ITEM 1.BUSINESS
This Report contains statements that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. These could be statements regarding our plans, beliefs or current expectations; including those plans, beliefs and expectations of our officers and directors with respect to, among other things, new product developments, future orders to be received from our customers, sales of products from inventory, future financial results, liquidity and the continued growth of the electric-powered vehicle industry. Important Risk Factors that could cause actual results to differ from those contained in the forward-looking statements are listed below in Part I, Item 1A.
ITEM 1A.RISK FACTORS
We operate in a challenging and changing environment that involves numerous known and unknown risks and uncertainties that could materially affect our operations. The risks, uncertainties and other factors set forth below may cause our actual results, performances or achievements to be materially different from those expressed or implied by our forward-looking statements. If any of these risks or events occur, our business, financial condition or results of operations may be adversely affected.
We have incurred significant losses and may continue to do so.
We have incurred significant net losses as shown in the following tables:
As of March 31, 2014, we had an accumulated deficit of $93,948,545.
In the future, we plan to make additional investments in product development, facilities and equipment and other costs related to the commercialization of our products. As a result, we expect to continue to incur net losses for the foreseeable future.
Our operating losses, anticipated capital expenditures and working capital requirements in the longer term may exceed our current cash balances.
Our net loss for the fiscal year ended March 31, 2014 was $2,773,244 versus a net loss for the fiscal years ended March 31, 2013 and 2012 of $10,688,312 and $4,928,520, respectively. At March 31, 2014, our cash and short-term investments totaled $10,310,141. We expect our losses to continue for the foreseeable future. Our existing cash resources, funding expected from our DOE Grant through early 2015, together with cash generated from reductions in our inventories of PowerPhase Pro propulsion systems, are expected to be sufficient to complete our business plan for at least the next several years. Should those resources be insufficient, we may need to secure additional debt or equity funding, which may not be available on terms acceptable to us, if at all.
Our business depends, in part, on the expansion of the market for all-electric and hybrid electric vehicles.
Although our electric propulsion systems may be used in a wide variety of products, the market for electric and hybrid vehicles is fairly new. At the present time, batteries used to power electric motors have limited life and require several hours to charge, and charging stations for electric motors are not widely available. Electric and hybrid vehicles also tend to be priced higher than comparable gasoline-powered vehicles. As a result, consumers may experience concerns about driving range limitations, battery charging time and higher purchase costs of electric or hybrid vehicles. If consumer preferences shift to vehicles powered by other alternative methods, or if concerns about the availability of charging stations cannot be overcome, the market for all-electric vehicles, and therefore our electric propulsion systems, may be limited. In addition, our electric propulsion systems are incorporated in buses used for mass transit in several U.S. cities. If passenger traffic in these mass transit systems declines or government funding to transportation districts declines from current levels, demand for our products may also decrease.
The popularity of alternative fuel based vehicles and “green energy” initiatives are highly dependent on macro-economic conditions, including oil prices and the overall health of the economy. When oil prices fall, interest in and resources allocated to the development of advanced technology vehicles and propulsion systems may diminish. Downturns in the world economy may also have a severe impact on the automotive industry, slowing the demand for vehicles generally and reducing consumers' willingness to pay more for environmentally friendly technology.
If our products do not achieve market acceptance, our business may not grow.
Although we believe our proprietary systems are suited for a wide-range of vehicle electrification applications, our business and financial plan relies heavily on the introduction of new products that have limited testing in the
			
		
marketplace. We have made substantial investments in manufacturing facilities and equipment, production and application engineering, among other things, to increase our production capacity in order to capitalize on the anticipated expansion in demand for electric propulsion systems and generators in the commercial truck, bus and automobile markets. We are not certain that our existing products will achieve broad market acceptance, or that we will be able to develop new products or product enhancements that will achieve broad market acceptance.
Our sales cycle is inherently long.
We must go through lengthy processes to achieve supply contracts with our customers. Our products must conform to the technical specifications of the customer and meet design requirements of the electric vehicle. Typically prototype testing is required to ensure consistent system performance on an ongoing basis. These steps can often take many months to multiple years until decisions are made on whether or not to take a vehicle to production. We may spend considerable financial and human resources over an extended period of time and not end up with a completed supply contract. Failure to secure volume production levels within a reasonable period of time could have an adverse effect on our results of operations and our liquidity.
CODA Automotive filed for bankruptcy protection on May 1, 2013 and it is unlikely we will be able to recover more than insignificant amounts due to us under our Supply Agreement, including substantial amounts due for accounts receivable, inventory purchases and guaranteed minimum payments.
We executed a ten-year Supply Agreement with CODA in July, 2009 which provided a framework for CODA, or its manufacturing partner, to purchase from us electric propulsion systems for use in automobiles to be manufactured by CODA. On May 1, 2013, CODA filed for bankruptcy protection. Amounts due from CODA at March 31, 2014 totaled $3,838,092, all of which had been written off as uncollectible. In addition, CODA is obligated under the Supply Agreement for inventory purchases totaling approximately $8.2 million and for a guaranteed minimum payment of $2 million due to their failure to purchase at least 15,000 units. It is likely that we will recover only an insignificant amount of the balance owed to us under the Supply Agreement, if any.
We carry a large inventory balance originally acquired for CODA and may not be able to sell this inventory.
At March 31, 2014, we had aged inventory of $7.9 million of PowerPhase Pro® systems on our books originally acquired for now-bankrupt CODA. We believe the PowerPhase Pro® system is right sized for many medium-duty truck, marine, passenger vehicle and stationary power applications, and this inventory is now for sale to other customers. While we believe that there continues to be a strong market for these products, a change in market conditions or technology advancements could make this inventory obsolete, causing a material adverse effect on our results of operations.
We entered into purchase contracts with our supply base to support the CODA program, some of which are non-cancellable by their terms. Our actual liability under these contracts may vary from our current estimates.
We have recorded a liability as of March 31, 2014 of $774,974 representing the amount we expect to pay to settle non-cancellable contracts with certain suppliers to the CODA program that will not be fulfilled due to the bankruptcy filing by CODA. This liability is lower than the original amount we recorded of $1,050,000 as of March 31, 2013 as a result of negotiations and settlements we reached with some vendors during fiscal year 2014. The amount of this liability represents management’s current estimate and may be subject to further adjustment based on future negotiations or litigation. Settlements in excess of our estimates or any upward revision in our settlement estimate could result in a material change in our results of operations and financial condition.
If we do not satisfy the terms of our DOE Grant, we may not receive the remaining $8.0 million under the grant we were awarded.
We have a $32.4 million Grant under the American Recovery and Reinvestment Act's Electric Drive Vehicle Battery and Component Manufacturing Initiative with the U.S. Department of Energy. We have received funding of $24.4 million under this Grant as of March 31, 2014. This Grant is subject to terms and conditions specified in the agreement between us and the DOE. We are required to spend on a dollar-for-dollar matching basis in order to receive funds under this Grant. If we are unable to match the total amount of the $32.4 million Grant with funding from non-Federal sources, we will be unable to take advantage of the entire award, and could become ineligible for continued participation in the program. The award may be terminated at any time at the convenience of the government.
			
		
Although we expect to satisfy the requirements in the Grant, we cannot assure that all of the requirements will be satisfied and the contract will not be terminated prior to receiving all of the proceeds.
All funding from our DOE Grant will cease as of January 12, 2015 when the Grant expires.
We believe that we have adequate cash resources for at least the next two years. However, if anticipated revenues are not realized and other cash resources are unavailable, the loss of the DOE Grant funding could significantly impact our ability to sustain operations.
The reduction or elimination of government subsidies and economic incentives for alternative energy technologies, including our electric vehicle motor technology, could reduce demand for our products and services, lead to a reduction in our revenues and adversely impact our operating results.
We believe that the near-term growth of alternative energy technologies, including our electric vehicle motor technology, relies on the availability and size of government and economic incentives both in the United States and in other countries. Many of these government incentives expire, phase out over time, exhaust the allocated funding, require renewal by the applicable authority, and/or could be reduced or discontinued for other reasons. The reduction, elimination, or expiration of government subsidies and economic incentives may result in the diminished demand from our customers and could materially and adversely affect our future operating results.
We are subject to risks inherent in international operations.
Since we market our products both inside and outside the United States, our success depends in part, on our ability to secure international customers and our ability to manufacture products that meet foreign regulatory and commercial requirements in target markets. In addition, we are subject to tariff regulations and requirements for export licenses. We can face numerous challenges in our international growth plans, including unexpected changes in regulatory requirements, potential conflicts or disputes that countries may have to deal with, fluctuations in currency exchange rates, longer accounts receivable requirements and collections, difficulties in managing international operations, potentially adverse tax consequences, restrictions on repatriation of earnings and the burdens of complying with a wide variety of international laws. Any of these factors could adversely affect our results of operations and financial condition.
Our revenue is highly concentrated among a small number of customers.
A large percentage of our revenue is typically derived from a small number of customers, and we expect this trend to continue.
Our customer arrangements generally are non-exclusive, have no long-term volume commitments and are often done on a purchase order basis. We cannot be certain that customers that have accounted for significant revenue in past periods will continue to purchase our products. Accordingly, our revenue and results of operations may vary substantially from period to period. We are also subject to credit risk associated with the concentration of our accounts receivable from our customers. If one or more of our significant customers were to cease doing business with us, significantly reduce or delay its purchases from us or fail to pay us on a timely basis, our business, financial condition and results of operations could be materially adversely affected.
Our business relies on third parties, whose success we cannot predict.
As a manufacturer of motors, generators, and other component parts, our business model depends on the ability of third parties in our industry to develop, produce and market products that include or are compatible with our technology and then to sell these products into the marketplace. Our ability to generate revenue depends significantly on the commercial success of our customers and partners. Failure of these third parties to achieve significant sales of products incorporating our products and fluctuations in the timing and volume of such sales could have a material adverse effect on our business, financial condition and results of operations.
Our electric propulsion systems use rare-earth minerals and unavailability or limited supply of these minerals could prevent us from manufacturing our products in production quantities or increase our costs.
Neodymium and dysprosium, rare-earth minerals, are key elements used in the production of magnets that are components of our electric propulsion systems. We currently source our magnets from China, and China has indicated
			
		
its intent to retain more of this mineral for China use, rather than exporting it. During calendar year 2011, we experienced significant price escalation in the cost of magnets used in our motors. This price escalation was primarily due to rare-earth government policy in China. Rare-earth prices have decreased substantially since peaking in the summer of 2011, and are now approaching the baseline prices (defined as the beginning of calendar year 2011). We have implemented a magnet surcharge process to recover these additional costs in the event of another price escalation. Although rare-earth magnets are available from other sources, these alternative sources are currently more costly. Reduced availability of neodymium and dysprosium from China could adversely affect our ability to obtain magnets in sufficient quantities, in a timely manner, or at a commercially reasonable cost. In the event that China's actions cause us to seek alternate sources of supply for magnets, it could cause an increase in our product costs, thereby reducing or eliminating our profit margin on electric propulsion systems if we are unable to pass the increase on to our customers. Increasing prices to our customers due to escalating magnet costs may reduce demand for our motors and make it difficult or impossible to compete with other motor manufacturers whose motors do not use rare-earth minerals.
Some of our contracts can be cancelled with little or no notice and could restrict our ability to commercialize our technology.
Our contracts with government agencies are subject to the risk of termination at the convenience of the contracting agency and in some cases grant "march-in" rights to the government. March-in rights are the right of the United States government or the applicable government agency, under limited circumstances, to exercise a non-exclusive, royalty-free, irrevocable worldwide license to any technology developed under contracts funded by the government to facilitate commercialization of technology developed with government funding. March-in rights can be exercised if we fail to commercialize the developed technology. The exercise of march-in rights by the government or an agency of the government could restrict our ability to commercialize our technology.
Some of our orders for the future delivery of products are placed under blanket purchase orders which may be cancelled by our customers at any time. The amount payable to us, if any, upon cancellation by the customer varies by customer. Accordingly, we may not recognize as revenue all or any portion of the amount of outstanding order backlog we have reported.
We face intense competition and may be unable to compete successfully.
In developing electric motors for use in vehicles and other applications, we face competition from very large domestic and international companies, including the world's largest automobile manufacturers. Many of our competitors have far greater resources to apply to research and development efforts than we have, and they may independently develop motors that are technologically more advanced than ours. These competitors also have much greater experience in and resources for marketing their products. For these reasons, potential customers may choose to purchase electric motors from our competitors rather than from us. In addition, the U.S. government has awarded substantial financial grants under the stimulus bill to several large companies who compete with us. To the extent that some of these competitors received awards under the stimulus bill in amounts greater than we have, this could adversely impact our ability to compete.
Changes in environmental policies could hurt the market for our products.
The market for electric and other alternative fuel vehicles and equipment and the demand for our products are influenced, to a degree, by federal, state and local regulations relating to air quality, greenhouse gases and pollutants. These laws and regulations may change, which could result in transportation or equipment manufacturers abandoning or delaying their interest in electric or hybrid electric vehicles or equipment. In addition, a failure by authorities to enforce current laws and regulations or to adopt additional environmental laws or regulations could limit the demand for our products.
Although many governments have identified as a significant priority the development of alternative energy sources, governments may change their priorities, and any change they make could materially affect our revenue or the development of our products.
If we are unable to protect our patents and other proprietary technology, we will be unable to prevent third parties from using our technology, which would impair our competitiveness and ability to commercialize our products. In addition, the cost of enforcing our proprietary rights may be expensive and result in increased losses.
			
		
Our ability to compete effectively against other companies in our industry will depend, in part, on our ability to protect our proprietary technology. Although we have attempted to safeguard and maintain our proprietary rights, we do not know whether we have been or will be successful in doing so. We have historically pursued patent protection in the United States and a limited number of foreign countries where we believe significant markets for our products exist or where potentially significant competitors have operations. It is possible that a substantial market could develop in a country where we have not received patent protection and under such circumstances our proprietary products would not be afforded legal protection in these markets. Further, our competitors may independently develop or patent technologies that are substantially equivalent or superior to ours. We cannot assure that additional patents will be issued to us or, if they are issued, as to the scope of their protection. Patents granted may not provide meaningful protection from competitors. Even if a competitor's products were to infringe patents owned by us, it would be costly for us to pursue our rights in an enforcement action, it would divert funds and resources which otherwise could be used in our operations and we may not be successful in enforcing our intellectual property rights. In addition, effective patent, trademark, service mark, copyright and trade secret protection may not be available in every country where we may operate or sell our products in the future. If third parties assert technology infringement claims against us, the defense of the claims could involve significant legal costs and require our management to divert time and attention from our business operations. If we are unsuccessful in defending any claims of infringement, we may be forced to obtain licenses or to pay royalties to continue to use our technology. We may not be able to obtain any necessary licenses on commercially reasonable terms or at all. If we fail to obtain necessary licenses or other rights, or if these licenses are costly, our results of operations may suffer either from reductions in revenues through our inability to serve customers or from increases in costs to license third-party technologies. Finally, patents may not deter third parties from attempting to reverse engineer our products and discovering our intellectual property.
We rely, in part, on contractual provisions to protect our trade secrets and proprietary knowledge, the adequacy of which may not be sufficient.
Confidentiality agreements to which we are party may be breached, and we may not have adequate remedies for any breach. Our trade secrets may also be known without breach of such agreements or may be independently developed by competitors. Our inability to maintain the proprietary nature of our technology and processes could allow our competitors to limit or eliminate any competitive advantages we may have.
Use of our motors in vehicles could subject us to product liability claims or product recalls, and product liability insurance claims could cause an increase in our insurance rates or could exceed our insurance limits, which could impair our financial condition, results of operations and liquidity.
The automotive industry experiences significant product liability claims. As a supplier of electric propulsion systems or other products to vehicle OEMs, we face an inherent business risk of exposure to product liability claims in the event that our products, or the equipment into which our products are incorporated, malfunction and result in personal injury or death. We may be named in product liability claims even if there is no evidence that our systems or components caused an accident. Product liability claims could result in significant losses as a result of expenses incurred in defending claims or the award of damages. The sale of systems and components for the transportation industry entails a high risk of these claims, which may increase as our production and sales increase. In addition, we may be required to participate in recalls involving these systems if any of our systems prove to be defective, or we may voluntarily initiate a recall or make payments related to such claims as a result of various industry or business practices or the need to maintain good customer relationships.
We carry product liability insurance of $10 million covering most of our products. If we were to experience a large insured loss, it might exceed our coverage limits, or our insurance carriers could decline to further cover us or raise our insurance rates to unacceptable levels, any of which could impair our financial position and results of operations. Any product liability claim brought against us also could have a material adverse effect on our reputation.
We may be subject to warranty claims, and our provision for warranty costs may not be sufficient.
We may be subject to warranty claims for defects or alleged defects in our products, and the risk of such claims arising will increase as our production and sales increase. In addition, in response to consumer demand, vehicle manufacturers have been providing, and may continue to provide, increasingly longer warranty periods for their products. As a consequence, these manufacturers may require their suppliers, such as us, to provide correspondingly longer product warranties. As a result, we could incur substantially greater warranty claims in the future.
Our future success will depend on our ability to attract and retain qualified management and technical personnel.
			
		
Our future success is substantially dependent on the continued services and on the performance of our executive officers and other key management, engineering, manufacturing and operating personnel. The loss of the services of any executive officer, or other key management, engineering, manufacturing and operating personnel, could materially adversely affect our business. Our ability to achieve our growth plans will also depend on our ability to attract and retain additional qualified management and technical personnel, and we do not know whether we will be able to be successful in these regards. Our inability to attract and retain additional qualified management and technical personnel, or the departure of key employees, could materially and adversely affect our growth plans and, therefore, our business prospects, results of operations and financial condition.
Our stock price has been and could remain volatile.
The market price for our common stock has been and may continue to be volatile and subject to extreme price and volume fluctuations in response to market and other factors, including the following, some of which are beyond our control:
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failure to meet growth expectations;
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variations in our quarterly operating results from the expectations of investors;
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downward changes in general market conditions;
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announcements of new products or services by our competitors;
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announcements by our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
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additions or departures of key personnel;
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investor perception of our industry or our prospects;
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insider selling or buying;
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demand for our common stock; and
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general technological or economic trends.
In the past, following periods of volatility in the market price of their stock, many companies have been the subjects of securities class action litigation. If we became involved in securities class action litigation in the future, it could result in substantial costs and diversion of management’s attention and resources and could harm our stock price, business prospects, results of operations and financial condition.
The maintenance and security of our information systems are critical to our operations.
We rely on our information systems to be functioning at all times, and that the data in those systems is protected and secure from viruses, illegal access and any other form of unauthorized use. Should our information systems be compromised in any way, our business operations could be severely impacted.
			
		
ITEM 1B.
ITEM 1B.UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
ITEM 2.PROPERTIES
We own our offices and manufacturing facility and believe the facility to be well maintained, adequately insured and suitable for its present and intended uses. Information concerning our facility as of March 31, 2014 is set forth in the table below:
ITEM 3.
ITEM 3.LEGAL PROCEEDINGS
Litigation
We are involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, and based on current available information, the ultimate disposition of these matters is not expected to have a material adverse effect on our financial position, results of operations or cash flow.
ITEM 4.
ITEM 4.MINE SAFETY DISCLOSURES
Not applicable.
			
		
Part II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock trades on the NYSE MKT and Chicago Stock Exchange under the symbol UQM. The high and low trade prices, by fiscal quarter, as reported by the NYSE MKT Stock Exchange for the last two fiscal years are as follows:
On May 27, 2014 the closing price of our common stock, as reported on the NYSE MKT, was $2.29 per share and there were 568 holders of record of our common stock.
We have not paid any cash dividends on our common stock since inception and we intend for the foreseeable future to retain any earnings to finance the growth of our business. Future dividend policy will be determined by our Board of Directors based upon consideration of our earnings, capital needs and other factors then relevant.
			
		
PERFORMANCE GRAPH 2
The following graph represents the yearly percentage change in the cumulative total return on the common stock of UQM Technologies, Inc., the group of companies comprising the S&P Electrical Equipment Index, and those companies comprising the S&P 500 Index for the five year period from March 31, 2009 through March 31, 2014:
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.
ITEM 6.SELECTED FINANCIAL DATA
The selected consolidated financial data presented below should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this document.
			
		
ITEM 7.
ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Report contains statements that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. These could be statements regarding our plans, beliefs or current expectations; including those plans, beliefs and expectations of our officers and directors with respect to, among other things, new product developments, future orders to be received from our customers, sales of products from inventory, future financial results, liquidity and the continued growth of the electric-powered vehicle industry. Important Risk Factors that could cause actual results to differ from those contained in the forward-looking statements are listed above in Part I, Item 1A. Risk Factors.
Introduction
UQM Technologies, Inc., (“UQM”, “Company”, “we”, “our”, or “us”) is a developer and manufacturer of power dense, high efficiency electric motors, generators and power electronic controllers for the commercial truck, bus, automotive, marine and military markets. We generate revenue from two principal activities: 1) the sale of motors, generators and electronic controls; and 2) research, development and application engineering contract services. Our product sales consist of annually recurring volume production, prototype low volume sales, and revenues derived from the sale of refurbished and serviced products. The sources of engineering revenue typically vary from year to year and individual projects may vary substantially in their periods of performance and aggregate dollar value.
We have invested considerable financial and human resources into the development of our technology and manufacturing operations. We have developed and production-validated a full range of products for use in full-electric, hybrid electric, plug-in-hybrid and fuel cell applications for the commercial bus and truck, automotive, marine and military markets. These products are all highly efficient permanent magnet designs and feature outstanding performance, package size and weight valued by our customers. Our production capabilities and capacity are sufficient to meet the demands of our current and future customers for the foreseeable future. We have recently been certified as an ISO/TS 16949 quality supplier, which is the highest level of quality standards in the automotive industry. We have a management team with significant experience in the automotive industry and the requirements for high quality production programs and very deep technical knowledge of the motor and controller business. This team has the ability and background to grow the business to significantly higher levels, and we believe we have adequate cash balances to fund our operations for at least the next two years.
Our most important strategic initiative going forward is to develop customer relationships that lead to longer-term supply contracts. Volume production is the key to our ongoing operations. We are driving business development in the following ways:
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We have created a well-defined, structured process to target potential customers of vehicle electric motor technology in the commercial truck/van and shuttles, passenger buses, automotive, marine, military and other targeted markets both domestically and internationally.
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We have developed a customer pipeline where identified potential customers are synergistic and strategic in nature for longer-term growth potential.
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We are building long term quantifiable and sustainable relationships within the identified target markets.
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We provide service and support to our customers from pilot and test activities through commissioning processes and then ultimately to volume production operations.
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We improve our purchasing and manufacturing processes to develop competitive costs to ensure that our pricing to customers is market competitive.
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We provide customized solutions to meet specification requirements that some customers require.
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We participate in trade show events globally to demonstrate our products and engage with users of electric motor technology.
			
		
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We actively involve all functional groups within the Company to support the requests of our customers.
We believe that the successful execution of these activities will lead us to secure volume production commitments from customers, so that our operations will become cash flow positive and ultimately profitable.
The Department of Energy grant that was awarded to us in 2010 will expire on January 12, 2015. Since the beginning of the grant program, we have billed a total of $25.0 million and been reimbursed a total of $24.4 million in matching funds through March 31, 2014. These cumulative reimbursements have allowed us to achieve many milestones to support our business development efforts that we believe will lead to volume production opportunities. First, we were able to relocate our headquarters and production operations to an approximate 130,000 square foot facility with fifteen adjacent acres of land for future expansion. Within this modern facility, we were able to develop and install manufacturing capacity and infrastructure to build and test our state-of-the-art traction motors and controllers, with current capacity to produce up to 56,000 systems annually, and ultimately to achieve the capacity targets defined in our agreement with the DOE. Throughout the program, the DOE grant supported product validation and release activities for both passenger vehicle and heavy duty truck and bus platforms. In addition, the grant assisted us in implementing all of the required processes and systems to certify our facility to the ISO/TS 16949 quality standard that is a requirement to be a supplier to the automotive industry.
The funding from the DOE grant has brought us to a position of strength with regards to product validation and manufacturing capabilities. This, in addition to the business development activities in place and the cash reserves we have to fund the operations for at least the next two years, makes us optimistic about the future of the Company.
In February 2014, we closed a $5.3 million offering of stock and stock purchase warrants with net proceeds of $4.9 million. While we believed that our pre-financing cash balances at that time were sufficient to fund the Company’s operations for approximately two years, we decided to raise additional capital in anticipation of future working capital needs. Specifically, a future supply contract with a customer in China could require us to establish a joint venture relationship and/or invest in a local manufacturing presence. Should we secure a production agreement with a large customer, there will be ramp-up costs required to meet the needs of higher volume operations. We, therefore, believed it was prudent to raise additional capital in advance of these types of growth scenarios, at a time when capital was available at reasonable costs to the Company.
Financial Condition
Cash and cash equivalents and short-term investments at March 31, 2014 were $10,310,141 and working capital was $20,052,187 compared with $4,527,899 and $16,011,344, respectively, at March 31, 2013. The increase in cash and short-term investments is primarily attributable to the proceeds from a follow-on offering of our common stock and warrants, which resulted in net proceeds of $4.9 million, and lower levels of accounts receivable and inventories, offset by operating losses, capital expenditures and lower levels of accounts payable and other current liabilities. The increase in working capital is primarily attributable to proceeds from the follow-on offering of our common stock, partially offset by operating losses and capital expenditures on property and equipment.
Accounts receivable decreased $1,251,976 to $960,419 at March 31, 2014 from $2,212,395 at March 31, 2013. The decrease is primarily due to cash receipts from the DOE under the Grant. Our sales are conducted through acceptance of customer purchase orders or in some cases through supply agreements. For credit qualified customers, our standard terms are net 30 days. For international customers and customers without an adequate credit rating or history, our typical terms are irrevocable letter of credit or cash payment in advance of delivery. At March 31, 2014 and 2013, we had an allowance for uncollectible accounts of zero and $3,838,092, respectively.
Costs and estimated earnings on uncompleted contracts increased to $341,255 at March 31, 2014 versus $178,264 at March 31, 2013. The increase is due to timing of billings on certain contracts in process at March 31, 2014 versus March 31, 2013. Estimated earnings on contracts in process increased to $670,596, or 30 percent of contracts in process of $2,219,909 at March 31, 2014, compared to estimated earnings on contracts in process of $515,299 or 38 percent of contracts in process of $1,353,545 at March 31, 2013. The increase in estimated earnings is attributable to higher levels of funded engineering contracts in process, partially offset by lower expected margin on certain contracts in process at March 31, 2014.
Inventories decreased $944,039 to $10,054,422 at March 31, 2014 compared to $10,998,461 at March 31, 2013, reflecting increased shipments of PowerPhase Pro® and PowerPhase HD® propulsion systems.
			
		
Prepaid expenses and other current assets decreased to $263,988 at March 31, 2014 from $309,957 at March 31, 2013, primarily due to lower levels of prepayments on software licenses outstanding at the end of the current fiscal year versus the prior fiscal year end.
We invested $377,224 for the acquisition of property and equipment during the fiscal year ended March 31, 2014 before reimbursements from the DOE Grant versus $561,669 during the fiscal year ended March 31, 2013. The decrease in capital expenditures is primarily attributable to decreased levels of investments in production equipment during the current fiscal year. Cash reimbursements for capital assets under the Grant during the fiscal years ended March 31, 2014 and March 31, 2013 were $215,754 and $208,032, respectively.
Patent costs increased to $227,015 at March 31, 2014 compared to $206,287 at March 31, 2013 primarily due to capitalized costs associated with a new patent application partially offset by the amortization of patent issuance costs.
Trademark costs decreased to $107,123 at March 31, 2014 compared to $110,528 at March 31, 2013 due to the amortization of trademark issuance costs.
Other assets decreased to $2,997 at March 31, 2014 from $76,731 at March 31, 2013 due to lower levels of long-term investments at the end of the current fiscal year versus the prior fiscal year end.
Accounts payable decreased $230,904 to $386,293 at March 31, 2014 from $617,197 at March 31, 2013, primarily due to the timing of vendor payments.
Other current liabilities decreased $1,107,690 to $1,491,745 at March 31, 2014 from $2,599,435 at March 31, 2013. The decrease is primarily attributable to reduced levels of accrued import duties, accrued vendor settlements, customer deposits and accrued payroll and employee benefits, partially offset by higher levels of accrued warranty costs at March 31, 2014.
Short-term deferred compensation under executive employment agreements was zero at March 31, 2014 versus $524,000 at March 31, 2013, reflecting a retirement payment to a former officer made in December 2013. Long-term deferred compensation under executive employment agreements was $182,100 at March 31, 2014 versus $103,412 at March 31, 2013, reflecting periodic accruals of future severance obligations under executive employment agreements.
Common stock and additional paid-in capital increased to $397,778 and $121,325,762, respectively, at March 31, 2014 compared to $366,641 and $115,573,331 at March 31, 2013. The increases in common stock and additional paid-in capital were primarily attributable to shares issued under a follow-on offering in February, 2014, shares issued under the Employee Stock Purchase Plan and the Stock Bonus Plan, and the periodic expensing of non-cash share-based payments associated with grants under our Equity Incentive Plan and Stock Bonus Plan.
Results of Operations
Revenue
Total revenue for the fiscal year ended March 31, 2014 was $7,046,200 compared to $7,178,709 and $10,143,456 for the fiscal years ended March 31, 2013 and 2012, respectively.
Product sales this fiscal year increased 4 percent to $6,136,305 compared to $5,910,153 for the fiscal year ended March 31, 2013. The increase is primarily due to increased shipments of PowerPhase HD® and PowerPhase Pro® propulsion systems, partially offset by decreased levels of PowerPhase Select® propulsion systems. Product sales for the fiscal year ended March 31, 2013 decreased 37 percent to $5,910,153 compared to $9,358,388 for the fiscal year ended March 31, 2012. The decrease was primarily due to a reduction in product revenue from CODA. Product revenue from CODA for the fiscal year ended March 31, 2013 was $21,762 versus $4,262,909 for the fiscal year ended March 31, 2012.
Revenue from contract services decreased $358,661, or 28 percent, to $909,895 for the fiscal year ended March 31, 2014 versus $1,268,556 for the fiscal year ended March 31, 2013. This was driven by a change in mix of contracts in process during the current fiscal year and by a change in our cumulative estimate of reimbursable rates under a cost-reimbursement type contract which resulted in a decrease in contract services revenue recognized during the fiscal year ended March 31, 2014 of $79,400. Revenue from contract services increased $483,488, or 62 percent, to $1,268,556 for the fiscal year ended March 31, 2013 versus $785,068 for the fiscal year ended March 31, 2012. The increase is primarily attributable to the application of additional engineering resources on the DOE non-rare earth program and other funded development programs.
			
		
Gross Profit Margin
Gross profit margins on product sales this fiscal year increased to 41 percent compared to 27 percent for fiscal 2013. The increase is primarily due to favorable changes in product mix and ramp-up costs during the prior fiscal year associated with the launch of our PowerPhase HD®. Gross profit margins on product sales for the fiscal year ended March 31, 2013 decreased to 27 percent compared to 29 percent for fiscal 2012. The decrease is primarily due to a less favorable product mix and ramp-up costs associated with the launch of our PowerPhase HD®. Gross profit margins on contract services decreased to 18 percent this fiscal year compared to 44 percent for the fiscal year ended March 31, 2013, reflecting a change in the mix of contracts in process in the current fiscal year and the change in our cumulative estimate of reimbursable rates noted above. Gross profit margins on contract services for the fiscal year ended March 31, 2013 increased to 44 percent this fiscal year compared to 36 percent for the fiscal year ended March 31, 2012, primarily due to higher expected margins on certain contracts in process at March 31, 2013.
Costs and Expenses
Research and development expenditures for the fiscal year ended March 31, 2014 were $219,887 compared to $96,905 and $37,128 for the fiscal years ended March 31, 2013 and 2012, respectively. The increase in research and development expenditures for the fiscal years ended March 31, 2014 and 2013 was primarily attributable to increased levels of cost-sharing on government research programs.
Production engineering costs were $4,644,646 for the fiscal year ended March 31, 2014 versus $4,921,970 and $6,014,868 for the prior two fiscal years, respectively. The decrease for the current fiscal year is attributable to decreased levels of product qualification and testing activities during the current fiscal year. The decrease for the fiscal year ended March 31, 2013 versus the fiscal year ended March 31, 2012 was attributable to higher than normal product qualification and testing activities during fiscal year 2012 associated with the launch of volume production for CODA and the redeployment of certain engineering resources on funded development programs.
Reimbursement of costs under the DOE Grant were $3,625,853 versus $4,205,678 and $3,794,324 for each of the two prior fiscal years, respectively. During the current fiscal year, we changed our cumulative estimate of reimbursable rates under the Grant which resulted in an increase in our reimbursement recorded for the year of $958,000. Excluding this adjustment, reimbursements recorded during the current fiscal year were 57 percent of production engineering expenditures versus 85 percent for the fiscal year ended March 31, 2013, reflecting a decrease in our estimated reimbursable overhead costs. For the fiscal year ended March 31, 2013, reimbursements under the grant were 85 percent of production engineering expenditures compared to 63 percent for the fiscal year ended March 31, 2012, reflecting an increase in the estimated reimbursable overhead costs under the Grant.
Selling, general and administrative expenses this fiscal year were $5,143,864 compared to $7,022,112 and $5,678,797 for the fiscal years ended March 31, 2013 and 2012, respectively. The decrease this fiscal year is attributable to cost reduction efforts implemented in the fourth quarter of fiscal year 2013. The increase for fiscal year 2013 versus 2012 is attributable to higher levels of business development, marketing, legal and recruiting and relocation costs versus the prior fiscal year.
Other
Recovery of impaired assets was $868,475 for the fiscal year ended March 31, 2014 compared to impairment of assets of $4,980,117 and zero for the fiscal years ended March 31, 2013 and 2012, respectively. During the fiscal year ended March 31, 2014, we recorded a reduction to our accrued import duties liability of $726,640 as a result of the ruling from the Department of Commerce that significantly reduced the amount of duties owed, and we reduced the carrying value of the accrued vendor settlement liability by $141,835, due to settlements with certain vendors during the year which were below the originally estimated amounts. During the fiscal year ended March 31, 2013, we recorded a reserve for impairments as a result of the CODA bankruptcy.
Interest income decreased to $1,787 for the current fiscal year compared to $15,743 and $22,805 for the fiscal years ended March 31, 2013 and 2012, respectively. The decrease this fiscal year versus fiscal year 2013 is attributable to lower levels of invested cash balances. The decrease for fiscal 2013 compared to fiscal 2012 is attributable to lower yields and lower levels of invested cash balances.
Other income for the fiscal year ended March 31, 2014 was $7,472 versus $3,377 and $2,011 for the fiscal years ended March 31, 2013 and 2012, respectively. The increase for fiscal year 2014 compared to fiscal year 2013 and 2012 is attributable to a recovery received from a bankruptcy proceeding during fiscal year 2014.
			
		
Net Loss
As a result, net loss for the fiscal year ended March 31, 2014 was $2,773,244, or $0.07 per common share, compared to a net loss of $10,688,312, or $0.29 per common share, and $4,928,520 or $0.14 per common share, for the fiscal years ended March 31, 2013 and 2012, respectively.
Liquidity and Capital Resources
Our cash balances and liquidity throughout the fiscal year ended March 31, 2014 were adequate to meet operating needs. In February, 2014, we completed a follow-on offering consisting of 2,864,872 shares of our common stock, and common stock purchase warrants to purchase 1,432,436 shares of our common stock. The warrants have an exercise price of $2.1275 per whole share of common stock and are exercisable on or after August 6, 2014 and on or before August 5, 2018. In addition, the placement agent was issued warrants to purchase 57,297 shares of common stock, on substantially the same terms as the warrants issued to the purchasers. Cash proceeds, net of offering costs, were $4,911,933. At March 31, 2014, we had cash and short-term investments of $10,310,141 and working capital of $20,052,187 compared to $4,527,899 and $16,011,344 at March 31, 2013, respectively.
For the year ended March 31, 2014, net cash used in operating activities was $622,732 compared to net cash used in operating activities of $7,259,552 and $11,414,137 for the years ended March 31, 2013 and 2012, respectively. The decrease in cash used in operating activities for the current fiscal year versus fiscal 2013 is primarily due to decreased net losses, significantly driven by lower operating costs as a result of a reduction in force and other strategic cost reductions, decreased levels of inventory purchases and decreased levels of accounts receivable, partially offset by decreases in accounts payable and deferred compensation under executive employment agreements. The decrease in cash used in operating activities for fiscal 2013 compared to fiscal 2012 is associated with decreased levels of inventory purchases partially offset by decreased levels of accounts payable at March 31, 2013.
Net cash provided by investing activities for the fiscal year ended March 31, 2014 was $1,348,248 compared to cash provided by investing activities of $114,556 and $7,124,741 for the fiscal years ended March 31, 2013 and 2012, respectively. The increase for the current fiscal year versus fiscal 2013 was primarily due to cash proceeds from the sale of our former Frederick, Colorado facility, partially offset by decreased levels of net short-term investment maturities versus the prior fiscal year and increased levels of net capital expenditures. The decrease in cash provided in the fiscal year ended March 31, 2013 compared to fiscal 2012 is due to decreased net maturities of short-term investments, partially offset by a decrease in the amount of capital expenditures, net of reimbursements under our DOE Grant.
Net cash provided by financing activities was $4,993,697 for the fiscal year ended March 31, 2014 versus cash provided by financing activities of $34,955 and $48,584 for the fiscal years ended March 31, 2013 and 2012, respectively. The increase in cash provided in the current fiscal year was primarily attributable to the completion of a follow-on offering which resulted in net cash proceeds of $4.9 million. The decrease in cash provided in fiscal 2013 versus fiscal 2012 is attributable to higher levels of treasury stock purchases during the fiscal year ended March 31, 2013.
We expect to fund our operations over the next year from existing cash and short-term investment balances, the reduction of inventories and from bank financing, if available. Although we expect to manage our operations and working capital requirements to minimize the future level of operating losses and working capital usage, our working capital requirements may increase in the future. If customer demand accelerates substantially, our working capital requirements may also increase substantially. In addition, our $32.4 million DOE Grant requires us to provide matching funds of 50 percent on all qualifying expenditures under the Grant. As of March 31, 2014, $25 million had been expended under the Grant.
			
		
If our existing financial resources are not sufficient to execute our business plan, including meeting future funding requirements under the DOE Grant, we may issue equity or debt securities in the future, although we cannot assure that we will be able to secure additional capital should it be required to implement our current business plan. In the event financing or equity capital to fund future growth is not available on terms acceptable to us, or at all, we will modify our strategy to align our operations with then available financial resources. Based on our current level of operations, we believe we have sufficient cash and short-term investments to fund our operations for at least the next two years.
Contractual Obligations
The following table presents information about our contractual obligations and commitments as of March 31, 2014:
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, assumptions and estimates that affect the dollar values reported in the consolidated financial statements and accompanying notes. Note 1 to our consolidated financial statements describes the significant accounting policies and methods used in preparation of the consolidated financial statements. Estimates are used for, but not limited to, allowance for uncollectible accounts receivables, costs to complete contracts, the recoverability of inventories and the fair value of financial and long-lived assets. Actual results could differ materially from these estimates. The following critical accounting policies are impacted significantly by judgments, assumptions and estimates used in preparation of the consolidated financial statements.
Inventories
We maintain raw material inventories of electronic components, motor parts and other materials to meet our expected manufacturing needs for proprietary products and for products manufactured to the design specifications of our customers. Some of these components may become obsolete or impaired due to bulk purchases in excess of customer requirements. Accordingly, we periodically assesses our raw material inventory for potential impairment of value based on then available information, expectations and estimates and establish impairment reserves for estimated declines in the realizable value of our inventories. On May 1, 2013, the date CODA filed for bankruptcy protection, we had approximately $8.2 million of PowerPhase Pro® inventory originally purchased or manufactured for CODA. As of March 31, 2014, $7.9 million of PowerPhase Pro® inventory was still on hand. We believe the PowerPhase Pro® system is right sized for many medium-duty truck, marine, passenger vehicle and stationary power applications, and this inventory is now being sold to other customers. It is reasonably possible that future events or changes in circumstances could cause the realizable value of our inventories to decline materially, resulting in additional material
			
		
impairment losses. During the fiscal years ended March 31, 2014, 2013 and 2012, we recorded inventory impairments of $5,047, $8,928 and $10,169, respectively.
Accounts Receivable
Our trade accounts receivable are subject to credit risks associated with the financial condition of our customers and their liquidity. We evaluate all customers periodically to assess their financial condition and liquidity and set appropriate credit limits based on this analysis. As a result, the collectability of accounts receivable may change due to changing general economic conditions and factors associated with each customer’s particular business. During the fiscal year ended March 31, 2013, we established an allowance for bad debts of $3,838,092, principally due to the bankruptcy filing of CODA. At March 31, 2014, the accounts receivable balance due from CODA and the associated allowance for bad debts has been written off. In light of current economic conditions, we may need to maintain an allowance for bad debts in the future. It is also reasonably possible that future events or changes in circumstances could cause the realizable value of our trade accounts receivable to decline materially, resulting in material losses.
Percentage of Completion Revenue Recognition on Long-term Contracts: Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts
We recognize revenue on development projects funded by our customers using the percentage-of-completion method. Under this method, contract services revenue is based on the percentage that costs incurred to date bear to management’s best estimate of the total costs to be incurred to complete the project. Many of these contracts involve the application of our technology to customers’ products and other applications with demanding specifications. Estimated costs for each project are developed by our engineering staff based upon a progression of technical tasks required to attain the project's objectives. These estimates typically include the number of hours of work required by each category of personnel, the cost of subcontracts, materials and components, as well as costs for consultants and project related travel. These estimated costs are reviewed throughout the project and revised quarterly, if necessary, to accurately reflect our best estimate of the remaining costs necessary to complete the project. Management’s best estimates have sometimes been adversely impacted by unexpected technical challenges requiring additional analysis and redesign, failure of electronic components to operate in accordance with manufacturers published performance specifications, unexpected prototype failures requiring the purchase of additional parts, changes in actual overhead costs versus estimated overhead costs and a variety of other factors that may cause unforeseen delays and additional costs. It is reasonably likely that estimated project costs to complete the projects in process at March 31, 2014 could change materially in the future, and any modification of management’s current estimate of total project costs to be incurred could result in material changes in the profitability of affected projects or result in material losses on any affected projects.
Fair Value Measurements and Asset Impairment
Some of our assets and liabilities may be subject to analysis as to whether the asset or liability should be marked to fair value and some assets may be evaluated for potential impairment in value. The determination of fair value for those assets that do not have quoted prices in active markets is highly judgmental. These estimates and judgments may include fair value determinations based upon the extrapolation of quoted prices for similar assets and liabilities in active or inactive markets, for observable items other than the asset or liability itself, for observable items by correlation or other statistical analysis, or from our assumptions about the assumptions market participants would use in valuing an asset or liability when no observable market data is available. Similarly, management evaluates both tangible and intangible assets for potential impairments in value. In conducting this evaluation, management may rely on a number of factors to value anticipated future cash flows including operating results, business plans and present value techniques. Rates used to value and discount cash flows may include assumptions about interest rates and the cost of capital at a point in time. There are inherent uncertainties related to these factors and management’s judgment in applying them to the analysis of asset impairment. Changes in any of the foregoing estimates and assumptions or a change in market conditions could result in a material change in the value of an asset or liability resulting in a material adverse change in our operating results.
ITEM 7A.
ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency exchange and interest rates. One component of interest rate risk involves the short term investment of excess cash in short term, investment grade interest-bearing securities. If there are changes in interest rates, those changes would
			
		
affect the investment income we earn on these investments and, therefore, impact our cash flows and results of operations, although we expect that the impact would be immaterial. We do not use financial instruments to any degree to manage these risks and do not hold or issue financial instruments for trading purposes. All of our product sales and related receivables are payable in U.S. dollars.
			
		
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ITEM 8.
ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
UQM Technologies, Inc.
We have audited the accompanying consolidated balance sheets of UQM Technologies, Inc. (a Colorado corporation) and subsidiaries (the “Company”) as of March 31, 2014 and 2013, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended March 31, 2014. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of UQM Technologies, Inc. and subsidiaries as of March 31, 2014 and 2013, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2014, in conformity with accounting principles generally accepted in the United States of America.
/s/ GRANT THORNTON LLP
Denver, Colorado
May 29, 2014
			
		
			
		
			
		
			
		
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
See accompanying notes to consolidated financial statements.
			 		
			
		
			
		
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
See accompanying notes to consolidated financial statements.
			
		
			
		
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
See accompanying notes to consolidated financial statements.
			
		
			
		
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity
See accompanying notes to consolidated financial statements.
			
		
			
		
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
			
		
			
		
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
			 		
			
		
			
		
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies
(a) Description of Business
UQM Technologies, Inc. and our wholly-owned subsidiaries are engaged in the research, development and manufacture of permanent magnet electric motors and the electronic controls for such motors. Our facility is located in Longmont, Colorado. Our revenue is derived primarily from product sales to customers in the commercial truck, bus, automotive, marine and military markets, and from contract research and development services. We are impacted by other factors such as the continued receipt of contracts from industrial and governmental parties, our ability to protect and maintain the proprietary nature of our technology, continued product and technological advances and our ability, together with our partners, to commercialize our products and technology.
(b) Principles of Consolidation
The consolidated financial statements include the accounts of UQM Technologies, Inc. and those of all majority-owned or controlled subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
(c) Cash and Cash Equivalents and Short-term Investments
We consider cash on hand and investments with original maturities of three months or less to be cash and cash equivalents. Investments with original maturities of greater than three months and less than one year from the balance sheet date are classified as short-term.
We limit our cash and cash equivalents and investments to high quality financial institutions in order to minimize our credit risk. We maintain cash and cash equivalent balances with financial institutions that exceed federally insured limits. We have not experienced any losses related to these balances and management believes our credit risk to be minimal.
(d) Investments
We have an investment policy approved by the Board of Directors that governs the quality, acceptability and dollar concentration of our investments. Under the policy, we may invest in marketable securities consisting 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 that hold custody of the investments. All of our investments are held-to-maturity investments as we have the positive intent and ability to hold until maturity. These securities are recorded at amortized cost.
The amortized cost and unrealized gain or loss of our investments at March 31, 2014 and March 31, 2013 were:
			 		
			
		
			
		
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
			
		
The time to maturity of held-to-maturity securities were:
(e) Accounts Receivables
We extend unsecured credit to many of our customers following a review of the customers’ financial condition and credit history. Our sales are conducted through acceptance of customer purchase orders or in some cases through supply agreements. For credit qualified customers, our standard terms are net 30 days. For international customers without an adequate credit rating, our typical terms are irrevocable letter of credit or cash payment in advance of delivery. We establish an allowance for uncollectable accounts based upon a number of factors including the length of time trade receivables are past due, the customer’s ability to pay its obligation to us, the condition of the general economy, estimates of credit risk, historical trends and other information. We write off accounts receivable when they become uncollectible against our allowance for doubtful accounts receivable. At March 31, 2014 and 2013, we had an allowance for doubtful accounts receivable of zero and $3,838,092, respectively. The following represents activity under our allowance for doubtful accounts receivable for the fiscal years ended March 31, 2014, 2013 and 2012:
(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, 2014, 2013 and 2012, we impaired inventory of $5,047, $8,928 and $10,169, respectively.
(g) Property and Equipment
Property and equipment are stated at cost, unless the asset was acquired, in part, with U.S. Department of Energy (“DOE”) grant funds, in which case it is stated at cost net of DOE reimbursements. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range from three to five years, except for buildings, 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, 2014, 2013 and 2012 was
			
		
			
		
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
			
		
$1,098,622, $1,218,812 and $1,139,821, respectively, and was reported in operating costs and expenses on the Consolidated Statements of Operations.
(h) Patent and Trademark Costs
Patent and trademark costs consist primarily of legal expenses, and represent those costs incurred by us for the filing of patent and trademark applications. Amortization of patent and trademark costs is computed using the straight-line method over the estimated useful life of the asset, typically 13 years for patents, and 40 years for trademarks. Amortization expense for the fiscal years ended March 31, 2014, 2013 and 2012 was $37,399, $34,022, and $39,137, respectively.
(i) Impairment of Long-Lived Assets
We periodically evaluate whether circumstances or events have affected the recoverability of long-lived assets including intangible assets with finite useful lives. The assessment of possible impairment is based on our ability to recover the carrying value of the asset or groups of assets from expected future cash flows (undiscounted and without interest charges) estimated by management. If expected future cash flows are less than the carrying value, an impairment loss is recognized to adjust the asset to fair value as determined by expected discounted future cash flows.
(j) Product Warranties
Our warranty policy generally provides three months to three years of coverage depending on the product. We record a liability for estimated warranty obligations at the date products are sold. The estimated cost of warranty coverage is based on our actual historical experience with our current products or similar products. For new products, the required reserve is based on historical experience of similar products until sufficient historical data has been collected on the new product. Adjustments are made as new information becomes available. The following is a summary of warranty activity for the fiscal years ended March 31, 2014, 2013 and 2012:
(k) Revenue and Cost Recognition
Revenue from sales of products is generally recognized at the time title to the goods and the benefits and risks of ownership passes to the customer, which is typically when products are shipped based on the terms of the customer purchase agreement.
Revenue relating to long-term fixed price contracts is recognized using the percentage of completion method. Under the percentage of completion method, contract revenues and related costs are recognized based on the percentage that costs incurred to date bear to total estimated costs. Changes in job performance, estimated profitability and final contract settlements may result in revisions to cost and revenue, and are recognized in the period in which the revisions are determined. Contract costs include all direct materials, subcontract and labor costs and other indirect costs. Selling, general and administrative costs are charged to expense as incurred. At the time a loss on a contract becomes known, the entire amount of the estimated loss is accrued.
			
		
			
		
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
			
		
The aggregate of costs incurred and estimated earnings recognized on uncompleted contracts in excess of related billings is shown as a current asset, and billings on uncompleted contracts in excess of costs incurred and estimated earnings is shown as a current liability.
(l) Government Grants
The Company recognizes revenue and cost reimbursements from government grants when it is probable that the Company will comply with the conditions attached to the grant arrangement and the grant proceeds will be received. Government grants are recognized in the 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 tax expense or benefit in the period that includes the enactment date. The Company has unexpired net operating losses and research and development credits carrying forward into current years that date from the tax year 1999 and 2001, respectively. As such, all federal tax returns from 1999 to the present are subject to audit.
(n) Research and Development
Costs of researching and developing new technology, or significantly altering existing technology, are expensed as incurred.
			
		
			
		
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
			
		
(o) Loss Per Common Share
Basic loss per share is computed by dividing loss attributable to common stockholders by the weighted average number of common shares outstanding during the periods presented. Diluted loss per share is computed by dividing loss attributable to common stockholders by all outstanding and potentially dilutive shares during the periods presented, unless the effect is antidilutive. At March 31, 2014, 2013 and 2012, 640,979 and 358,855 and 167,680 shares of common stock issued but not yet vested, respectively under the Stock Bonus Plan, were being held by the Company. For fiscal years 2014, 2013 and 2012, 267,911, 32,681 and 16,487 shares were potentially includable in the calculation of diluted loss per share under the treasury stock method but were not included, because to do so would be antidilutive. At March 31, 2014, 2013 and 2012, options to purchase 3,342,627, 4,282,001 and 3,254,905 shares of common stock, respectively, and warrants to purchase 1,489,733, zero and zero shares of common stock, respectively, were outstanding. For the fiscal years ended March 31, 2014, 2013 and 2012, options and warrants for 3,371,161, 2,872,257 and 3,201,569 shares were not included in the computation of diluted loss per share because the option exercise price was greater than the average market price of the common stock. In-the-money options and warrants determined under the treasury stock method to acquire 462,104, zero and 2,834 shares of common stock for the fiscal years ended March 31, 2014, 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.
(p) Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
(2) Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts and Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts
At March 31, 2014 and March 31, 2013, the estimated period to complete contracts in process ranged from one to ten months and one to twenty-one months, respectively. We expect to collect all accounts receivable arising from these contracts within sixty days of billing.
The following summarizes contracts in process:
(3) Inventories
Inventories consist of:
			
		
			
		
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
			
		
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.
(4) Impairment of Long-Lived Assets
During the fiscal years ended March 31, 2014, 2013 and 2012, we recorded total impairment charges of zero, zero and 27,845, respectively for the impairment of long-lived assets.
Impairments for the fiscal year ended March 31, 2012 consist solely of capitalized legal fees associated with the preparation and filing of patent applications that were subsequently abandoned. Because no patents were issued, none of these patent application costs were amortized prior to their impairment.
(5) Facility Held for Sale
We had listed our former facility in Frederick, Colorado for sale with a commercial real estate broker as of March 31, 2013. The facility was reclassified as a current asset and we had discontinued depreciating the asset pending the sale of the building.
On June 6, 2013, we closed on the sale the building. The sales price was $1,650,000 and net proceeds were $1,565,032.
(6) Patents and Trademarks
Patents owned by the Company had a gross carrying amount of $1,105,722 and $1,052,082, accumulated amortization of $878,707 and $845,795, and a net carrying amount of $227,015 and $206,287, at March 31, 2014 and 2013, respectively. Trademarks owned by the Company had a gross carrying amount of $175,841 and $174,758, accumulated amortization of $68,718 and $64,230, and a net carrying value of $107,123 and $110,528 at March 31, 2014 and 2013, respectively. Patents and trademarks are amortized on a straight-line basis over the estimated useful life of the asset. The weighted-average period of amortization is 13 years for patents, and 40 years for trademarks.
Estimated future amortization of these intangible assets by fiscal year is as follows:
(7) Government Grant
We have a grant (the “Grant”) with the DOE under the American Recovery and Reinvestment Act for reimbursements up to a maximum of $32.4 million. The Grant provides funds to facilitate the manufacture and deployment of electric drive vehicles, batteries and electric drive vehicle components in the United States. Pursuant to the terms of the Agreement, the DOE will reimburse us for 50 percent of qualifying costs for the purchase of facilities, tooling and manufacturing equipment, and for engineering related to product qualification and testing of our electric propulsion systems. The period of the Grant is through January 12, 2015. We recognize government grant reimbursements when it is probable that the Company will comply with the conditions attached to the grant arrangement and the grant proceeds will be received.
The Grant is also subject to our compliance with certain reporting requirements. The American Recovery and Reinvestment Act imposes minimum construction wages and labor standards for projects funded by the Grant. If we
			
		
			
		
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
			
		
dispose of assets acquired using Grant funding, we may be required to reimburse the DOE upon such sale date if the fair value of the asset on the date of disposition exceeds $5,000. The amount of any such reimbursement shall be equal to 50 percent of the fair value of the asset on the date of disposition.
While UQM has exclusive patent ownership rights for any technology developed with Grant funds, we are required to grant the DOE a non-exclusive, non-transferable, paid-up license to use such technology.
During the second quarter of the current fiscal year, we changed our cumulative estimate of reimbursable rates under the Grant which resulted in an increase in our reimbursement of costs recorded for the fiscal year ended March 31, 2014 of $958,000.
At March 31, 2014, we had received reimbursements from the DOE under the Grant totaling approximately $24.4 million and had grant funds receivable of approximately $0.6 million.
The application of grant funds to the recorded value of eligible capital asset purchases under the Grant as of March 31, 2014 and March 31, 2013 are as follows:
(8) Other Current Liabilities
Other current liabilities consist of:
(9) Commitments and Contingencies
Employment Agreements
			
		
			
		
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
			
		
The Company has entered into employment agreements with all of its officers. Messrs. Ridenour, Rosenthal, Lutz, Schaffer and Mitchell have agreed to serve in their present capacity for a term expiring on August 31, 2015. The aggregate future base salary payable to the executive officers over their remaining terms is $1,608,250. In addition, we have recorded a liability of $182,100 and $627,412 at March 31, 2014 and March 31, 2013, respectively, representing the potential future compensation payable under the retirement and voluntary termination provisions of the employment agreements of the Company’s current officers.
The employment agreements provide for severance payments under the conditions and for the amounts specified in the agreements.
Lease Commitments
At March 31, 2014, there were no operating leases and there was no rental expense during the years ended March 31, 2014, 2013 and 2012.
Litigation
We are involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, and based on current available information, the ultimate disposition of these matters is not expected to have a material adverse effect on our financial position, results of operations or cash flow.
(10) Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the short maturity of these instruments. The carrying value of investments is the amortized cost of the investments which approximates fair value. See Note 1(d).
(11) Fair Value Measurements
Liabilities measured at fair value on a recurring basis as of March 31, 2014 are summarized below:
Liabilities measured at fair value on a recurring basis as of March 31, 2013 are summarized below:
			
		
			
		
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
			
		
Deferred compensation under executive employment agreements represents the future compensation potentially payable under the retirement and voluntary termination provisions of executive employment agreements. The value of the Level 3 liability in the foregoing table was determined using a discounted cash flow model. The significant unobservable input used in the calculation is a discount rate of 14 percent, which is based on the expected cost of capital for the Company. A 1 percent change in this discount rate would result in approximately a $2,500 change in the recorded value of the liability as of March 31, 2014.
A summary of the liability measured at fair value on a recurring basis using significant unobservable inputs (Level 3) follows:
(12) Stockholders’ Equity
In February, 2014, we completed a follow-on offering consisting of 2,864,872 shares of our common stock, and common stock purchase warrants to purchase 1,432,436 shares of our common stock. The warrants have an exercise price of $2.1275 per whole share of common stock and are exercisable on or after August 6, 2014 and on or before August 5, 2018. In addition, the placement agent was issued warrants to purchase 57,297 shares of common stock, on substantially the same terms as the warrants issued to the purchasers. Cash proceeds, net of offering costs, were $4,911,933. The fair value of the warrants at the time of issuance was $1,832,943, and was recorded as additional paid-in capital. This fair value was determined using the Black-Scholes option pricing model with the following assumptions: a term of four and a half years, risk-free interest rate of 1.5%, volatility of 78.3%, and dividend yield of zero. Warrants to acquire 1,489,733 and zero shares of our common stock were outstanding at March 31, 2014 and 2013, respectively.
(13) Stock-Based Compensation
Stock Option Plans
As of March 31, 2014, we had 1,100,000 shares of common stock authorized and 14,870 shares of common stock available for future grant to employees and consultants under our 2012 Equity Incentive Plan (“Plan”). The term of the 2012 Plan is ten years. Under the 2012 Plan, the exercise price of each option is set at the fair value of the common stock on the date of grant and the maximum term of the option is ten years from the date of grant. Options granted to employees generally have a ten year term and vest ratably over a three-year period. The maximum number of options that may be granted to an employee under the Plan in any calendar year is 500,000 options. Forfeitures under the Plan are available for re-issuance at any time prior to expiration of the Plan in 2022. Options
			
		
			
		
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
			
		
granted under the Plan to employees require the option holder to abide by certain Company policies, which restrict their ability to sell the underlying common stock. Prior to the adoption of the 2012 Plan, we issued stock options under our 2002 Equity Incentive Plan. Forfeitures under the 2002 Equity Incentive Plan may not be re-issued.
We also have a Stock Option Plan for Non-Employee Directors (“Directors Plan”) pursuant to which Directors may elect to receive stock options in lieu of cash compensation for their services as directors. As of March 31, 2014, we had 1,000,000 shares of common stock authorized and 224,173 shares of common stock available for future grant under the Directors Plan. Option terms range from three to ten years from the date of grant. Option exercise prices are equal to the fair value of the common shares on the date of grant. Options granted under the plan vest immediately. Forfeitures under the Directors Plan are available for re-issuance at a future date.
Stock Bonus Plan
We have a Stock Bonus Plan (“Stock Plan”) administered by the Board of Directors. As of March 31, 2014, we had 1,954,994 shares of common stock authorized and there were 47,149 shares of common stock available for future grant under the Stock Plan. Under the Stock Plan, shares of common stock may be granted to employees, key consultants, and directors who are not employees as additional compensation for services rendered. Vesting requirements for grants under the Stock Plan, if any, are determined by the Board of Directors at the time of grant.
Stock Purchase Plan
We have established a Stock Purchase Plan under which eligible employees may contribute up to 10 percent of their compensation to purchase shares of our common stock at 85 percent of the fair market value at specified dates. At March 31, 2014, we had 700,000 shares of common stock authorized and 307,650 shares of common stock available for issuance under the Stock Purchase Plan.
Share-Based Compensation Expense
We use the straight-line attribution method to recognize share-based compensation costs over the requisite service period of the award. The exercise price of options is equal to the market price of our common stock (defined as the closing price reported by the NYSE MKT) on the date of grant. We adjust share-based compensation on a quarterly basis for changes to the estimate of expected equity award forfeitures based on actual forfeiture experience. The effect of adjusting the forfeiture rate for all expense amortization is recognized in the period the forfeiture estimate is changed. The effect of forfeiture adjustments during the years ended March 31, 2014, 2013 and 2012 was insignificant.
We use the Black-Scholes-Merton option pricing model for estimating the fair value of stock option awards. The expected volatility and the expected life of options granted are based on historical experience, and the risk free interest rate is obtained from the U.S. Department of the Treasury daily yield curve rates. The weighted average estimated values of employee and director stock option grants, as well as the weighted average assumptions that were used in calculating such values during the years ended March 31, 2014, 2013 and 2012, were based on estimates at the date of grant as follows:
			
		
			
		
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
			
		
Total share-based compensation expense and the classification of these expenses for the last three fiscal years were as follows:
Stock Option Plans Activity
Additional information with respect to stock option activity during the year ended March 31, 2014 under our Stock Option Plans is as follows:
Additional information with respect to stock option activity during the year ended March 31, 2013 under our Stock Option Plans is as follows:
			
		
			
		
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
			
		
Additional information with respect to stock option activity during the year ended March 31, 2012 under our Stock Option Plans is as follows:
The weighted-average grant date fair value of options granted during the years ended March 31, 2014, 2013 and 2012 was $0.68, $0.56 and $1.46, respectively.
As of March 31, 2014, there was $271,804 of total unrecognized compensation costs related to stock options granted under our Stock Option Plans. The unrecognized compensation cost is expected to be recognized over a weighted-average period of fourteen months. The total fair value of stock options that vested during the years ended March 31, 2014, 2013 and 2012 was $493,271, $885,916 and $513,236, respectively.
Cash received by us upon the exercise of stock options for the years ended March 31, 2014, 2013 and 2012 was $21,075, zero and zero, respectively. The source of shares of common stock issuable upon the exercise of stock options is from authorized and previously unissued common shares.
			
		
			
		
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
			
		
Stock Bonus Plan Activity
Activity with respect to non-vested shares under the Stock Bonus Plan as of March 31, 2014, 2013 and 2012 and changes during the years ended March 31, 2014, 2013 and 2012 are presented below:
As of March 31, 2014, there was $490,759 of total unrecognized compensation costs related to common stock granted under our Stock Bonus Plan. The unrecognized compensation cost at March 31, 2014 is expected to be recognized over a weighted-average period of twenty-two months.
Stock Purchase Plan Activity
During the years ended March 31, 2014, 2013 and 2012, we issued 62,421, 85,550 and 41,158 shares of common stock, respectively, under the Stock Purchase Plan. Cash received by us upon the purchase of shares under the Stock Purchase Plan for the years ended March 31, 2014, 2013 and 2012 was $60,689, $75,385 and $60,960, respectively.
(14) Significant Customers
We have historically derived significant revenue from a few key customers. The following table summarizes revenue and percent of total revenue from significant customers for the fiscal years ended March 31, 2014, 2013 and 2012:
The following table summarizes accounts receivable from significant customers as of March 31, 2014 and 2013:
			
		
			
		
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
			
		
(15) Income Taxes
Income tax benefit attributable to loss from operations differed from the amounts computed by applying the U.S. federal income tax rate of 34 percent as a result of the following:
The tax effects of temporary difference that give rise to significant portions of the net deferred tax asset are presented below:
As of March 31, 2014 and March 31, 2013, respectively, we had net operating loss (“NOL”) carry-forwards of approximately $70.9 million and $67.3 million for U.S. income tax purposes that expire in varying amounts through 2034. Approximately $5.3 million of the net operating loss carry-forwards are attributable to stock options, the benefit of which will be credited to additional paid-in capital if realized. However, due to the provisions of Section 382 of the Internal Revenue Code, the utilization of a portion of these NOLs may be limited. Future ownership changes under Section 382 could occur that would result in additional Section 382 limitations, which could further restrict the use of NOLs. In addition, any Section 382 limitation could reduce our ability for utilization to zero if we fail to satisfy the continuity of business enterprise requirement for the two-year period following an ownership change.
The valuation allowance for deferred tax assets of $26.1 million and $25.2 million at March 31, 2014 and 2013, respectively, relates principally to the uncertainty of the utilization of deferred tax assets in various tax jurisdictions. The Company continually assesses both positive and negative evidence to determine whether it is more-likely-than-
			
		
			
		
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
			
		
not that the deferred tax assets can be realized prior to their expiration. Based on the Company’s assessment it has determined the deferred tax assets are not currently realizable.
We have not recorded any potential liability for uncertain tax positions taken on our tax returns.
We may, from time to time, be assessed interest or penalties by major tax jurisdictions, although any such assessments historically have been minimal and immaterial to our financial results. Penalties are recorded in selling, general and administrative expenses and interest paid or received is recorded in interest expense or interest income, respectively, in the consolidated statements of operations.
(16) 401(k) Employee Benefit Plan
We have established a 401(k) Savings Plan (“401K Plan”) under which eligible employees may contribute up to 15 percent of their compensation. Employees over the age of 18 are eligible immediately upon hire to participate in the 401K Plan. At the direction of the participants, contributions are invested in several investment options offered by the 401K Plan. We currently match 33 percent of participants’ contributions, subject to certain limitations. These matching contributions vest ratably over a three-year period. Matching contributions to the 401K Plan were $132,471, $149,311, and $135,825, for the years ended March 31, 2014, 2013, and 2012, respectively.
(17) Interim Financial Data (Unaudited)
			 		
			
		
			
		
			
		
			
		
ITEM 9.
ITEM 9.CHANGE IN AND DISAGREEMENTS WITH INDEPENDENT ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A.
ITEM 9A.CONTROLS AND PROCEDURES
Controls Evaluation
We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2014 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, 2014, 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, 2014. 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, 2014, our internal control over financial reporting is effective. Management reviewed the results of its assessment with the Audit Committee of our Board of Directors who oversees the financial reporting process.
Changes in Internal Control Over Financial Reporting
There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal year ended March 31, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
May 29, 2014
						
						
						
						
Eric R. Ridenour
						
David I. Rosenthal
President and Chief Executive Officer
						
Treasurer, Secretary and
						
Chief Financial Officer
			
		
			
		
			
		
			
		
ITEM 9B.
ITEM 9B.OTHER INFORMATION
None.
			
		
			
		
			
		
			
		
PART III
ITEM 10.
ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Additional information required by Item 10 is incorporated by reference from and contained under the headings “Election of Directors”, “Management” “Section 16(a) Beneficial Ownership Reporting Compliance” and “Code of Ethics” in our Definitive Proxy Statement for the Annual Meeting of Shareholders’ to be held August 13, 2014.
						
ITEM 11.
ITEM 11.EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference from and contained under the headings “Executive Compensation”, “Option Grants during Fiscal Year 2014,” “Aggregate Option Exercises During Fiscal Year 2014,” “Option Values at the End of Fiscal Year 2014,” “Director Compensation,” “Compensation discussion and Analysis,” “Compensation and Benefits Committee Report,” and “Compensation Committee Interlocks” in our definitive Proxy Statement for the Annual Meeting of Shareholders’ to be held August 13, 2014.
						
ITEM 12.
ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by Item 12 is incorporated by reference from and contained under the heading “Security Ownership of Certain Owners and Management” and “Equity Compensation Plan Information” in our definitive Proxy Statement for the Annual Meeting of Shareholders’ to be held August 13, 2014.
						
ITEM 13.
ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required by Item 13 is incorporated by reference from and contained under the headings “Certain Relationships and Related Transactions” in our definitive Proxy Statement for the Annual Meeting of Shareholders’ to be held August 13, 2014.
ITEM 14.
ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The information required by Item 14 is incorporated by reference from and contained under the heading “Ratification of Selection of Independent Auditors” in our definitive Proxy Statement for the annual meeting of shareholders to be held August 13, 2014.
			
		
			
		
			
		
			
		
PART IV
ITEM 15.
ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
			
		
			
		
			
		
			
		
			
		
			
		
			
		
			
		
			
		
			
		
			
		
			
		
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, UQM Technologies, Inc. has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in Longmont, Colorado on the 29th day of May, 2014.
UQM TECHNOLOGIES, INC.,
a Colorado Corporation
						
By:
/s/ ERIC R. RIDENOUR
						
						
Eric R. Ridenour
						
						
President and
						
						
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of UQM Technologies, Inc., in the capacities indicated and on the date indicated.
						
						
						
						
Signature
Title
Date
/s/ DONALD W. VANLANDINGHAM
Donald W. Vanlandingham
Chairman of the Board of Directors
May 28, 2014
/s/ERIC R. RIDENOUR
Eric R. Ridenour
President and Chief Executive Officer
May 29, 2014
/s/DAVID I. ROSENTHAL
David I. Rosenthal
Treasurer and Secretary (Principal Financial and Accounting Officer)
May 29, 2014
/s/STEPHEN J. ROY
Stephen J. Roy
Director
May 28, 2014
s/JOSEPH P. SELLINGER
Joseph P. Sellinger
						
Director
May 28, 2014
/s/JOHN E. SZTYKIEL
John E. Sztykiel
Director
May 28, 2014