobile market, the amount of government grants and loans available to encourage the development and introduction of clean vehicles, tax incentives to purchasers of these vehicles, progressively more challenging Consumer Average Fuel Economy Standards ("CAFE") and carbon dioxide emission regulations, and a desire on the part of the global automotive industry to provide a broader selection of highly fuel efficient vehicles.

During the quarter ended September 30, 2012 contract services revenue increased 159 percent to $350,634 versus the comparable quarter last fiscal year due primarily to funded research activities on an onboard vehicle power generation program and our non-rare earth magnet development program. Product sales decreased 62 percent to $845,470 versus the comparable quarter last year, primarily due to the suspension of shipments to CODA during the quarter.

For the six months ended September, 2012 contract services revenue increased over three-fold to $716,013 from $211,849 for the comparable period last fiscal year. The increase is primarily attributable to the application of additional resources on funded development programs. Product sales for the six month period this fiscal year decreased 16.3 percent to $2,876,519 versus $3,437,434 for the same six month period last fiscal year. The decrease is primarily attributable to the suspension of shipments to CODA throughout the period, partially offset by additional shipments to Audi resulting from an expansion of their A1 e-tron test fleet program.

Gross profit margins on contract services for the second quarter increased to 39.1 percent versus 36.5 percent for the comparable quarter last fiscal year primarily due to improved overhead absorption. Gross profit margins on product sales for the second quarter decreased to 38.6 percent versus 44.2 percent for the comparable quarter last fiscal year primarily due to changes in product mix. Gross profit contribution dollars decreased to $463,891 versus $1,020,541 for the same quarter last fiscal year due primarily to lower sales and reduced gross profit margins for the current quarter.

Gross profit margins on contract services for the first half of fiscal 2013 increased to 44.6 percent versus 37.8 percent for the comparable period last fiscal year primarily due to improved overhead absorption. Gross profit margins on product sales for the first half decreased to 37.4 percent versus 44.5 percent for the comparable quarter last fiscal year primarily due to changes in product mix and reduced overhead absorption. Gross profit contribution dollars decreased to $1,394,380 versus $1,608,436 for the comparable period last fiscal year due primarily to lower sales and reduced gross profit margins for the current year period.

Production engineering expenditures decreased to $1,505,103 for the second quarter versus $1,622,163 for the comparable quarter last fiscal year. The decrease is attributable to higher than normal product qualification and testing activities during the comparable quarter last year associated with preparations for the launch of volume production for CODA and the redeployment of certain engineering resources on funded development programs. During the second quarter we recorded reimbursements of production engineering costs from the U.S. Department of Energy under our Grant of $965,564 representing 64.2 percent of production engineering expenditures. Reimbursements of production engineering expenditures for the comparable quarter last fiscal year were 68.5 percent.

For the six months ended September 30, 2012 production engineering expenditures decreased to $2,655,322 versus $3,196,986 for the comparable period last fiscal year. The decrease is attributable to higher than normal product qualification and testing activities last year associated with preparations for the launch of volume production for CODA and the redeployment of certain engineering resources on funded development programs. During the first half of the current fiscal year we recorded reimbursements of production engineering costs from the U.S. Department of Energy under our Grant of $1,730,200 representing 65.2 percent of production engineering expenditures. Reimbursements of production engineering expenditures for the comparable six month period last fiscal year were 69.8 percent.

Net loss for the quarter ended September 30, 2012 increased to $2,563,548, or $0.07 per common share, on consolidated total revenue of $1,196,104, versus a net loss of $1,586,185, or $0.04 per common share, on consolidated total revenue of $2,334,223 for the second quarter last fiscal year. The increase in net loss is primarily attributable to reduced revenue levels and higher levels of business development, marketing, legal, and recruiting and relocation costs.

Our liquidity throughout the second quarter was sufficient to meet our operating requirements. At September 30, 2012 we had cash and short-term investments totaling $7,026,434. Net cash used in operating activities and net capital expenditures for property and equipment for the six months ended September 30, 2012 were $4,902,266 and $168,444, respectively versus $4,907,801 and $250,502, respectively for the comparable period last fiscal year. Our cash and short-term investment balances have decreased significantly over the six month period primarily due to the purchase of


long-lead time raw materials ordered from vendors prior to the suspension of production for CODA and the purchase of raw materials to support future deliveries to Proterra and EVI. We do not expect to expend additional cash resources to fund our production activities for CODA when production resumes. Rather, the reduction of inventories for CODA associated with the resumption of shipments to CODA are expected to initially generate significant increases in our cash balances until such time as new raw material purchases are required.

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. We believe we have sufficient cash resources to fund our expected rate of future growth, however, if our future growth occurs at a rate higher than our expectations, our existing cash and short-term investments may not be adequate to fund our operations and we may need to raise additional capital. Otherwise, we believe our cash balances are sufficient to fund our operations for at least the next eighteen months.

Financial Condition

Cash and cash equivalents and short-term investments at September 30, 2012 were $7,026,434 and working capital (the excess of current assets over current liabilities) was $22,457,945 compared with $12,120,849 and $25,025,517, respectively, at March 31, 2012. The decrease in cash and short-term investments is primarily attributable to higher levels of inventories, operating losses, and lower levels of accounts payable, partially offset by lower levels of accounts receivable. The decrease in working capital is primarily attributable to operating losses and investments in property and equipment.

Accounts receivable decreased $171,377 to $4,757,740 at September 30, 2012 from $4,929,117 at March 31, 2012. The decrease is primarily due to decreased levels of product shipments during the quarter partially offset by higher levels of billings under our DOE Grant. CODA accounted for $3,838,092 of these accounts receivable at September 30, 2012, all of which were over ninety days delinquent. Many of our other customers are large well-established companies of high credit quality. Our sales are conducted through acceptance of customer purchase orders or in some cases through supply agreements. For credit qualified customers our standard terms are net 30 days. For international customers and customers without an adequate credit rating or history our typical terms are irrevocable letter of credit or cash payment in advance of delivery. At September 30, 2012 and March 31, 2012 we had an allowance for bad debts of $127,697.

Costs and estimated earnings on uncompleted contracts increased $105,289 to $183,665 at September 30, 2012 versus $78,376 at March 31, 2012. The increase is due to less favorable billing terms on certain contracts in process at September 30, 2012 versus March 31, 2012. Estimated earnings on contracts in process increased to $608,179 on contracts in process of $1,671,203 at September 30, 2012 compared to estimated earnings on contracts in process of $380,713 on contracts in process of $1,587,499 at March 31, 2012. The increase in estimated earnings is attributable to higher expected margins on certain contracts in process at September 30, 2012.

Inventories increased $2,863,711 to $13,427,859 at September 30, 2012 principally due to higher levels of raw material and finished goods inventories, partially offset by a decrease in work-in-process inventories. Raw material and finished goods inventories increased $2,916,466 and $229,486, respectively, primarily reflecting inventory purchases to support the CODA, EVI, BEV and Proterra production programs. Work-in-process inventory decreased $282,241, reflecting decreased levels of low volume propulsion system builds in process at September 30, 2012.

Prepaid expenses and other current assets increased to $622,270 at September 30, 2012 from $556,592 at March 31, 2012 primarily due to prepayments on commercial insurance policies.

We invested $107,431 and $311,580 for the acquisition of property and equipment, before reimbursements under the DOE Grant, during the quarter and six month period ended September 30, 2012 compared to $439,389 and $1,329,245 during the comparable quarter and six month period last fiscal year. The decrease in capital expenditures is primarily attributable to reduced renovation costs on our facility and decreased acquisitions of equipment during the quarter and six month period ended September 30, 2012 versus the comparable quarter and six month period last fiscal year. Cash reimbursements for capital assets under the DOE Grant for the quarters and six month periods ended September 30, 2012 and September 30, 2011 were $98,991 and $143,136, and $416,123 and $1,078,743, respectively.

Patent costs decreased to $221,453 at September 30, 2012 versus $222,836 at March 31, 2012 primarily due to the systematic amortization of patent issuance costs. Similarly, trademark costs decreased to $111,600 at September 30, 2012 versus $113,844 at March 31, 2012 primarily due to the systematic amortization of trademark costs.


Accounts payable decreased $807,510 to $1,549,003 at September 30, 2012 from $2,356,513 at March 31, 2012, primarily due to decreased raw material purchases for CODA.

Other current liabilities increased to $3,496,252 at September 30, 2012 from $2,329,101 at March 31, 2012. The increase is primarily attributable to higher levels of accrued import duties, customer deposits and accrued payroll and employee benefits at September 30, 2012.

Short-term deferred compensation under executive employment agreements decreased to zero at September 30, 2012 from $152,007 at March 31, 2012 reflecting a severance payment made during the first quarter.

Billings in excess of costs and estimated earnings on uncompleted contracts increased $128,824 to $136,025 at September 30, 2012 from $7,201 at March 31, 2012 reflecting increased billings on certain engineering contracts in process at September 30, 2012 in advance of the performance of the associated work versus March 31, 2012.

Common stock and additional paid-in capital were $365,915 and $115,161,473, respectively, at September 30, 2012 compared to $363,562 and $114,371,106 at March 31, 2012. The increases in common stock and additional paid-in capital were primarily attributable to the issuance of shares under the Employee Stock Purchase and Stock Bonus Plans and the periodic expensing of non-cash share-based payments associated with option grants under our equity incentive plan.

Results of Operations

Quarter Ended September 30, 2012

Operations for the quarter ended September 30, 2012, resulted in a net loss of $2,563,548, or $0.07 per common share, compared to a net loss of $1,586,185, or $0.04 per common share, for the comparable quarter last year. The increase in net loss is primarily attributable to reduced revenue levels and higher levels of business development, marketing, legal, and recruiting and relocation costs.

Revenue from contract services increased to $350,634 at September 30, 2012 versus $135,547 for the comparable quarter last year. The increase is primarily due to funded research activities on an onboard vehicle power generation program and our non-rare earth magnet development program.

Product sales revenue for the current quarter decreased to $845,470 versus $2,198,676 for the comparable quarter last fiscal year. The decrease is primarily due to the suspension of shipments to CODA during the quarter.

Gross profit margins for the quarter ended September 30, 2012 decreased to 38.8 percent compared to 43.7 percent for the quarter ended September 30, 2011. Gross profit margin on contract services was 39.1 percent for the second quarter this fiscal year compared to 36.5 percent for the quarter ended September 30, 2011. The improvement is primarily due to improved overhead absorption on contracts in process at September 30, 2012 versus the comparable quarter last fiscal year. Gross profit margin on product sales for the second quarter this year decreased to 38.6 percent compared to 44.2 percent for the second quarter last year primarily due to changes in product mix.

Research and development expenditures for the quarter ended September 30, 2012 increased to $19,810 compared to $647 for the quarter ended September 30, 2011 reflecting increased levels of cost-sharing on government research programs.

Production engineering costs were $1,505,103 for the second quarter versus $1,622,163 for the comparable quarter last fiscal year. The decrease is attributable to higher than normal product qualification and testing activities during the comparable quarter last year associated with preparations for the launch of volume production for CODA and the redeployment of certain engineering resources on funded development programs.

Reimbursement of product qualification and testing costs under the DOE Grant was $965,564 for the quarter ended September 30, 2012 versus $1,111,034 for the comparable quarter last fiscal year reflecting a reduction in the estimated reimbursement rates for product qualification and testing activities and decreased qualified production engineering costs.


Selling, general and administrative expense for the quarter ended September 30, 2012 was $2,472,653 compared to $2,099,025 for the same quarter last year. The increase is primarily attributable to higher levels of business development, marketing, legal and recruiting and relocation costs versus the comparable quarter last fiscal year.

Interest income increased to $2,260 for the quarter ended September 30, 2012 versus $641 for the same quarter last fiscal year. The increase is attributable to higher yields on invested cash balances.

Six Months Ended September 30, 2012

Operations for the six month period ended September 30, 2012, resulted in a net loss of $3,850,982, or $0.11 per common share, compared to a net loss of $2,629,728, or $0.07 per common share, for the comparable period last year. The increase in net loss is primarily attributable to decreased levels of product shipments and higher levels of business development, marketing, legal and recruiting and relocation costs partially offset by lower levels of net production engineering expenses.

Revenue from contract services increased to $716,013 for the six month period ended September 30, 2012 versus $211,849 for the comparable period last year.
The increase is primarily attributable to the application of additional engineering resources on funded development programs.

Product sales for the six month period ended September 30, 2012 decreased to $2,876,519 compared to $3,437,434 for the comparable period last year. The decrease is primarily attributable to the suspension of shipments to CODA throughout the period, partially offset by additional shipments to Audi resulting from an expansion of their A1 e-tron test fleet program.

Gross profit margins for the six month period ended September 30, 2012 decreased to 38.8 percent compared to 44.1 percent for the comparable six month period last fiscal year. Gross profit margin on contract services increased for the six month period to 44.6 percent versus 37.8 percent for the comparable six month period last fiscal year primarily due to improved overhead absorption. Gross profit margin on product sales for the six month period ended September 30, 2012 decreased to 37.4 percent compared to 44.5 percent for the comparable period last year. The decrease is primarily due to changes in product mix and reduced overhead absorption.

Research and development expenditures for the six month period ended September 30, 2012 increased to $32,457 compared to $4,810 for the same period last year reflecting increased levels of cost-sharing on government research programs.

Production engineering costs were $2,655,322 for the six month period ended September 30, 2012 versus $3,196,986 for the comparable six month period last year. The decrease is attributable to higher than normal product qualification and testing activities during the prior comparable six month period associated with preparations for the launch of volume production for CODA and the redeployment of certain engineering resources on funded development programs.

. . .

  Add UQM to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for UQM - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.