UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K10-K/A
(Amendment No. 1)
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[X] x ] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the fiscal year ended MarchDecember 31, 20162018 |
OR
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OR |
[ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from to _________________ |
Commission file number 1-10869
UQM TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
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Colorado | | 84-0579156 |
(State or other jurisdiction | | (I.R.S. Employer |
of incorporation or organization) | Identification No.) |
| Identification No.)
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4120 Specialty Place, Longmont, Colorado | | 80504 |
(Address of principal executive offices) | | (Zip Code) |
Registrant’s telephone number, including area code: (303) 682-4900
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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| Title of each class | Name of each exchange on which registered |
Title of each class
| | NYSE MKT
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Common Stock | | NYSE American |
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes [ ] No [X]
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every interactive data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):None.
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. | Yes [ ] No [X] |
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Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. | Yes [ ] No [X] |
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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), |
and (2) has been subject to such filing requirements for the past 90 days. | Yes [X] No [ ] |
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Indicate by check mark whether the registrant has submitted electronically every interactive data file required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such |
shorter period that the registrant was required to submit such files). | Yes [X] No [ ] |
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] |
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act: |
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Large accelerated filer | [ ] | Accelerated filer | [] |
Non-accelerated filer | [X ] X] | Smaller reporting company | [X] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). (Do not check if a smaller reporting company) Yes [ ] No [X]
The aggregate market value of the registrant’s common stock (“Common Stock”) held by non-affiliates as of September 30, 2015, based on the closing price of the Common Stock as reported by the NYSE MKT on such date was approximately $25,838,504. As of June 5, 2016, there were 48,436,196 shares of the registrant’s Common Stock outstanding.
| | Emerging growth company | [ ] |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ] |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). | Yes [ ] No [X] |
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DOCUMENTS INCORPORATED BY REFERENCE
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Document
| Parts Into Which Incorporated
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PortionsThe aggregate market value of the Proxy Statement forregistrant’s common stock (“Common Stock”) held by non-affiliates as of December 31, 2018, based on the 2016 Annual
| Part III
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Meetingclosing price of Shareholders.
| the Common Stock as reported by the NYSE American Stock Exchange on such date was approximately $46,127,324. As of April 24, 2019, there were 56,566,585 shares of the registrant’s Common Stock outstanding. |
Explanatory Statement:
UQM Technologies, Inc. (“UQM” or the “Company”) is filing this Amendment No. 1 on Form 10-K/A this “Amendment No. 1” to amend our Annual Report on Form 10-K for the year ended December 31, 2018, initially filed with the U.S. Securities and Exchange Commission on March 27, 2019 (the “Original Form 10-K”). This Amendment No. 1 includes information required by Part III of Form 10-K (Items 10, 11, 12, 13, and 14). Our Original Form 10-K stated that information required by these Items would be incorporated by reference to the Company’s definitive proxy statement for the 2019 Annual Meeting of Shareholders, which was to be filed with the Securities and Exchange Commission on or before April 30, 2019. We are filing this Amendment No. 1 to include this information because we will not be able to file the definitive proxy statement by such date.
This Amendment No. 1 amends and restates Items 10, 11, 12, 13, and 14 of Part III of the Original Form 10-K. No other items in the Original Form 10-K are amended hereby. This amendment does not change any previously reported financial results, modify or update disclosures in the Original Form 10-K, or reflect events occurring after the date of the Original Form 10-K other than compensation decisions and award grants made following the end of the reported period. Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), new certifications of our principal executive officer and principal financial officer are being filed as exhibits (Item 15) to this Amendment No. 1.
PART III
Item 10.Directors, Executive Officers and Corporate Governance
DIRECTORS
Pursuant to the bylaws of the Company, the Board of Directors (the “Board”) or shareholders set the number of directors. The Board currently consists of five members. The Board is not classified, and each director serves for a term of one year and thereafter until his successor is duly elected and qualified. Below is a list of our directors, their ages, committee assignments and business experience.
Name | | Age | | Position with the Company | | Officer or
Director
Since | | Business Experience | |
| | | | | | | | | |
Donald W. Vanlandingham | | 79 | | Chairman of the Board, Member of the Compensation Committee and Member of the Governance and Nominating Committee | | 2003 | | Retired since 2003. Chairman of the board of directors of Ball Aerospace and Technologies Corporation, a wholly-owned subsidiary of Ball Corporation from 2002 to 2003; President and Chief Executive Officer of Ball Aerospace and Technologies Corporation from 1996 to 2002. | |
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Joseph R. Mitchell | | 58 | | President and Chief Executive Officer | | 2012 | | President and CEO of UQM since January 2016. Interim President, CEO, and Chief Operating Officer (COO) of UQM from July 2015 to January 2016. Senior VP of Operations of UQM from June 2012 to July 2015. Director of Quality, North America for A123 Systems, Inc. from March to May 2012. Director of Operations and Quality – North American Hybrid Electric Drives for Continental Automotive from 2008 to February 2012. | |
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Stephen J. Roy | | 69 | | Director, Chairman of the Audit Committee and Member of the Compensation Committee | | 2000 | | Principal, STL Capital Partners, LLC since 2002. Managing Director - Investment Banking for A. G. Edwards & Sons, Inc. from 1989 through 2002. | |
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Joseph P. Sellinger | | 73 | | Director, Chairman of the Compensation Committee, and Member of the Audit Committee and Member of the Governance and Nominating Committee | | 2008 | | Retired since 2006. Vice President, Anheuser Busch Companies and Chairman, President and Chief Executive Officer of the Anheuser Busch Packaging Group from 2000 to 2006. | |
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John E. Sztykiel | | 62 | | Director, Chairman of the Governance and Nominating Committee and Member of the Audit Committee | | 2012 | | President, Chief Executive Officer and Director, Spartan Motors, Inc. from 2002 to February 2015. | |
We have provided below information about each director’s specific experience, qualifications, attributes or skills that led our Board to conclude, in light of our business and corporate strategy, that such individual should serve as a director of the Company at the time of their election in October 2019.
Mr. Vanlandingham, our Chairman, has been an independent director of the Company for 16 years. He brings many years of leadership and management experience as Chairman and Chief Executive Officer of a major technology and manufacturing company to his role on the Board. With experience in overseeing development of technology and complex equipment with attention to development schedules, production, quality, business development and budgets, he brings valuable insight to the Board as it oversees the Company’s operations and strategy.
Mr. Mitchell is our President and Chief Executive Officer. Mr. Mitchell has over 28 years of experience in the automotive sector with particular focus in operations and quality, and over 18 years of experience in hybrid electric automotive applications. Mr. Mitchell brings operational and management experience specific to UQM’s business and is a recognized leader in the electric propulsion industry.
Mr. Roy has been an independent director of the Company for over 17 years. With over 30 years of investment banking experience and over ten years’ experience as a principal and co-founder of a private equity business, Mr. Roy brings valuable insight to the Company in finance and accounting, capital markets, business analysis and strategy. Mr. Roy has the financial background and skills to serve as our “audit committee financial expert.”
Mr. Sellinger has been an independent director of the Company since 2008. He brings extensive senior management experience with a major manufacturing company to his role on the Board. From his experience running a high volume manufacturing business with annual sales in excess of $1 billion, he provides valuable insight to the Board on operations, planning and implementation of strategy, risk management and other issues as the Company launches volume production of its products.
Mr. Sztykiel has been an independent director of the Company since 2012. Mr. Sztykiel was the Chief Executive Officer of a manufacturer of trucks and truck components for 12 years. In this capacity, Mr. Sztykiel has extensive senior management and marketing experience in the North American truck market. Mr. Sztykiel’s extensive management experience in a manufacturing company servicing the truck market provides valuable insight to the Board on strategy, marketing and manufacturing of the Company’s products.
No family relationship exists between any director, executive officer, significant employee or person nominated or chosen by the Company to become a director or executive officer. There are no arrangements or understandings between any director and any other person pursuant to which any director was nominated or serves as a director.
During the year ended December 31, 2018, the Board held nine meetings. Each incumbent director attended or participated in more than 80 percent of the meetings of the Board and Board committees on which he served during the period he was a director. Participation at meetings was sometimes by telephone, as authorized under Colorado law. The Company encourages directors to attend the Annual Meeting of Shareholders each year. The independent directors serving on the Board periodically meet as a group without management present. At the 2018 Annual Meeting of Shareholders held October 17, 2018, all members of the Board attended. None of the directors listed above have been involved during the last ten years in any legal proceedings required to be disclosed under Item 401(f) of Regulation S-K and that are material to an evaluation of the ability or integrity of that person to serve as a director of the Company.
Code of Ethics
The Company has adopted a Code of Business Conduct Ethics that applies to all directors, officers, employees, consultants, representatives and agents. The Code of Business Conduct Ethics is available on our website at www.uqm.com “Investors – Corporate Governance.” If the Company makes any substantive amendments to the Code of Business Conduct Ethics or grants any waiver from a provision of the code to any executive officer or director, the Company will promptly disclose the nature of the amendment or waiver on its website.
Committees of the Board
Our Board has three standing committees – the Audit Committee, the Compensation Committee, and the Governance and Nominating Committee. Each of the Audit, Compensation and Governance and Nominating committees is comprised entirely of independent directors and is led by a committee chair. All of our independent directors are encouraged to, and do, actively participate in the development of the Company’s business strategy in collaboration with the Chief Executive Officer and in the general oversight of the Company’s operations and financial affairs.
Mr. Roy serves as the committee chair of the Audit Committee. The Audit Committee has a written charter adopted by the Board that specifies its duties including assisting the Board in its general oversight of the Company’s financial
reporting, internal controls and audit functions, and its direct responsibility for the appointment, retention, compensation and oversight of the independent auditors. A copy of the Company’s Audit Committee charter is available on our website at www.uqm.com “Investors – Corporate Governance”. The Audit Committee consists of three directors, Messrs. Roy, Sellinger and Sztykiel, and met four times during the year ending December 31, 2018. All members of the Audit Committee are independent directors as defined in applicable rules of the NYSE American Stock Exchange and the Securities and Exchange Commission (“SEC”). The Board has determined that Mr. Roy meets the qualifications of an “audit committee financial expert” in accordance with SEC rules.
Mr. Sztykiel serves as the committee chair of the Governance and Nominating Committee. The Governance and Nominating Committee considers such matters as whether the size and composition of the Board is appropriate in the context of the Company’s business operations, monitors and addresses issues related to corporate governance and suggests changes when it deems appropriate and oversees the annual assessment of Board performance. The Governance and Nominating Committee has a written charter specifying its responsibilities. The Governance and Nominating Committee consists of three directors, Messrs. Sellinger, Sztykiel and Vanlandingham and met five times during the year ending December 31, 2018. All members of the Governance and Nominating Committee are independent directors as defined in applicable rules of the NYSE American Stock Exchange.
Mr. Sellinger serves as the committee chair of the Compensation Committee. The Compensation Committee reviews the performance and compensation of the Company’s Chief Executive Officer and administers the 2012 Equity Incentive Plan, Employee Stock Purchase Plan, Non-Employee Director Stock Option Plan and Stock Bonus Plan. The Compensation Committee consists of three directors, Messrs. Roy, Sellinger and Vanlandingham, and met four times during the year ending December 31, 2018. All members of the Compensation Committee are independent directors as defined in applicable rules of the NYSE American and the SEC. The Compensation Committee has a written charter specifying its responsibilities which is available on our website at www.uqm.com “Investors – Corporate Governance.”
Compensation Committee Interlocks and Insider Participation
Messrs. Roy, Sellinger and Vanlandingham were members of the Compensation Committee during the year ending December 31, 2018. All members of the Compensation Committee were independent directors, and no member was an employee or former employee of the Company. During the year ending December 31, 2018, none of the Company’s executive officers served on the compensation committee (or its equivalent) or board of directors of another entity whose executive officer served on the Board or the Compensation Committee.
The executive officers of the Company are:
On January 5, 2016, Joseph R. Mitchell was appointed as our President and Chief Executive Officer. Mr. Mitchell served as our interim President, Chief Executive Officer, and Chief Operating Officer from July 20, 2015 until January 5, 2016. Mr. Mitchell joined the Company on June 1, 2012 and served as Senior Vice President of Operations. From March 2012 until joining the Company, Mr. Mitchell was Director of Quality, North America, for A123 Systems, Inc. Mr. Mitchell served as Director, Operations and Quality - North American Hybrid Electric Drives for Continental Automotive from January 2008 through March 2012. From January 2007 through January 2008, Mr. Mitchell served as
Director of Operations and Hybrid Drive Segment Manager for Siemens VDO. Prior to that, Mr. Mitchell held a series of manufacturing and quality positions at Ballard Power Systems and Ford Motor Company.
David I. Rosenthal joined the Company as Treasurer, Secretary and Chief Financial Officer on May 1, 2013. From March 2011 until joining the Company, Mr. Rosenthal was a financial consultant for start-up and turnaround companies. From February 2010 until February 2011, Mr. Rosenthal was Interim President and Chief Executive Officer of Cyanotech Corporation, a publicly-traded manufacturer of nutritional supplement products. Mr. Rosenthal served as a director of Cyanotech from August 2000 until September 2011. From May 2008 until March 2009, Mr. Rosenthal served as Chief Financial Officer for Hickory Farms and from June 2007 until November 2007 served as Chief Financial Officer of Sanz, Inc., both portfolio companies of the private equity firm Sun Capital Partners.
Adrian P. Schaffer joined the Company on December 1, 2011 as Vice President of Sales and Business Development. From February 2006 until joining the Company, Mr. Schaffer served as Vice President of Sales for the Industrial, Commercial and Energy Group of Linamar Corporation, a leading supplier to the global vehicle and mobile industrial markets. Mr. Schaffer also spent thirteen years with Motorola Corporation where he held positions in sales, business development and account management in Motorola’s Telematics, Powertrain, Autobody and Heavy Vehicle Electronics Groups, including most recently as Director of Global Marketing for the global automotive group.
Josh M. Ley joined the Company in January 1994 and was appointed Vice President of Engineering on March 4, 2015. Mr. Ley previously served as Motor Design Engineer and Manager of Motor Design Engineering for the Company.
There are no arrangements or understandings between any executive officer and any other person pursuant to which any executive officer was selected as an executive officer. None of the executive officers listed above have been involved during the last ten years in any legal proceedings required to be disclosed under Item 401(f) of Regulation S-K and that are material to an evaluation of the ability of that person to serve as an executive officer of the Company.
Section 16(a) Beneficial Ownership Reporting Compliance
Under Section 16(a) of the Exchange Act, the Company’s directors, its executive (and certain other) officers, and any persons holding more than ten percent of the Company’s common stock are required to report their ownership of the Company’s common stock and any changes in that ownership to the SEC. The Company is required to report in this Annual Report any failure to file timely reports with the SEC during the year ending December 31, 2018. Based solely on its review of Form 3, Form 4 and Form 5 filings, the Company believes that all required Section 16(a) reports were filed timely during the year ending December 31, 2018.
Item 11. Executive Compensation
| COMPENSATION DISCUSSION AND ANALYSIS |
Compensation Philosophy and Objectives
Our executive compensation program is designed to attract, motivate and retain highly qualified executives, while providing performance-based incentives for the attainment of strategic business objectives, rewarding superior performance and aligning the interests of our executives with those of our shareholders.
Our management compensation program has three primary components:
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Base pay | Provides an annual salary level consistent with market conditions, the individual’s position, responsibility and contributions. |
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Bonus | Provides variable cash compensation based on the achievement of Company, organizational and individual performance objectives. |
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Long-term equity-based Incentive pay | Aligns a portion of each executive’s annual compensation to the long-term success of the Company and encourages an ownership mindset that aligns the interests of management with those of the Company’s other shareholders. |
The minimum base pay component of executive compensation is specified in an employment agreement with each of our executive officers. Bonus payments are performance-based payments that are payable annually in cash. Long-term equity-based incentive awards consist of shares of the Company’s common stock, stock options to acquire shares of the Company’s common stock or a combination of both.
Bonus payments and long-term incentive grants are determined by the Compensation Committee based principally on objective criteria consisting of each executive officer’s achievement of personal and Company-wide goals. Payments of bonus awards each year are based on a retrospective review of the prior year’s performance. The amount of the cash bonus payment and long-term incentive grant for each executive is determined based on the Compensation Committee’s deliberations regarding attainment of Company-wide goals by Company executives. The Compensation Committee’s determination of the degree of attainment of these goals by each executive was subjective and based on its deliberations. The Compensation Committee also annually reviews the base pay of our executive offices and may increase (but not decrease) the amount of base pay as specified in the respective employment agreement with each executive officer.
The Compensation Committee is composed of three members of our Board, each of which is independent as defined in applicable rules of the NYSE American Stock Exchange and the SEC. The Compensation Committee does not delegate its authority to establish executive compensation to any other persons. The Compensation Committee approved the total compensation (and each of the individual elements of compensation) for Joseph R. Mitchell, President and Chief Executive Officer. The Committee also approved the compensation of the other named executive officers with input from the Chief Executive Officer.
In 2017, the Compensation Committee retained the consulting firm Frederic W. Cook & Co., Inc. to review and assist in establishing appropriate compensation for the Company’s executive officers. Frederic W. Cook & Co. evaluated the compensation practices of a peer group of 18 publicly-traded companies with broadly similar operations as UQM. The consulting firm affirmed that the compensation packages of the Company’s executive officers are in-line with market comparisons. The Compensation Committee anticipates that it may engage a compensation consultant at an interval of every three to five years to assist it in evaluating the competitiveness of its executive compensation program.
The Compensation Committee has also reviewed compensation data from a peer group of alternative energy companies that it believed to be in competition with the Company in the marketplace for executive talent. While the Compensation Committee does not set benchmark percentile targets for executive compensation, the compensation levels for the three
primary elements of executive compensation are generally set to establish pay levels that are competitive with those of the identified peer group of companies.
The Compensation Committee has reviewed all compensation policies and practices for the Company’s executive officers and employees to determine if there is risk arising from such policies and practices that could reasonably have a material adverse effect on the Company. The Compensation Committee reviews all aspects of performance in determining bonus awards and there are no specific threshold targets that increase bonuses. In addition, the Company’s maximum bonus award in any year is limited to two times the target bonus, and the Company has to date never exceeded a bonus payout of more than 100% of the target. Further, bonuses awarded may be recouped pursuant to our clawback policy. Therefore, the Committee believes there is a low risk for any material adverse effect on the Company arising from the Company’s compensation policies and practices.
We have entered into employment agreements with our executive officers that contain severance payment provisions, including change in control severance payments, and provide a modest program of executive perquisites and personal benefits as are further described in the section “Employment Agreements” below. The purpose of the employment agreements is to provide financial security for the applicable executive officer, to aid in retention and to encourage loyalty to and long-term employment with the Company.
2018 Say-on-Pay Advisory Vote
At our 2018 Annual Meeting of the Company’s shareholders, 93% of the votes cast by our shareholders approved, on an advisory basis, the compensation of our named executive officers. Our Compensation Committee considered the results of the advisory vote on executive compensation.
Adoption of Compensation Clawback Policy
In July 2015, our Board adopted the UQM Technologies, Inc. Clawback Policy. This clawback policy allows us to recoup executive incentive compensation in the event of an accounting restatement resulting from material noncompliance with financial reporting requirements under the federal securities laws. The clawback policy applies to all forms of incentive compensation previously granted to executive officers, including stock options, cash bonuses, and restricted stock, that were granted during the three years prior to any accounting restatement. The amount to be recovered will be the excess of the executive compensation paid to the named executive officer based on the erroneous data over the executive compensation that would have been paid to the named executive officer had it been based on the restated results, as determined by the Compensation Committee.
Elements of Compensation
Base Salary. Base salaries for our executive officers are established based on the scope of their responsibilities, taking into account competitive market compensation for similar positions in the peer group of companies, as well as the experience and performance of the individual, our ability to replace the individual and other primarily judgmental factors deemed relevant by the Compensation Committee. Base salaries are reviewed annually by the Compensation Committee and the Board and may be increased, but not decreased without the consent of the executive, by the Board from time to time coincident with our annual review.
During the year ending December 31, 2018, the Compensation Committee increased annual base salary for each executive officer by approximately 3.0%. These increases consisted of cost of living and merit based adjustments.
Cash Bonus Compensation. The Compensation Committee annually considers the award of performance-based cash bonuses to compensate executives for achieving financial, operational and strategic goals and for individual performance. The amount of cash bonuses, if any, is established during deliberations by the Compensation Committee using its judgment after considering the objective and subjective factors discussed above and the individual’s performance. As a result, bonuses may vary greatly from one year to the next.
The Compensation Committee has established target cash bonus levels as a percentage of base salary for each named executive officer based on the level of responsibility for each executive position and by reference to the level of target cash bonus payments by the peer group of companies. The target cash bonus levels for each of the Company’s named executive officers as a percentage of each officer’s base salary is as follows:
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Item 3.
| Legal ProceedingsNamed Executive Officer
| | 14 | Target Cash Bonus Percentage |
Joseph R. Mitchell | | 75% |
David I. Rosenthal | | 40% |
Adrian P. Schaffer | | 35% |
Actual cash bonus payments may either exceed or be less than the target level based on the Compensation Committee’s judgment as to whether Company-wide goals were met, exceeded or partially-met, subject to a maximum bonus award in any year of two times the target bonus.
For the year ending December 31, 2018, cash bonuses paid to the named executive officers as a percentage of their base salary, were as follows for performance in the year ended December 31, 2017:
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Item 4.
| Mine Safety DisclosureNamed Executive Officer
| | 14 | Cash Bonus Percentage Paid |
Joseph R. Mitchell | | 75% |
David I. Rosenthal | | 40% |
Adrian P. Schaffer | | 35% |
In addition, for the year ending December 31, 2018, the Company-wide goals for the year ending December 31, 2018
used by the Compensation Committee for purposes of determining bonus payments included growing the Company’s revenue, executing on international strategies, controlling the rate of cash outflows with cost management and efficiencies, and executing on product innovation and product quality.
As of the date of this filing, the Compensation Committee is evaluating management’s performance for the year ended December 31, 2018 against the Company’s goals, and has not approved or authorized payment of any cash bonus awards.
When the Company entered into new employment agreements with its named executive officers in July 2015, it agreed to provide retention bonuses to its named executive officers to incent them to remain employees of the Company while it explored strategic alternatives. If the executive remained an employee of the Company continuously through June 30, 2017, he would be paid a cash bonus after that date in the amount specified in his respective employment agreement. The retention bonuses were paid to its named executive officers, Mr. Mitchell, Mr. Rosenthal, and Mr. Schaffer, in July 2017 in the amounts of $100,000, $100,000, and $75,000, respectively.
Long-Term Incentive Compensation. The Compensation Committee annually considers the award of long-term incentive compensation to compensate executive officers for their efforts in positioning the Company for long-term growth. The Compensation Committee considers a number of qualitative factors in setting the long-term incentive compensation for each executive officer, including the specific goals listed above as well as each executive officer’s contribution to a variety of other Company-wide goals such as new customer and market development activities, supply chain optimization and improvement, technology base enhancements, new product development and launch activities, enhanced investor relations and implementation of certain extraordinary transactions, among other things.
Long-term incentive compensation may be paid in the form of Company common stock or in the form of a grant of stock options or any combination of stock and stock options. The Compensation Committee believes that equity-based compensation awards aid in the retention of the named executive officers and serve to align the interests of the executive with those of the Company’s other shareholders. Equity-based compensation awards have a future service requirement (vesting period) of three years.
Qualitative criteria are generally used to establish goals and objectives that the Board believes add value to the Company and enhance its prospects for long-term growth and success. The Compensation Committee has established target levels for long-term incentive compensation for each executive officer based on the level of responsibility for each executive position and the peer group of companies. The target long-term incentive compensation level (as a percentage of each officer’s base salary) for each of the Company’s named executive officers is as follows:
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PART IINamed Executive Officer
| | Target Long-Term Incentive Compensation |
Joseph R. Mitchell | | 100% |
David I. Rosenthal | | 65% |
Adrian P. Schaffer | | 55% |
The Compensation Committee reviewed performance for the year ended December 31, 2017 and determined to award in 2018 long-term incentive compensation to the named executive officers at 100% of the target level. The fair value of long-term incentive compensation awards granted to the named executive officers in for their performance, as a percentage of their base salary, were as follows:
| | | | | | |
Named Executive Officer | | Actual Long-Term Incentive Compensation Percentage Awarded | | Options Granted
# of Shares | | Stock Granted
# of Shares |
Joseph R. Mitchell | | 100% | | 294,737 | | 56,000 |
David I. Rosenthal | | 65% | | 142,143 | | 27,007 |
Adrian P. Schaffer | | 55% | | 115,243 | | 21,896 |
As of the date of this filing, the Compensation Committee is evaluating management’s performance for the year ended December 31, 2018 against the Company’s goals, and has not approved or authorized payment of any long term incentive compensation awards.
Employment Agreements
Each of our named executive officers has an employment agreement with the Company, as described below. The agreements provide for compensation in the form of annual base salary, which cannot be decreased during the term of the agreement without the consent of the executive, a monthly automobile allowance, the opportunity for cash bonuses, stock awards, stock options, and employee benefits available to other Company employees. The agreements also provide for potential payments upon termination without cause, termination upon a change in control, disability or death. See “Employment Agreements” below.
Tax and Accounting Considerations
All elements of our employee and executive compensation program generate charges to earnings under generally accepted accounting principles in the United States. Our allocations of the elements of total compensation are generally not influenced by the accounting treatment of each element. We do, however, consider the tax treatment of compensation elements as one factor in the allocation of each element.
Executive Compensation
The following tables and narrative discuss the compensation of our Chief Executive Officer and our next two highest compensated officers serving as of December 31, 2018 as determined under the SEC rules. These persons are referred to as our “named executive officers.”
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| Summary Compensation Table | | | | | | | | | | | | | | | | |
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| Name and Principal Position | | Period ended | | Salary | | Bonus (1) | | Stock awards (2) | | Option awards (2) | | Non-equity incentive plan compensation (3) | | All other compensation (4) | | Total |
| | | | | ($) | | ($) | | ($) | | ($) | | ($) | | ($) | | ($) |
| Joseph R. Mitchell | | Dec-18 | | 363,142 | | - | | - | | 100,980 | | - | | 19,543 | | 483,665 |
| President and Chief | | Dec-17 | | 344,975 | | 100,000 | | 28,215 | | 95,931 | | 196,875 | | 19,551 | | 785,547 |
| Executive Officer | | | | | | | | | | | | | | | | |
| David I. Rosenthal | | | | | | | | | | | | | | | | |
| Treasurer, Secretary | | Dec-18 | | 264,325 | | - | | - | | 49,368 | | - | | 23,885 | | 337,578 |
| And Chief Financial | | Dec-17 | | 257,247 | | 100,000 | | 13,795 | | 46,904 | | 77,905 | | 19,655 | | 515,506 |
| Officer | | | | | | | | | | | | | | | | |
| Adrian P. Schaffer | | Dec-18 | | 254,706 | | - | | - | | 33,726 | | - | | 17,167 | | 305,598 |
| Sr. Vice President of Sales | | Dec-17 | | 168,065 | | 75,000 | | 9,423 | | 32,038 | | 65,315 | | 31,848 | | 381,689 |
| and Business Development | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
(1) | These payments were retention bonuses that were paid in July 2017 pursuant to the named executive officer's employment agreements. |
| | | | | | | | | | | | | | | | | |
(2) | The amounts reported in the stock and option awards’ columns represent the aggregate grant date fair value in the year granted for prior year services performed computed pursuant to FASB ASC Topic 718 in the Company’s financial statements, not reduced by the estimated forfeiture rate. The assumptions used in determining the fair value are contained in footnote 12 to the Company’s consolidated financial statements contained in Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. |
| | | | | | | | | | | | | | | | | |
(3) | Non-equity incentive payments listed for the year ended December 31, 2018 have not been approved by the Company's Compensation Committee as of this filing. Non-equity incentive payments listed for the year ended December 31, 2017 represent payments to be made in May, 2018 with respect to performance in the year ended December 31, 2017. |
| | | | | | | | | | | | | | | | | |
(4) | Amounts reported in the all other compensation column above are comprised of the following items: The Company's 401-K matching contribution, automobile allowance and the employee benefit portion of life insurance premiums. |
14 | | | | | | | | | | | | | |
| All Other Compensation | | | | | | | | | | | | |
| | | | | | | | | | | Moving, | | |
| | | | | | | | | | | professional | | |
| | | | | 401(k) plan | | | | Employer | | dues, | | |
| | | | | matching | | Automobile | | paid life | | education | | |
| Name | | Period ended | | contributions | | allowance | | insurance (1) | | & other | | Total |
| | | | | ($) | | ($) | | ($) | | ($) | | ($) |
| Joseph R. Mitchell | | Dec-18 | | 7,992 | | 9,720 | | 1,831 | | - | | 19,543 |
| | | Dec-17 | | 7,999 | | 9,720 | | 1,832 | | - | | 19,551 |
| David I. Rosenthal | | Dec-18 | | 11,008 | | 9,720 | | 1,962 | | - | | 22,690 |
| | | Dec-17 | | 7,973 | | 9,720 | | 1,962 | | - | | 19,655 |
| Adrian P. Schaffer | | Dec-18 | | 5,888 | | 9,720 | | 1,559 | | - | (2) | 17,167 |
| | | Dec-17 | | 4,622 | | 9,720 | | 1,559 | | 15,947 | (2) | 31,848 |
| | | | | | | | | | | | | |
(1) | Premiums paid by the Company on Company-owned insurance policies to insure the salary continuation provisions contained in executive employment agreements which provide for the payment of three years annual base salary to the estate of the executive in the event of his death during the term of the employment agreement. |
| | | | | | | | | | | | | |
(2) | Includes apartment living expenses of $0 for the year ended December 31, 2018 and $15,947 for the year ended December 31, 2017, and income tax gross-ups on those expenses. |
| | | | | | | | | | | | | |
| |
Stock Awards
Stock awards are granted under the Company’s Stock Bonus Plan. Any shares granted vest in three equal annual installments beginning on the first anniversary of the grant date.
Option Awards
Option awards are granted under the Company’s 2012 Equity Incentive Plan. Any options granted vest in three equal annual installments beginning on the first anniversary of the grant date. Any options granted are incentive stock options and are exercisable for a term of ten years from the date of grant. The exercise price of the options is equal to the closing price of our common stock on the NYSE American Stock Exchange on the date of grant.
| | | | | | | | | | | | | |
| Outstanding Equity Awards at December 31, 2018 |
| | | Option awards | | Stock awards |
| | | Number | | Number | | | | | | | | |
| | | of securities | | of securities | | | | | | Number | | Market value |
| | | underlying | | underlying | | | | | | of shares | | of shares |
| | | unexercised | | unexercised | | Option | | Option | | of stock | | of stock |
| | | options | | options | | exercise | | expiration | | that have | | that have |
| Name | | exercisable | | unexercisable | | price | | date | | not vested | | not vested (5) |
| | | (#) | | (#) | | ($) | | | | (#) | | ($) |
| | | | | | | | | | | | | |
| Joseph R. | | - | | 294,737 | (1) | 1.25 | | 4/19/2028 | | 56,000 | (4) | 47,600 |
| Mitchell | | 51,000 | | 102,000 | (2) | 0.87 | | 7/11/2027 | | | | |
| | | 133,237 | | 66,619 | (3) | 0.68 | | 7/11/2026 | | 13,831 | (5) | 11,756 |
| | | 67,808 | | - | | 0.66 | | 9/23/2025 | | | | |
| | | 27,278 | | - | | 1.71 | | 8/18/2024 | | | | |
| | | 24,193 | | - | | 0.89 | | 7/11/2022 | | | | |
| | | | | | | | | | | | | |
| David I. | | - | | 142,143 | (1) | 1.25 | | 4/19/2028 | | 27,007 | (4) | 22,956 |
| Rosenthal | | 24,933 | | 49,867 | (2) | 0.87 | | 7/11/2027 | | | | |
| | | 65,145 | | 32,572 | (3) | 0.68 | | 7/11/2026 | | 6,762 | (5) | 5,748 |
| | | 85,836 | | - | | 0.66 | | 9/23/2025 | | | | |
| | | 40,651 | | - | | 1.71 | | 8/18/2024 | | | | |
| | | - | | - | | 0.00 | | 1/0/1900 | | | | |
| | | | | | | | | | | | | |
| Adrian P. | | - | | 115,243 | (1) | 1.25 | | 4/19/2028 | | 21,896 | (4) | 18,612 |
| Schaffer | | 17,033 | | 34,067 | (2) | 0.87 | | 7/11/2027 | | | | |
| | | 44,497 | | 22,249 | (3) | 0.68 | | 7/11/2026 | | 4,619 | (5) | 3,926 |
| | | 58,630 | | - | | 0.66 | | 9/23/2025 | | | | |
| | | 27,677 | | - | | 1.71 | | 8/18/2024 | | | | |
| | | 71,854 | | - | | 0.89 | | 7/11/2022 | | | | |
| | | | | | | | | | | | | |
(1) | These unexercisable options were granted on April 20, 2018. One-third of the options will vest over each of the next three years starting on April 20, 2019. |
| | | | | | | | | | | | | |
(2) | These unexercisable options were granted on July 12, 2017. One-third of the options have vested, and an additional one-third of the options are scheduled to vest on each of July 12, 2019 and July 12, 2020. |
| | | | | | | | | | | | | |
(3) | These unexercisable options were granted on July 12, 2016. Two-thirds of the options have vested, the remaining one-third of the options are scheduled to vest on July 12, 2019. |
We have employment agreements with each of our named executive officers as described below.
Current Named Executive Officers
On July 1, 2017, the Company entered into an employment agreement with each of Messrs. Mitchell, Rosenthal, and Schaffer, which continue through December 31, 2019. The agreements will automatically renew on generally the same terms and conditions for successive twenty-four (24) month periods, unless either party gives written notice of non-renewal to the other party at least sixty (60) days prior to December 31, 2019 or any such renewal term then in effect. The agreements for these officers contain certain severance provisions, including severance provisions arising from a change in control of the Company.
If the executive’s employment is terminated by the Company without cause, other than upon a change in control event, the executive will be paid a lump sum equal to six months’ base salary (twenty-four months’ base salary in the case of Mr. Mitchell, because Mr. Mitchell’s employment agreement mandates that, in the event of termination, Mr. Mitchell would be prohibited from working with any competitor for twenty-four months).
Health and Life Insurance and Other Benefits
The executive employment agreements provide that upon termination without cause, change in control or because of disability, the Company will pay two-thirds of the cost of COBRA premiums for the executive and any covered dependents for a period of six months or, if earlier, until the executive is employed by another employer. Each executive of the Company also receives a monthly automobile allowance.
All of the employment agreements provide that the Company shall maintain at its expense, life insurance coverage on the executive payable to the executive’s designees in an amount equal to three times the annual salary payable to the executive.
Change in Control
In the event of a change in control, all stock options and bonus stock awards held by executive officers become immediately vested under the terms of the employment agreements. In addition, upon a termination of the executive officer’s employment (or a material diminution to his responsibilities or other material changes) within twenty-four months following a change of control, the executive will receive a lump sum equal to one year’s base salary (two years’ base salary in the case of Mr. Mitchell), a cash bonus (equal to the average of the annual cash bonus paid for the preceding three years), and two-thirds of six months of COBRA premiums for the same medical coverage elected by the Executive immediate prior to the termination date. For purposes of the agreements, a change in control generally means any merger, reorganization, sale of substantially all Company assets, liquidation, a change in the composition of the Company’s Board as defined in the employment agreement and any other transaction that the Board determines by resolution to be a corporate transaction.
Other Provisions
The employment agreements have customary confidentiality obligations. The employment agreements further provide that the executive, for a period of one year after the term of his respective employment agreement, will not become affiliated with any person, firm or corporation whose business is similar to or in competition with the Company and for a period of two years (in the case of Mr. Mitchell) or six months (in the case of the other executives) after termination of the executive’s employment agreement, to not induce or attempt to induce any employee of the Company to leave the employ of the Company; nor will the executive induce or attempt to induce any customer, supplier or licensee to cease doing business with the Company.
| PAYMENTS AND POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL |
Our current executive employment agreements provide compensation to Messrs. Mitchell, Rosenthal and Schaffer in the event of a termination of employment, including termination of employment (or deemed termination) following a change in control. The tables below show the potential payments or benefits upon a termination or change in control for each of the Company’s executive officers assuming the triggering event took place on December 31, 2018. The closing price per share of our common stock on the last trading day prior to December 29, 2018 was $0.85. Actual amounts can only be determined at the date of the triggering event. The amount of acceleration of unvested equity awards represents the intrinsic value of in-the-money non-vested stock options and non-vested stock awards as of December 31, 2018 that would vest upon termination or change in control. The proposed Merger with Danfoss (as described below and in the Original Form 10-K) will constitute a change in control for purposes of each executive officer’s employment agreement; however, it is expected that each executive officer will continue to serve as an executive officer of the Company after the Merger is consummated.
| | | | | | | |
| Termination | | Termination | | | | Termination |
| by us for | | by us without | | Termination | | due to a change |
| cause | | cause | | due to death | | in control |
| ($) | | ($) | | ($) | | ($) |
Joseph R. Mitchell: | | | | | | | |
Base Salary/Severance | - | | 729,129 | | 180,243 | | 847,421 |
Life Insurance Proceeds | - | | - | | 1,081,458 | | - |
Acceleration of unvested equity awards | - | | - | | - | | 349,233 |
Total | - | | 729,129 | | 1,261,701 | | 1,196,653 |
| | | | | | | |
David I. Rosenthal: | | | | | | | |
Base Salary/Severance | - | | 141,395 | | 133,337 | | 324,700 |
Life Insurance Proceeds | - | | - | | 800,021 | | - |
Acceleration of unvested equity awards | - | | - | | - | | 169,527 |
Total | - | | 141,395 | | 933,358 | | 494,227 |
| | | | | | | |
Adrian P. Schaffer: | | | | | | | |
Base Salary/Severance | - | | 133,529 | | 127,905 | | 300,306 |
Life Insurance Proceeds | - | | - | | 767,430 | | - |
Acceleration of unvested equity awards | - | | - | | - | | 127,082 |
Total | - | | 133,529 | | 895,336 | | 427,388 |
In 2017, the Compensation Committee retained the consulting firm Frederic W. Cook & Co., Inc. to review and assist in establishing appropriate compensation for the Company’s non-employee Directors. Frederic W. Cook & Co. evaluated the compensation practices of a peer group of 18 publicly-traded companies with broadly similar operations as UQM. After reviewing the recommendations of the consultant, the Board adopted a director compensation policy consisting of an annual cash compensation and an equity compensation that it believes appropriately compensates the non-employee directors while aligning the interests of directors with those of the Company’s shareholders.
Starting in April, 2018, each non-employee director receives an annual cash retainer of $35,000. In addition the Chairman of the Board receives a cash retainer of $21,000. The Chairman of the Audit Committee, the Chairman of the Compensation Committee and the Chairman of the Governance and Nominating Committee receive additional cash retainers of $10,000, $8,000, and $5,000 respectively. Each non-employee Director receives $2,000 for each committee served on except the committee chaired.
Non-employee directors also receive each year shares of the Company’s common stock with a fair value of $14,000 on the date of the grant. These shares vest immediately upon grant. In addition, each non-employee director receives a stock option for the number of shares that is equivalent to $21,000 as determined by utilizing the Black-Scholes-Merton option-pricing model on the date of the grant. Options granted under this component of director compensation vest immediately.
In addition, each non-employee director upon initial election to the Board is awarded 2,000 shares of the Company’s common stock at a purchase price of $0.01 per share. Directors who are employees of the Company are not entitled to additional compensation for their service as directors. Accordingly, Mr. Mitchell did not receive additional compensation for his service as a director.
For the year ended December 31, 2018, directors of the Company who are not employees may elect to receive an annual retainer of $35,000 in cash or the grant of options with an exercise period of ten years to acquire that number of shares of the Company’s common stock that is equivalent to $35,000 as determined by utilizing the Black-Scholes-Merton option pricing model on the date of grant or a combination of cash and options that together have a fair value of $35,000. Options granted under the plan vest immediately. In addition, the Chairman of the Board receives an additional annual cash retainer of $21,000 and the the Chairman of the Audit Committee, Chairman of the Compensation Committee, and the Chairman of the Governance and Nominating Committee each receive an additional annual cash retainer of $10,000, $8,000, and $5,000 respectively.Each non-employee Director receives $2,000 for each committee served on except the committee chaired.
During the year ended December 31, 2018, non-employee directors also received shares with a fair value of $14,000 on the date of grant, except for the Chairman of the Board who received shares with a fair value of $17,000 on the date of grant. These shares vest immediately. In addition, each non-employee director received a stock option for that number of shares of the Company’s common stock that is equivalent to $21,000, or $26,000 in the case of the Chairman of the Board, as determined by utilizing the Black-Scholes-Merton option pricing model on the date of grant. Options granted under this component of director compensation vest immediately.
The following table sets forth information concerning remuneration paid to non-employee directors of the Company during year ended December 31, 2018:
| | | | | | | | | | |
Non-Employee Director Compensation Year Ended December 31, 2018 |
| | | | | | | | | | |
| | Fees earned | | | | | | All | | |
| | or paid in | | Stock | | Option | | other | | |
| | cash | | awards (1) | | awards (1) | | compensation | | Total |
| | ($) | | ($) | | ($) | | ($) | | ($) |
| Donald W. Vanlandingham | 54,667 | | 17,000 | | 26,000 | | - | | 97,667 |
| Stephen J. Roy | 44,667 | | 14,000 | | 21,000 | | - | | 79,667 |
| Joseph P. Sellinger | 44,667 | | 14,000 | | 21,000 | | - | | 79,667 |
| John E. Sztykiel | 41,333 | | 14,000 | | 21,000 | | - | | 76,333 |
| | | | | | | | | | |
| (1) | The amount reported is the aggregate grant date fair value computed under FASB ASC Topic 718. The fair value of stock options is computed utilizing the Black-Scholes-Merton pricing model. The assumptions used in determining the fair value are contained in footnote 10 to the Company’s consolidated financial statements contained in Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. Stock and option awards vest in full on the date of grant. |
The table below shows the aggregate number of shares of common stock granted under the Stock Bonus Plan held by each non-employee director as of December 31, 2018:
The table below shows the aggregate number of options held by each non-employee director as of December 31, 2018:
| | | | | | | |
| | | Number of | | Option | | Option |
| | | options | | exercise | | expiration |
| Grant date | | outstanding | | price | | date |
| | | (#) | | ($) | | |
Donald W. Vanlandingham | 4/20/2018 | | 24,762 | | 1.25 | | 4/19/2028 |
| 7/12/2017 | | 10,706 | | 0.87 | | 7/11/2027 |
| 7/12/2016 | | 27,625 | | 0.68 | | 7/11/2026 |
| 9/24/2015 | | 16,250 | | 0.66 | | 9/23/2025 |
| 8/19/2014 | | 13,240 | | 1.71 | | 8/18/2024 |
| 8/7/2013 | | 14,383 | | 1.19 | | 8/6/2023 |
| | | 106,966 | | | | |
Stephen J. Roy | 4/20/2018 | | 20,000 | | 1.25 | | 4/19/2028 |
| 7/12/2017 | | 8,647 | | 0.87 | | 7/11/2027 |
| 7/12/2016 | | 22,313 | | 0.68 | | 7/11/2026 |
| 9/24/2015 | | 13,125 | | 0.66 | | 9/23/2025 |
| 8/19/2014 | | 10,694 | | 1.71 | | 8/18/2024 |
| 8/7/2013 | | 14,383 | | 1.19 | | 8/6/2023 |
| 8/8/2012 | | 51,220 | | 0.79 | | 8/7/2019 |
| | | 140,382 | | | | |
Joseph P. Sellinger | 4/20/2018 | | 20,000 | | 1.25 | | 4/19/2028 |
| 7/12/2017 | | 8,647 | | 0.87 | | 7/11/2027 |
| 7/12/2016 | | 22,313 | | 0.68 | | 7/11/2026 |
| 9/24/2015 | | 13,125 | | 0.66 | | 9/23/2025 |
| 8/19/2014 | | 10,694 | | 1.71 | | 8/18/2024 |
| 8/7/2013 | | 14,383 | | 1.19 | | 8/6/2023 |
| 8/3/2011 | | 17,073 | | 2.04 | | 8/2/2021 |
| 11/3/2009 | | 12,111 | | 4.73 | | 11/2/2019 |
| | | 118,346 | | | | |
John E. Sztykiel | 4/20/2018 | | 20,000 | | 1.25 | | 4/19/2028 |
| 7/12/2017 | | 8,647 | | 0.87 | | 7/11/2027 |
| 7/12/2016 | | 22,313 | | 0.68 | | 7/11/2026 |
| 9/24/2015 | | 13,125 | | 0.66 | | 9/23/2025 |
| 8/19/2014 | | 10,694 | | 1.71 | | 8/18/2024 |
| 8/7/2013 | | 14,383 | | 1.19 | | 8/6/2023 |
| | | 89,162 | | | | |
The Board determines the total amount of the annual retainer, bonus share award and stock option award payable to non-employee members of the Board.
Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Security Ownership
The following table shows the ownership of the Company’s common stock by (i) beneficial owners of five percent or more of the Company’s common stock, (ii) each director, (iii) each of our named executive officers and (iv) all directors and executive officers as a group, as of April 24, 2019. Unless otherwise noted, each shareholder’s address is the address of the Company and exercises sole voting and investment power with respect to the shares beneficially owned. None of the shares reported below are pledged as security or have been placed in a margin account by any executive officer or director.
| | | | | | | | | |
| Name of Beneficial Owner | | Shares of Common Stock Ownership as of April 24, 2019 | | Shares of Common Stock Holder has a right to acquire by April 24, 2020 | | Total Shares Beneficially Owned | | Percent of Class (1) |
| Sinotruk (BVI) Limited (2) | | | | | | | | |
| Units 2102-03 Shun Tak Centre, | | 5,347,300 | | - | | 5,347,300 | | 9.45% |
| China Merchants Tower, | | | | | | | | |
| 168-200 Connaught Rd., | | | | | | | | |
| Central, Hong Kong | | | | | | | | |
| GAMCO Investors, Inc. | | | | | | | | |
| One Corporate Center (3) | | 4,605,762 | | - | | 4,605,762 | | 8.14% |
| Rye, NY 10580 | | | | | | | | |
| GDG Green Dolphin, LLC (4) | | | | | | | | |
| 1 N. Wacker Drive, Suite 2500, | | 4,000,000 | | - | | 4,000,000 | | 7.07% |
| Chicago, Illinois 60606 | | | | | | | | |
| Roger M. Kline (5) | | | | | | | | |
| PO Box 610102 | | 3,419,153 | | - | | 3,419,153 | | 6.04% |
| Newton, MA 02461 | | | | | | | | |
| Joseph R. Mitchell | | 181,847 | | 303,516 | | 485,363 | | * |
| David I. Rosenthal | | 82,367 | | 216,565 | | 298,932 | | * |
| Adrian P. Schaffer | | 100,131 | | 219,692 | | 319,823 | | * |
| Donald W. Vanlandingham | | 152,399 | | 106,966 | | 259,365 | | * |
| Stephen J. Roy | | 97,877 | | 140,382 | | 238,259 | | * |
| Joseph P. Sellinger | | 88,520 | | 118,346 | | 206,866 | | * |
| John E. Sztykiel | | 79,248 | | 89,162 | | 168,410 | | * |
| Director and Executive Officers as a Group (seven persons) | | 782,389 | | 1,194,629 | | 1,977,018 | | 3.42% |
| | | | | | | | | |
* | Less than 1% | | | | | | | | |
| | | | | | | | | |
(1) | Based on 56,566,585 shares of our common stock issued and outstanding as of April 24, 2019. Pursuant to Exchange Act Rule 13d-3(d)(1), shares of common stock of which a person has the right to acquire beneficial ownership at any time by June 23, 2019 are deemed outstanding and beneficially owned by the person for the purpose of computing the number of shares and percentage beneficially owned by such person, but are not deemed outstanding for purpose of computing the percentage beneficially owned by any other person. |
| | | | | | | | | |
(2) | Share data based on information in an amendment to a Schedule 13D filed on October 5, 2017 with the SEC by Sinotruk (BVI) Limited. The securities reported are held by Sinotruk (BVI) Limited and China National Heavy Duty Truck Group Co. Ltd. As of September 25, 2017, the Schedule 13D indicates that Sinotruk (BVI) Limited and China National Heavy Duty Truck Group Co. Ltd. have shared voting and investment power with respect to 5,347,300 shares of common stock. |
| | | | | | | | | |
(3) | Share data based on information in a second amendment to a Schedule 13D filed on March 5, 2019 with the SEC by GAMCO Investors, Inc. and related parties. The securities reported are held by Gabelli Funds, LLC, GAMCO Asset Management Inc., Teton Advisors, Inc., and Gabelli & Company Investment Advisers, Inc. The March 5, 2019 amendment to the Schedule 13D indicates that (i) Gabelli Funds, LLC had voting and investment power with respect to 2,672,962 of the shares of common stock, (ii) GAM Asset Management Inc. had voting and investment power with respect to 1,144,500 of the shares of common stock, (iii) Teton Advisors, Inc. had voting and investment power with respect to 250,000 of the shares of common stock, and (iv) Gabelli & Company Investment Advisers, Inc. had voting and investment power with respect to 538,300 of the shares of common stock, Further, Mario Gabelli is deemed to have beneficial ownership of such securities owned beneficially by each of the foregoing persons. |
| | | | |
Item 6.
| Selected Financial Data
| | 16 | |
| | | | |
Item 7.
| Management’s Discussion and Analysis of Financial Condition and Results of Operations
| | 17 | |
| | | | |
Item 7A.
| Quantitative and Qualitative Disclosures About Market Risk
| | 24 | |
| | | | |
Item 8.
| Financial Statements and Supplementary Data
| | 25 | |
| | | | |
| Report of Independent Registered Public Accounting Firm- Hein & Associates LLP
| | 25 | |
| | | | |
| Report of Independent Registered Public Accounting Firm- Grant Thornton LLP
| | 26 | |
| | | | |
| Consolidated Balance Sheets as of March 31, 2016 and March 31, 2015
| | 27 | |
| | | | |
| Consolidated Statements of Operations for the Fiscal Years ended March 31, 2016, 2015 and 2014
| | 29 | |
| | | | |
| Consolidated Statements of Stockholders’ Equity for the Fiscal Years ended March 31, 2016, 2015 and 2014
| | 30 | |
| | | | |
| Consolidated Statements of Cash Flows for the Fiscal Years ended March 31, 2016, 2015 and 2014
| | 31 | |
| | | | |
| Notes to Consolidated Financial Statements
| | 32 | |
| | | | |
Item 9.
| Change In and Disagreements with Independent Accountants on Accounting and Financial Disclosure
| | 47 | |
| | | | |
Item 9A.
| Controls and Procedures
| | 47 | |
| | | | |
Item 9B.
| Other Information
| | 48 | |
| | | | |
PART III
| | | 49 | |
| | | | |
Item 10.
| Directors, Executive Officers and Corporate Governance
| | 49 | |
| | | | |
Item 11.
| Executive Compensation
| | 49 | |
| | | | |
Item 12.
| Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
| | 49 | |
| | | | |
Item 13.
| Certain Relationships and Related Transactions and Director Independence
| | 49 | |
| | | | |
Item 14.
| Principal Accountant Fees and Services
| | 49 | |
| | | | |
PART IV
| | | 50 | |
| | | | |
Item 15.
| Exhibits and Financial Statement Schedules
| | 50 | |
PART I
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. Risk Factors.
ITEM 1.
Overview
UQM Technologies, Inc., (“UQM”, “Company”, “we”, “our”, or “us”) develops, manufactures and sells power dense, high efficiency electric motors, generators, power electronic controllers and fuel cell compressors for the commercial truck, bus, automotive, marine, military and industrial markets. Our primary focus is incorporating our advanced technology as propulsion systems for electric, hybrid electric, plug-in hybrid electric and fuel cell electric vehicles, delivering the heart of the electric vehicle.
We believe our proprietary permanent magnet propulsion motor and motor control technology delivers exceptional performance at a competitive cost. Our principal products include propulsion motors and generators with power ratings from 50 kilowatts to 250 kilowatts, auxiliary motors and electronic controls and DC-to-DC converters. The principal attributes that we believe differentiate our proprietary products are compact size, high torque delivery, high power density (the ratio of power output to weight), design and manufacture of integrated motor/controller systems, and superior energy efficiency with full system ratings as high as 95%.
We have assembled a management team with significant experience in the automotive and electric propulsion market with critical experience in state of the art design and high quality production. We are ISO/TS 16949 certified, the highest level of quality certification in the automotive supplier industry, and ISO 14001 certified, the highest environmental standards. We have an approximately 130,000 square foot combined headquarters and manufacturing facility located in Longmont, Colorado. We were incorporated in 1967 as a Colorado corporation.
The Market
The global electrified vehicle market is an emerging market with high growth potential being driven by several factors. In China, the market for electric vehicles is driven by strong government pressure to deal with the staggering pollution that is choking citizens in its major cities. The government has a number of initiatives to encourage electric vehicle market growth including mandates for purchases of New Energy Vehicles by municipalities, incentives and other tools. We are seeing strong demand for electric buses across several cities and regions. We are also seeing demand for electric buses, delivery vans, trucks and taxi fleets across several cities and regions in China. As China is the world’s largest market for electric vehicles, we believe that our presence in China is critical to our long-term success. Therefore, we continue to devote significant time and resources to business development efforts in China.
In other global markets, including the United States, the drivers for growth in the electric commercial truck and bus market include the demand for zero tailpipe emissions from full electric vehicles or during the electric only range for hybrids, improved operating costs due to a more efficient powertrain on a gas equivalent basis and reduced maintenance costs for the powertrain system and other systems, such as improved brake life. Moreover, there is community support for cleaner buses and trucks operating in congested areas, along with government incentives and requirements to purchase electric and hybrid vehicles. In the automotive market, these same growth drivers exist, as well as growing consumer acceptance of electric vehicles due to their excellent performance, quiet operation, zero or reduced tailpipe emissions and improved operating cost. In addition, significant Corporate Average Fuel Economy (“CAFE”) standards in the United States are expected to accelerate further electrification of vehicle fleets. The major impediment to electrification of vehicle has been total vehicle cost, of which a substantial part is due to the cost of batteries. Battery cost has decreased considerably over the last few years and is projected to continue to improve. Government incentives
have helped to offset these early additional costs and generate the volume and momentum that should further reduce these incremental costs through economies of scale.
Many studies have been conducted indicating the potential for electric vehicles to capture significant market share over the next several years. For example, in 2016, The International Energy Agency forecasted that 6 million electric vehicles will be on the road by 2020, as shown in the chart below:
Governments around the world have implemented financial incentives to promote the sales of electric vehicles. For example, the U.S. federal government currently offers a $7,500 federal tax credit for the purchase of an electric passenger vehicle, and there are additional tax credits and other benefits such as HOV lane access in various states for purchasers of qualifying vehicles. In China, the country’s National Development and Reform Commission and three other ministries jointly announced in September 2015, a new round of New Energy Vehicle supportive policies for the years 2015 - 2016. Various levels of government subsidies for electric vehicles were announced, including subsidies for pure electric buses of RMB 500,000 each (approximately $78,000), electric trucks of RMB 150,000 each (approximately $23,000) and plug-in electric and fuel cell passenger vehicles of RMB 60,000 each (approximately $9,300). Additionally, the Chinese government offers higher subsidies for more efficient vehicle performance. This should incentivize our potential customers to purchase our drivetrain systems because they are highly efficient. In Europe, a majority of European Union member states provide tax incentives for electrically chargeable passenger vehicles, with Norway providing the most generous package of subsidies totaling almost EUR 17,000 (approximately $19,000).
We believe that the trend toward increasing electrification of vehicles coupled with the government subsidies offered world-wide provide a substantial opportunity for the broad commercial application of our products.
Business Strategy
We are focused primarily on the transportation markets, with a strong emphasis on the commercial truck and bus space, followed by automotive and then marine, military and other. We have developed two basic frame size propulsion systems: the PowerPhase® Pro for passenger car, light commercial applications, light duty marine and other lighter duty applications and the PowerPhase® HD lineup of products for heavier commercial bus and truck applications and heavier duty marine and other applications. We also utilize these products, customized versions of these products and all new custom solutions in these markets to meet various customer requirements. We provide motor and controller systems for full-electric, hybrid electric, plug-in hybrid and fuel cell applications. We also provide units for non-automotive markets including the energy management market, auxiliary systems and motor and controller systems for aircraft. Further, we manufacture fuel cell compressor motors for the fuel cell business.
Our products are used in the following applications:
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| | Commercial Trucks, Vans and Shuttles - We supply electric propulsion systems to Zenith Motors, LLC for their electric shuttle vans and have supplied Electric Vehicles International (“EVI”) for their all-electric medium-duty delivery trucks.
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| | Passenger Buses – Electric and hybrid passenger buses can have large positive impacts on the environment and many municipalities around the world are demanding more of these vehicles on the road. We supply electric propulsion systems to Proterra, Inc., a developer and manufacturer of all-electric composite transit buses, under a multi-year supply agreement. We have provided electric propulsion systems for Hino Bus, a subsidiary of Toyota Motor Corporation, for their electric city-buses. PT Sarimas Ahmadi Pratama of Jakarta, Indonesia is using our motors and controllers for their all-electric 17-passenger bus. In October 2015, we signed a ten-year supply agreement with ITL Efficiency Corporation to provide electric propulsion systems for New Energy Vehicles in China, in particular 6-8 meter shuttles and 10-12 meter transit buses. In addition, we are in discussions with other potential Chinese customers to supply our products for both all-electric and hybrid-electric vehicles, and we have shipped a small number of electric motor and controller systems into China for prototype testing in buses.
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| | Mining vehicles – In January 2015, we announced a long-term supply agreement with the KESHI Group, a Chinese market leader that manufactures vehicles for the mining industry in China. KESHI will manufacture under license explosion proof electric mining vehicles using UQM’s designs and parts supplied by UQM to Keshi. This first phase is for the vehicles that move the coal from the mines. We are also under discussions for additional usage for the vehicles that move the people in and out of the mines and other potential applications.
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| | Airplane tugs – In January 2016, we announced that Kalmar Motor AB in Sweden had successfully passed vehicle trials with major airlines and plans on beginning production orders by mid-2016 using our heavy-duty commercial traction electric motor/controller system, for their TBL50 airplane tugs. Ground handling tugs play a vital role at airports by enabling large aircraft to be moved from their hangars to the passenger gate, as well as for pushback and other taxiing functions on the runway.
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| | Marine – The marine market is an emerging market for the Company. In January 2015, Research and Markets announced that marine electric vehicles are now a rapidly growing market due to new capability, affordability and legislation banning or restricting internal combustion engines. Their research found that the market for electric water craft, including those on and under water, is expected to increase from $2.6 billion to $6.3 billion in 2023. In addition, there is a market for electric outboard motors that will more than triple in value as high power pure electric versions become increasingly viable. We are seeing demand for electric solutions for both the clean and quiet operation afforded by full electric and hybrid electric solutions. We supply UQM motors and controllers used in a variety of marine applications and for a variety of customers. We believe the marine market could be a growing sector of electrified vehicles.
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| | Fuel Cell Compressors – We manufacture fuel cell compressors which are an integral component of hydrogen powered fuel cell vehicles designed for light duty automotive and commercial bus applications for 75kW to 150kW fuel cell stacks.
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| | Military - The U.S. military purchases a wide-range of ground vehicles each year, including combat vehicles such as tanks, self-propelled artillery and armored personnel carriers, as well as a variety of light, medium and heavy-duty trucks for convoy and supply operations and for the transport of fuel used on the battlefield. We have in the past worked with a number of military contractors and vehicle makers on prototype hybrid electric vehicles, high export power generators, and electric auxiliaries. There are a number of initiatives to reduce the carbon footprint of military bases that may drive additional efforts in this area. Although this market has not yet emerged, we believe that it may, driven by the availability of electric components in the commercial truck market that operate at similar power levels as those required by many military vehicles.
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| | Automobiles – Government mandates for fuel economy and clean air emissions are accelerating the demand for electric passenger cars. In the United States, for example, CAFE standards will increase the average fuel economy of each manufacturer’s passenger car and light truck model offerings to 35.5 miles per gallon in 2016
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and 54.5 miles per gallon by 2025. We have in the past provided electric propulsion systems to many original equipment manufacturers (“OEMs”) for testing and product development.
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| | Other – We supply an automotive qualified DC-to-DC converter which can be used in medium and heavy-duty hybrid trucks. We also provide small motors and controllers for aircraft HVAC usage to AirComm. Further, we have supplied systems to a customer in the energy management market for a stationary application for electric motors.
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Our business strategy is also comprised of the following:
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| | Highly qualified and experienced management – We have a management team with significant experience in the automotive industry and the requirements for high quality production programs and very deep technical knowledge of the electric motor and controller business.
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| | State-of-the-art manufacturing facility – Our headquarters and manufacturing plant are located in an approximately 130,000 square foot facility. We have designed, installed and qualified volume production lines for our motors and their related electronic controllers.
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| | Manufacturing capacity – We currently have the capacity to build motor/controller systems, in quantities sufficient to meet demands of our current and future customers for the foreseeable future.
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| | Highest production quality standards – Our Company is certified under the ISO/TS 16949 standards, the highest level of automotive quality standards in the industry and ISO 14001, the highest environmental standards.
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| | Leading edge technology – Our technology base includes a number of proprietary technologies and patents related to brushless permanent magnet motors, generators and power electronic controllers, together with software code to intelligently manage the operation of our systems. We continue to develop next generation products to achieve improved performance and efficiency, smaller package sizes and lower production costs.
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Products
We offer a full range motors and controllers for electric, hybrid electric, plug-in hybrid electric and fuel cell electric commercial trucks, vans, buses and automobiles. Our current core electric propulsion products are:
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| | PowerPhase HD® 220: Designed for medium and heavy duty trucks and buses.
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| | PowerPhase HD® 950T: A high torque version designed for heavy duty trucks and buses that require additional torque due to higher GVW or more challenging hilly terrain, this product delivers especially high torque performance compared to the PowerPhase HD® 220.
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| | PowerPhase HD® 250: A high voltage version designed for buses and medium and heavy duty trucks.
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| | PowerPhase Pro® 100: Designed for passenger vehicles and light duty truck or van applications.
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| | PowerPhase Pro® 135: The PP 135 offers higher performance for those applications that require it versus our PowerPhase Pro® 100.
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| | Auxiliary Motor Systems: Multiple products are offered for compressor, pump and fan applications, including a family of motor/controller systems for fuel cell air compressors, an integrated motor/controller for aircraft air conditioning compressors, and an integrated motor/controller for aircraft air conditioning condenser fans.
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| | Custom Solutions: We offer variations of the above motors in custom configurations as well as custom hybrid solutions to meet individual customer specifications.
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| | R340 and R410 Fuel Cell Compressor Systems: These fuel cell compressors are used in hydrogen powered fuel cell vehicles.
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We also sell four types of DC to DC converters at 1.6 kW and 2.2 kW levels, each available at two different voltage output ranges.
Product Development Activities
We continue to develop new variations of our product lineup to meet expanding customer requirements and work on custom solutions for new prospective customers meeting their precise specifications. We are also developing the next generation of PowerPhase Pro® products designed to be smaller, lighter weight, more energy efficient and producible at lower cost with equal or better performance than our current PowerPhase Pro® systems. This development effort is expected to take more than two years. Development targets include a substantial size reduction of the motor controller. Adopting new generation components and control strategies are also elements of this development. Target applications include automotive and light commercial truck and bus markets.
We are also pursuing an advanced motor design technology that eliminates the need for rare-earth elements in the magnets. The technology incorporates permanent magnets of an alternate chemistry, arranged in a unique way that maintains performance benefits. A patent has been awarded to protect this innovation. We have a $4.0 million program with the Department of Energy (“DOE”) to develop non-rare-earth magnet electric motors for use in electric and hybrid vehicles. The DOE is providing $3.0 million of funding for this program and the Company is providing $1.0 million of cost-share contribution. This award was announced in August 2011 and is a multi-year technology development program.
Competition
All of the markets in which we operate are highly competitive and are characterized by changes due to technological advances that could render existing technologies and products obsolete, although we are not currently aware of any such advances that could render our current product portfolio obsolete. We believe our competitors are large automotive OEMs, Tier 1 suppliers to OEMs, Chinese electric motor manufacturers offering lower cost options, and numerous other competitors in nearly every region of the world
As a result, additional vehicle makers in both on-road and off-road markets are expected to develop and introduce a variety of hybrid electric and all-electric vehicles as market acceptance of these vehicles continues to grow. We cannot assure that we will be able to compete successfully in this market or any other market that now exists or may develop in the future. There are numerous companies developing products that do or soon will compete with our systems. Some of these companies possess significantly greater financial, personnel and other resources than we do, including established supply arrangements, volume manufacturing operations and access to governmental incentive programs.
Customers and Suppliers
We derive our revenue from the following sources: 1) the sale of products designed, engineered and manufactured by us primarily to OEMs, Tier 1 suppliers of OEMs, and vehicle integrators; 2) funded contract research and development services performed for strategic partners, customers and the U.S. government directed toward either the advancement of our proprietary technology portfolio or the application of our proprietary technology to customers’ products; and 3) after market services and remanufacture.
Our business is subject to revenue fluctuation based on the buying cycles of our customers. Specific customers that reach 10% or more of revenues in any given fiscal quarter or year will also vary depending on these buying cycles. In fiscal year ending March 31, 2016, four customers individually comprised 10% or more of our total revenues. Any loss of business with these customers could have a material adverse effect on our business, financial condition and results of operation.
Principal raw materials and components purchased by us include iron, steel, electronic components, rare-earth magnets and copper wire. Most of these items are available from several suppliers. Certain components used by us are custom designs and if our current supplier no longer made them available to us, we could experience production delays.
We can experience significant price fluctuation in the cost of magnets used in our motors, which contain the rare-earth elements neodymium and dysprosium and are primarily sourced from China. We have not experienced any disruption in
supply of magnets and magnet prices may continue to be volatile until mining operations outside of China increase or restart.
Financial Information about Geographic Areas
The following summarizes total revenue by geographic area:
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| | Fiscal Year Ended March 31, | |
| | 2016 | | 2015 | | 2014 | |
United States | | $ | 3,537,397 | | $ | 3,442,050 | | $ | 5,694,144 | |
Foreign Countries | | | 1,769,402 | | | 573,694 | | | 1,352,056 | |
| | $ | 5,306,799 | | $ | 4,015,744 | | $ | 7,046,200 | |
Classification of geographic area is determined based upon the country where the purchase transaction originated.
U.S. Government Contracts
We have a $4.0 million program with the DOE to develop non-rare-earth magnet electric motors for use in electric and hybrid vehicles. The DOE is providing $3.0 million of funding for this three-year program and the Company is providing $1.0 million of cost-share contribution. The objective of the program is to identify and evaluate magnet materials and technology that can deliver performance comparable to our rare-earth magnet motors, broaden our product portfolio, potentially lower magnet costs and limit our exposure to price and supply concerns associated with rare-earth magnets. At March 31, 2016, we had received reimbursements from the DOE under this program of $2.3 million. We have been granted a U.S. patent for our electric and hybrid electric vehicle motor design using non-rare earth magnets.
We had a Grant from the DOE under the American Recovery and Reinvestment Act that ended on January 12, 2015. The Grant provided funds to facilitate the manufacture and deployment of electric drive vehicles, batteries and electric drive vehicle components in the United States. Under the terms of our Grant Agreement, the DOE reimbursed us 50 percent of qualifying costs incurred for the purchase of facilities, tooling and manufacturing equipment, and for engineering expenditures related to product qualification and testing of our electric propulsion systems and other products. The Grant ended on January 12, 2015.
As of March 31, 2015, we had received cumulative reimbursements from the DOE of $27.1 million and had no funds receivable.
Backlog
Our order backlog for products at April 30, 2016 was approximately $2.3 million versus $1.8 million at April 30, 2015. Certain orders are blanket purchase orders which are subject to the issuance of subsequent release orders directing the number and timing of actual deliveries. We had backlog of service contracts from customers, which will provide future revenue upon completion, totaling approximately $457,000 at April 30, 2016 versus $1.2 million at April 30, 2015. Substantially all of the backlog amounts at April 30, 2016 and 2015 are subject to amendment, modification or cancellation. We expect to ship motor and controller backlog products over the next twelve months and complete all service contracts in backlog over the next six months.
Intellectual Property
We have numerous patents in the United States and in other countries to protect our intellectual property.
We determine if our intellectual property should be treated as a trade secret or submitted to the patent application process by deciding whether a technology successfully passes through three evaluation gates. The first gate is an assessment of whether the expected breadth of the patent would offer a high level of protection or whether it will serve as an educational tool for competitors. Based upon a patent and literature search, if the expected coverage is broad, the evaluation moves to the second gate, which is an assessment of infringement detection. This is a review of whether or not it will be possible to detect patent infringement if a competitor were to adopt the technology. Difficulty in detection reduces the value of a patent and will lead us to handle the technology as a trade secret rather than a patent. The last gate is an assessment of whether the technology will have value for many years or whether the technology is a stepping stone
to a different technology. The patent process is a multi-year endeavor from the initial disclosure to the granted patent, which leads to the importance of this gate. A technology that is expected to have value for five or more years will pass the final gate and the patent application process will then commence.
We also implement measures to protect our intellectual property, including the guarding and encryption of source code, nondisclosure of control techniques, and protection of product design details, drawings and documentation.
Trademarks
We have registered the letters "UQM" in the U.S. Patent and Trademark Office. Counterpart applications have been filed in numerous countries throughout the world, most of which have granted registrations or indicated them to be allowable. We own three U.S. Trademark Registrations for "UQM" (International Class 7 for power transducers, Class 12 for utility land vehicles, and Class 16 for publications). The foreign trademark registrations and applications include major markets where we are doing business or establishing business contacts.
We have also registered the trademark "POWERPHASE" which we use in conjunction with certain of our propulsion systems. The trademark is registered in the European Community and several other foreign countries.
Employee and Labor Relations
As of April 30, 2016, we had 49 employees, all of whom are full-time employees. We have entered into employment agreements with our executive officers. The employment agreements expire on June 30, 2017. We believe our relationship with employees has been generally satisfactory.
In addition to our full-time staff, we from time to time engage the services of outside consultants and contract employees to meet peak workload or specialized program requirements. We do not anticipate any difficulty in locating additional qualified engineers, technicians and production workers, if so required, to meet expanded research and development or manufacturing operations.
Available Information
We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”). Anyone seeking information about our business can receive copies of our Fiscal Year 2016 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, all amendments to those reports and other documents, filed with the SEC at the public reference section of the SEC at 100 F Street, NE, Room 1580, Washington, D.C. 20549. These documents also may be obtained, free of charge, by: contacting our Investor Relations office by e-mail at investor@uqm.com; by phone at (303) 682-4900; writing to UQM Technologies, Inc., Investor Relations, 4120 Specialty Place, Longmont, CO 80504-5400; or accessing our website at www.uqm.com. We make our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, available on our website as soon as reasonably practicable after we file or furnish the materials electronically with the SEC. To obtain any of this information, go to www.uqm.com, select “Investor Relations” and select the form you would like to access. Our website also includes our Audit Committee Charter and Code of Business Conduct and Ethics as well as the procedures for reporting a violation of business ethics. Information on our website does not constitute part of this Annual Report.
ITEM 1A. RISK FACTORS
We operate in a challenging and changing environment that involves numerous known and unknown risks and uncertainties that could materially affect our operations. The risks, uncertainties and other factors set forth below may cause our actual results, performances or achievements to be materially different from those expressed or implied by our forward-looking statements. If any of these risks or events occur, our business, financial condition or results of operations may be adversely affected.
We have incurred significant losses and may continue to do so.
We have incurred significant net losses as shown in the following tables:
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| | Fiscal Year Ended March 31, | |
| | 2016 | | 2015 | | 2014 | |
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Net loss | | $ | 6,938,351 | | $ | 5,988,530 | | $ | 2,773,244 | |
As of March 31, 2016, we had an accumulated deficit of $106,875,426.
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, 2016 was $6,938,351 versus a net loss for the fiscal years ended March 31, 2015 and 2014 of $5,988,530 and $2,773,244, respectively. At March 31, 2016, our cash and cash equivalents totaled $7,030,230. We expect our losses to continue for the foreseeable future. Our existing cash resources, 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 twelve months. Should those resources be insufficient, we may need to secure additional debt or equity funding, which may not be available on terms acceptable to us, if at all.
Our business depends, in part, on the expansion of the market for all-electric and hybrid electric vehicles.
Although our electric propulsion systems may be used in a wide variety of products, the market for electric and hybrid vehicles is fairly new. At the present time, batteries used to power electric motors have limited life and require several hours to charge, and charging stations for electric motors are not widely available. Electric and hybrid vehicles also tend to be priced higher than comparable gasoline-powered vehicles. As a result, consumers may experience concerns about driving range limitations, battery charging time and higher purchase costs of electric or hybrid vehicles. If consumer preferences shift to vehicles powered by other alternative methods, or if concerns about the availability of charging stations cannot be overcome, the market for all-electric vehicles, and therefore our electric propulsion systems, may be limited. In addition, our electric propulsion systems are incorporated in buses used for mass transit in several U.S. cities. If passenger traffic in these mass transit systems declines or government funding to transportation districts declines from current levels, demand for our products may also decrease.
The popularity of alternative fuel based vehicles and “green energy” initiatives are highly dependent on macro-economic conditions, including oil prices and the overall health of the economy. When oil prices fall, interest in and resources allocated to the development of advanced technology vehicles and propulsion systems may diminish. We cannot predict how and the extent to which the recent substantial decrease of oil prices will affect the domestic interest in electric and hybrid vehicles. Downturns in the world economy may also have a severe impact on the automotive industry, slowing the demand for vehicles generally and reducing consumers' willingness to pay more for environmentally friendly technology.
If our products do not achieve market acceptance, our business may not grow.
Although we believe our proprietary systems are suited for a wide-range of vehicle electrification applications, our business and financial plan relies heavily on our introduction of new products that have limited testing in the marketplace. We have made substantial investments in manufacturing facilities and equipment, production and application engineering, among other things, to increase our production capacity in order to capitalize on the anticipated expansion in demand for electric propulsion systems and generators in the commercial truck, bus and automobile markets. We cannot be certain that our existing products will achieve broad market acceptance, or that we will be able to develop new products or product enhancements that will achieve broad market acceptance.
Our sales cycle is inherently long.
We must go through lengthy processes to achieve supply contracts with our customers. Our products must conform to the technical specifications of the customer and meet design requirements of the electric vehicle. Typically prototype testing is required to ensure consistent system performance on an ongoing basis. These steps can often take many months to multiple years until decisions are made on whether or not to take a vehicle to production. We may spend considerable financial and human resources over an extended period of time and not end up with a completed supply contract. Failure to secure volume production levels within a reasonable period of time could have an adverse effect on our results of operations and our liquidity.
CODA Automotive filed for bankruptcy protection on May 1, 2013 and it is unlikely we will be able to recover more than insignificant amounts due to us under our CODA Supply Agreement, including substantial amounts due for accounts receivable, inventory purchases and guaranteed minimum payments.
We executed a ten-year supply agreement with CODA in July, 2009 which provided a framework for CODA, or its manufacturing partner, to purchase from us electric propulsion systems for use in automobiles to be manufactured by CODA. On May 1, 2013, CODA filed for bankruptcy protection. Amounts due from CODA at March 31, 2015 totaled $3,838,092, all of which had been written off as uncollectible. In addition, CODA was obligated under the supply agreement for inventory purchases totaling approximately $8.2 million and for a guaranteed minimum payment of $2 million due to their failure to purchase at least 15,000 units. It is likely that we will recover only an insignificant amount of the balance owed to us under the CODA supply agreement, if any.
We carry a large inventory balance originally acquired for CODA and may not be able to sell this inventory and may recognize a loss on the value of this inventory carried on our books.
At March 31, 2016, we had aged inventory of $7.7 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 regularly consider outstanding customer orders, potential customers, market conditions and other factors that may affect our ability to sell this inventory at prices above our costs. At least each quarter, we consider the appropriate value of this inventory to maintain on our books. A change in customer orders or prospects for future sales may impact the carrying value we believe is appropriate for our CODA inventory and may result in one or more future write-downs in value of this inventory. This would be reflected as a loss on our Consolidated Statement 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, 2016 of $189,175 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 since then. 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.
All funding from our DOE Grant under the American Recovery and Reinvestment Act ended as of January 12, 2015 when the Grant expired.
Funds from the DOE Grant were very useful in supporting our growth initiatives and reducing our losses over the past several years. We believe that we have adequate cash resources for at least the next twelve months. However, if anticipated revenues are not realized and other cash resources are unavailable, the end 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 typically done on a purchase order basis. We cannot be certain that customers that have accounted for significant revenue in past periods will continue to purchase our products. Accordingly, our revenue and results of operations may vary substantially from period to period. We are also subject to credit risk associated with the concentration of our accounts receivable from our customers. If one or more of our significant customers were to cease doing business with us, significantly reduce or delay its purchases from us or fail to pay us on a timely basis, our business, financial condition and results of operations could be materially adversely affected.
Our business relies on third parties, whose success we cannot predict.
As a manufacturer of motors, generators, and other component parts, our business model depends on the ability of third parties in our industry to develop, produce and market products that include or are compatible with our technology and then to sell these products into the marketplace. Our ability to generate revenue depends significantly on the commercial success of our customers and partners. Failure of these third parties to achieve significant sales of products incorporating our products and fluctuations in the timing and volume of such sales could have a material adverse effect on our business, financial condition and results of operations.
Our electric propulsion systems use rare-earth minerals and unavailability or limited supply of these minerals could prevent us from manufacturing our products in production quantities or increase our costs.
Neodymium and dysprosium, rare-earth minerals, are key elements used in the production of magnets that are components of our electric propulsion systems. We currently source our magnets from China, and China has indicated its intent to retain more of this mineral for China use, rather than exporting it. During calendar year 2011, for example, we experienced significant price escalation in the cost of magnets used in our motors. This price escalation was primarily due to rare-earth government policy in China. Rare-earth prices have decreased substantially since peaking in the summer of 2011, and are now approaching the baseline prices (defined as the beginning of calendar year 2011). We have implemented a magnet surcharge process to recover these additional costs in the event of another price escalation. Although rare-earth magnets are available from other sources, these alternative sources are currently more costly. Reduced availability of neodymium and dysprosium from China could adversely affect our ability to obtain magnets in
sufficient quantities, in a timely manner, or at a commercially reasonable cost. In the event that China's actions cause us to seek alternate sources of supply for magnets, it could cause an increase in our product costs, thereby reducing or eliminating our profit margin on electric propulsion systems if we are unable to pass the increase on to our customers. Increasing prices to our customers due to escalating magnet costs may reduce demand for our motors and make it difficult or impossible to compete with other motor manufacturers whose motors do not use rare-earth minerals.
Some of our contracts can be cancelled with little or no notice and could restrict our ability to commercialize our technology.
Our contracts with government agencies are subject to the risk of termination at the convenience of the contracting agency and in some cases grant "march-in" rights to the government. March-in rights are the right of the United States government or the applicable government agency, under limited circumstances, to exercise a non-exclusive, royalty-free, irrevocable worldwide license to any technology developed under contracts funded by the government to facilitate commercialization of technology developed with government funding. March-in rights can be exercised if we fail to commercialize the developed technology. The exercise of march-in rights by the government or an agency of the government could restrict our ability to commercialize our technology.
Some of our orders for the future delivery of products are placed under blanket purchase orders which may be cancelled by our customers at any time. The amount payable to us, if any, upon cancellation by the customer varies by customer. Accordingly, we may not recognize as revenue all or any portion of the amount of outstanding order backlog we have reported.
We face intense competition and may be unable to compete successfully.
In developing electric motors for use in vehicles and other applications, we face competition from very large domestic and international companies, including the world's largest automobile manufacturers. Many of our competitors have far greater resources to apply to research and development efforts than we have, and they may independently develop motors that are technologically more advanced than ours. These competitors also have much greater experience in and resources for marketing their products. For these reasons, potential customers may choose to purchase electric motors from our competitors rather than from us.
Changes in environmental policies could hurt the market for our products.
The market for electric and other alternative fuel vehicles and equipment and the demand for our products are influenced, to a degree, by federal, state and local regulations relating to air quality, greenhouse gases and pollutants. These laws and regulations may change, which could result in transportation or equipment manufacturers abandoning or delaying their interest in electric or hybrid electric vehicles or equipment. In addition, a failure by authorities to enforce current laws and regulations or to adopt additional environmental laws or regulations could limit the demand for our products.
Although many governments have identified as a significant priority the development of alternative energy sources, governments may change their priorities, and any change they make could materially affect our revenue or the development of our products.
If we are unable to protect our patents and other proprietary technology, we will be unable to prevent third parties from using our technology, which would impair our competitiveness and ability to commercialize our products. In addition, the cost of enforcing our proprietary rights may be expensive and result in increased losses.
Our ability to compete effectively against other companies in our industry will depend, in part, on our ability to protect our proprietary technology. Although we have attempted to safeguard and maintain our proprietary rights, we do not know whether we have been or will be successful in doing so. We have historically pursued patent protection in the United States and a limited number of foreign countries where we believe significant markets for our products exist or where potentially significant competitors have operations. It is possible that a substantial market could develop in a country where we have not received patent protection and under such circumstances our proprietary products would not be afforded legal protection in these markets. Further, our competitors may independently develop or patent technologies that are substantially equivalent or superior to ours. We cannot assure that additional patents will be issued to us or, if they are issued, as to the scope of their protection. Patents granted may not provide meaningful protection from
competitors. Even if a competitor's products were to infringe patents owned by us, it would be costly for us to pursue our rights in an enforcement action, it would divert funds and resources which otherwise could be used in our operations and we may not be successful in enforcing our intellectual property rights. In addition, effective patent, trademark, service mark, copyright and trade secret protection may not be available in every country where we may operate or sell our products in the future. If third parties assert technology infringement claims against us, the defense of the claims could involve significant legal costs and require our management to divert time and attention from our business operations. If we are unsuccessful in defending any claims of infringement, we may be forced to obtain licenses or to pay royalties to continue to use our technology. We may not be able to obtain any necessary licenses on commercially reasonable terms or at all. If we fail to obtain necessary licenses or other rights, or if these licenses are costly, our results of operations may suffer either from reductions in revenues through our inability to serve customers or from increases in costs to license third-party technologies. Finally, patents may not deter third parties from attempting to reverse engineer our products and discovering our intellectual property.
We rely, in part, on contractual provisions to protect our trade secrets and proprietary knowledge, the adequacy of which may not be sufficient.
Confidentiality agreements to which we are party may be breached, and we may not have adequate remedies for any breach. Our trade secrets may also be known without breach of such agreements or may be independently developed by competitors. Our inability to maintain the proprietary nature of our technology and processes could allow our competitors to limit or eliminate any competitive advantages we may have.
Use of our motors in vehicles could subject us to product liability claims or product recalls, and product liability insurance claims could cause an increase in our insurance rates or could exceed our insurance limits, which could impair our financial condition, results of operations and liquidity.
The automotive industry experiences significant product liability claims. As a supplier of electric propulsion systems or other products to vehicle OEMs, we face an inherent business risk of exposure to product liability claims in the event that our products, or the equipment into which our products are incorporated, malfunction and result in personal injury or death. We may be named in product liability claims even if there is no evidence that our systems or components caused an accident. Product liability claims could result in significant losses as a result of expenses incurred in defending claims or the award of damages. The sale of systems and components for the transportation industry entails a high risk of these claims, which may increase as our production and sales increase. In addition, we may be required to participate in recalls involving these systems if any of our systems prove to be defective, or we may voluntarily initiate a recall or make payments related to such claims as a result of various industry or business practices or the need to maintain good customer relationships.
We carry product liability insurance of $10 million covering most of our products. If we were to experience a large insured loss, it might exceed our coverage limits, or our insurance carriers could decline to further cover us or raise our insurance rates to unacceptable levels, any of which could impair our financial position and results of operations. Any product liability claim brought against us also could have a material adverse effect on our reputation.
We may be subject to warranty claims, and our provision for warranty costs may not be sufficient.
We may be subject to warranty claims for defects or alleged defects in our products, and the risk of such claims arising will increase as our production and sales increase. In addition, in response to consumer demand, vehicle manufacturers have been providing, and may continue to provide, increasingly longer warranty periods for their products. As a consequence, these manufacturers may require their suppliers, such as us, to provide correspondingly longer product warranties. As a result, we could incur substantially greater warranty claims in the future.
Our future success will depend on our ability to attract and retain qualified management and technical personnel.
Our future success is substantially dependent on the continued services and on the performance of our executive officers and other key management, engineering, manufacturing and operating personnel. The loss of the services of any executive officer, or other key management, engineering, manufacturing and operating personnel, could materially adversely affect our business. Our ability to achieve our growth plans will also depend on our ability to attract and retain additional qualified management and technical personnel, and we do not know whether we will be able to be successful in these regards. Our inability to attract and retain additional qualified management and technical personnel, or the
departure of key employees, could materially and adversely affect our growth plans and, therefore, our business prospects, results of operations and financial condition.
The maintenance and security of our information systems are critical to our operations.
We rely on our information systems to be functioning at all times, and that the data in those systems is protected and secure from viruses, illegal access and any other form of unauthorized use. Should our information systems be compromised in any way, our business operations could be severely impacted.
Threats to information technology systems associated with cybersecurity risks and cyber incidents or attacks continue to grow. Cybersecurity attacks could include, but are not limited to, malicious software, viruses, attempts to gain unauthorized access, whether through malfeasance or error, either from within or outside of our organization, to our data or that of our customers or our customers’ customers which may be in our possession, and the unauthorized release, corruption or loss of the data, loss of the intellectual property, theft of the proprietary or licensed technology, whether ours, that of our customers or their customers, loss or damage to our data delivery systems, other electronic security breaches that could lead to disruptions in our critical systems, and increased costs to prevent, respond to or mitigate cybersecurity events. It is possible that our business, financial and other systems could be compromised, which might not be noticed for some period of time. Although we utilize various procedures and controls to mitigate our exposure to such risk, cybersecurity attacks are evolving and unpredictable and we cannot guarantee that any risk prevention measures implemented will be successful. The occurrence of such an attack could lead to financial losses and have a material adverse effect on our reputation, business, financial condition and results of operations.
Our stock price has been and could remain volatile.
The market price for our common stock has been and may continue to be volatile and subject to extreme price and volume fluctuations in response to market and other factors, including the following, some of which are beyond our control:
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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.
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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.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
We own our offices and manufacturing facility and believe the facility to be well maintained, adequately insured and suitable for its present and intended uses. Information concerning our facility as of March 31, 2016 is set forth in the table below:
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(4) | Share data based on information provided by GDG Green Dolphin, LLC. The securities reported are held by GDG Green Dolphin, LLC and Gregory D. Glyman. As of February 8, 2019, (i) GDG Green Dolphin, LLC had shared voting and investment power with respect to 4,000,000 shares of common stock and (ii) Gregory D. Glyman had sole voting and investment power with respect to 15,200 shares of common stock and shared voting and investment power with respect to 4,000,000 shares of common stock. | | | Ownership or
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Location(5)
| | Square Feet
| | Expiration Date of Lease
| | Use
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Longmont, Colorado
| | 129,304 | | Own
| | Manufacturing, laboratories and offices
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ITEM 3. LEGAL PROCEEDINGS
Litigation
We are involvedShare data based on information 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. MINE SAFETY DISCLOSURES
Not applicable.
Part II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock trades on the NYSE 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:
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2016 | | High | | Low | |
Fourth Quarter | | $ | 0.67 | | $ | 0.43 | |
Third Quarter | | $ | 1.65 | | $ | 0.47 | |
Second Quarter | | $ | 0.96 | | $ | 0.50 | |
First Quarter | | $ | 1.25 | | $ | 0.70 | |
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2015 | | High | | Low | |
Fourth Quarter | | $ | 1.32 | | $ | 0.71 | |
Third Quarter | | $ | 1.44 | | $ | 0.76 | |
Second Quarter | | $ | 2.30 | | $ | 1.18 | |
First Quarter | | $ | 2.96 | | $ | 1.72 | |
On June 3, 2016 the closing price of our common stock, as reported on the NYSE MKT, was $0.79 per share and there were 538 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 1
The following graph represents the yearly percentage change in the cumulative total return on the common stock of UQM Technologies, Inc., the group of companies comprising the S&P Electrical Equipment Index, and those companies comprising the S&P 500 Index for the five year period from March 31, 2011 through March 31, 2016:
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| | 3/11 | | 3/12 | | 3/13 | | 3/14 | | 3/15 | | 3/16 | |
UQM Technologies, Inc. | | 100 | | 49.66 | | 24.83 | | 88.59 | | 36.91 | | 19.20 | |
S&P 500 | | 100 | | 108.54 | | 123.69 | | 150.73 | | 169.92 | | 172.95 | |
S&P Electrical Components & Equipment | | 100 | | 94.75 | | 112.02 | | 140.20 | | 129.75 | | 127.03 | |
*$100 invested on 3/31/11 in stock or index, including reinvestment of dividends Fiscal year ending March 31.
Copyright 2016 S&P Global. All rights reserved.
1 The stock price performance graph depicted is not “soliciting material,” is not deemed "filed" with the SEC, and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation contained in such filing.
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.
UQM Technologies, Inc.
Selected Consolidated Financial Data
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| | Fiscal Year Ended March 31, | |
| | 2016 | | 2015 | | 2014 | | 2013 | | 2012 | |
Product sales | | $ | 4,592,852 | | $ | 3,218,616 | | $ | 6,136,305 | | $ | 5,910,153 | | $ | 9,358,388 | |
Contract services revenue | | $ | 713,947 | | $ | 797,128 | | $ | 909,895 | | $ | 1,268,556 | | $ | 785,068 | |
Loss before other income (expense) | | $ | (6,976,527) | | $ | (6,859,891) | | $ | (2,782,503) | | $ | (10,707,432) | | $ | (4,953,336) | |
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Net loss | | $ | (6,938,351) | | $ | (5,988,530) | | $ | (2,773,244) | | $ | (10,688,312) | | $ | (4,928,520) | |
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Net loss per common share - basic and diluted | | $ | (0.16) | | $ | (0.15) | | $ | (0.07) | | $ | (0.29) | | $ | (0.14) | |
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Total assets | | $ | 23,350,903 | | $ | 24,801,993 | | $ | 29,835,133 | | $ | 28,608,715 | | $ | 39,655,601 | |
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Long-term obligations (1) | | $ | 288,889 | | $ | 445,024 | | $ | 182,100 | | $ | 627,412 | | $ | 715,107 | |
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Cash dividend declared per common share | | | - | | | - | | | - | | | - | | | - | |
| (1)
| | Includes current portion of long-term obligations.
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
UQM is a developer and manufacturer of power dense, high efficiency electric motors, generators, power electronic controllers, and fuel cell compressors for the commercial truck, bus, automotive, marine, military, and industrial markets. We generate revenue from two principal activities: 1) the sale of motors, generators, electronic controls, and fuel cell compressors; and 2) research, development and application engineering contract services. Our product sales consist of annually recurring volume production, prototype low volume sales, and revenues derived from the sale of refurbished and serviced products. The sources of engineering service revenue typically vary from year to year and individual projects may vary substantially in their periods of performance and aggregate dollar value.
We have invested considerable financial and human resources into the development of our technology and manufacturing operations. We have developed and production-validated a full range of products for use in full-electric, hybrid electric, plug-in-hybrid and fuel cell applications for the commercial bus and truck, automotive, marine, military, and industrial markets. These products are all highly efficient permanent magnet designs and feature outstanding performance, package size and weight valued by our customers. Our production capabilities and capacity are sufficient to meet the demands of our current and future customers for the foreseeable future. We are certified as an ISO/TS 16949 quality supplier, which is the highest level of quality standards in the automotive industry, and we are ISO 14001 certified, meeting the highest environmental standards. We have a management team with significant experience in the automotive industry and the requirements for high quality production programs and very deep technical knowledge of the motor and controller business. This team has the ability and background to grow the business to significantly higher levels, and we believe we have adequate cash balances to fund our operations for at least the next twelve months.
Our most important strategic initiative going forward is to develop customer relationships that lead to longer-term supply contracts. Volume production is the key to our ongoing operations. We are driving business development in the following ways:
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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, particularly in China.
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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 leading 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 needs of our customers.
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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.
In October 2015, we announced the introduction of the PowerPhase® HD(+) electric propulsion systems. The HD(+) is a major improvement in UQM’s motor system technology, offering an enhanced thermal path and an increase in continuous power of up to 25% for handling extreme duty drive cycles and steep grades for heavy duty vehicles.
In October 2015, we announced the signing of a ten year supply agreement (“Agreement”) with ITL Efficiency Corporation (“ITL”) in China. Over the term of the Agreement, revenues could exceed $400 million based on projected volume shipments. Production is expected to begin in early 2017 following development, test and certification programs during 2016, and timing will be dependent on the successful completion of the test and certification processes, followed by orders under the Agreement. We received the first purchase order under the Agreement for the initial 3,000 units which are expected to ship in calendar year 2017. We will manufacture our electric propulsion systems in Colorado through 2017 with plans to produce product in China beginning in calendar year 2018. Initially, the PowerPhase Pro® 135 electric propulsion system will be sold to address the 6-8 meter shuttle bus market in China, with larger delivery truck and transit bus applications slated to begin in early 2017 with the PowerPhase HD® 250 system. Due to the fact of this new Agreement and that management believes the majority of sales of current PP135 inventory will be to ITL, at March 31, 2016, inventory of $6,840,170 was reclassified as a noncurrent asset on the Consolidated Balance Sheet representing that portion of inventory in excess of amounts expected to be sold in the next twelve months, given the parameters and expectations of the Agreement.
In November 2015, we announced that we closed an offering of common stock and warrants to certain institutional investors, raising net proceeds of $5.8 million.
In January 2016, we announced that Kalmar Motor AB in Sweden had successfully passed vehicle trials with major airlines using our propulsion system and plans on beginning production orders by mid-2016 using the PowerPhase® HD220, our heavy-duty commercial traction electric motor/controller system, for their TBL50 airplane tugs. Ground handling tugs play a vital role at airports by enabling large aircraft to be moved from their hangars to the passenger gate, as well as for pushback and other taxiing functions on the runway.
In April 2016, we announced entry into the South American market with a key business relationship in Colombia with Creatti Labs SAS, an electric vehicle integrator that is designing the next generation EV transportation systems for Colombia and other South American markets. We have begun collaboration with Creatti Labs on an electric transit bus platform for the major bus operators in Cali, Medellin and Bogota, which are the three main transportation systems in Colombia.
The Department of Energy grant that was awarded to us in 2010 expired on January 12, 2015. Since the beginning of the grant program, we were reimbursed a total of $27.1 million through March 31, 2015. 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. 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. We have installed a flexible manufacturing footprint that allows us to build both the large and smaller frame size motors and controllers at production capacity levels consistent with the growth targets of our current and potential customers. 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.
With the expiration of the Grant, we launched and re-deployed resources from production engineering activities to several new internally funded projects aimed at developing and significantly improving our product portfolio. This led to a significant increase in research and development expenditures in fiscal year 2016, and we expect those resources to continue to be deployed on similar research and development activities in the future.
The funding from the DOE grant strengthened our position 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 twelve months, makes us optimistic about the future of the Company.
Financial Condition
Cash and cash equivalents at March 31, 2016 were $7,030,230 and working capital was $8,765,522 compared with $6,585,703 and $15,605,555, respectively, at March 31, 2015. The increase in cash and cash equivalents was the result of our capital raise offset by operating losses. Working capital decreased in fiscal year 2016 because we reclassified
some inventory as non-current to reflect the timing of sales projections anticipated in our new long-term supply agreement with ITL.
Accounts receivable decreased $41,013 to $481,404 at March 31, 2016 from $522,417 at March 31, 2015. The decrease is primarily due to the timing of collections. Our sales are conducted through acceptance of customer purchase orders or in some cases through supply agreements. For credit qualified customers, our standard terms are net 30 days. For international customers and customers without an adequate credit rating or history, our typical terms are irrevocable letter of credit or cash payment in advance of delivery. At both March 31, 2016 and 2015, we had an allowance for uncollectible accounts of zero.
Other receivable decreased to zero at March 31, 2016 from $855,000 at March 31, 2015 resulting from insurance proceeds received under a key-man life insurance policy.
Costs and estimated earnings on uncompleted contracts increased to $60,296 at March 31, 2016 versus $49,917 at March 31, 2015. The increase is due to timing of billings on certain contracts in process at March 31, 2016 versus March 31, 2015.
Total inventories decreased $242,612 to $9,111,441 at March 31, 2016 compared to $9,354,053 at March 31, 2015, reflecting shipments of PowerPhase Pro® and PowerPhase HD® propulsion systems.
Prepaid expenses and other current assets increased to $272,597 at March 31, 2016 from $266,448 at March 31, 2015, primarily due to higher levels of prepayments on software licenses outstanding at the end of the current fiscal year versus the prior fiscal year end.
We invested $144,522 for the acquisition of property and equipment during the fiscal year ended March 31, 2016 versus $558,755 during the fiscal year ended March 31, 2015. 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, 2016 and March 31, 2015 were zero and $371,140, respectively, due to the expiration of the Grant in fiscal year 2015.
Patent costs increased to $249,414 at March 31, 2016 compared to $239,043 at March 31, 2015 primarily due to capitalized costs associated with a new patent application partially offset by the amortization of capitalized patent costs.
Trademark costs decreased to $98,327 at March 31, 2016 compared to $102,823 at March 31, 2015 due to the amortization of capitalized trademark costs.
Accounts payable decreased $33,727 to $364,841 at March 31, 2016 from $398,568 at March 31, 2015, primarily due to the timing of vendor payments.
Other current liabilities decreased $559,536 to $985,435 at March 31, 2016 from $1,544,971 at March 31, 2015. The decrease is primarily attributable to the settlement of accrued vendor obligations at March 31, 2016.
Billings in excess of costs and estimated earnings on uncompleted contracts decreased to $0 at March 31, 2016 versus $84,444 at March 31, 2015. The decrease is due to timing of billings on certain contracts in process at March 31, 2016 versus March 31, 2015.
Other long-term liabilities decreased $156,135 to $288,889 at March 31, 2016 from $445,024 at March 31, 2015 due to the amortization of a license fee received from a customer under a ten-year cooperation agreement and revision of the executive employment agreements.
Common stock and additional paid-in capital increased to $483,303 and $128,103,861, respectively, at March 31, 2016 compared to $400,000 and $121,866,061 at March 31, 2015. The increases in common stock and additional paid-in capital were primarily attributable to the registered direct offering that took place in October, 2015 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
Product sales this fiscal year increased 43 percent to $4,592,852 compared to $3,218,616 for the fiscal year ended March 31, 2015, reflecting an increase in orders from our customers, both domestically and internationally. Product sales for the fiscal year ended March 31, 2015 decreased 48 percent to $3,218,616 compared to $6,136,305 for the fiscal year ended March 31, 2014. The decrease was primarily due a slow domestic market resulting in reduced orders from our customers.
Revenue from contract services decreased $83,181, or 10 percent, to $713,947 for the fiscal year ended March 31, 2016 versus $797,128 for the fiscal year ended March 31, 2015. This was driven by a change in mix of contracts in process during the current fiscal year and by decreased levels of customer funded research activities, which vary from period to period. Revenue from contract services decreased $112,767, or 12 percent, to $797,128 for the fiscal year ended March 31, 2015 versus $909,895 for the fiscal year ended March 31, 2014. This was driven by a change in mix of contracts in process and by decreased levels of customer funded research activities.
Gross Profit Margin
Gross profit margins on product sales this fiscal year decreased to 27 percent compared to 35 percent for fiscal 2015. The decrease is primarily due to a change in overhead absorption resulting from the termination of our DOE grant. Gross profit margins on product sales for the fiscal year ended March 31, 2015 decreased to 35 percent compared to 41 percent for fiscal 2014. The decrease is primarily due to the decrease in overhead absorption as a result of lower volumes shipped during the fiscal year.
Gross profit margins on contract services increased to 8 percent this fiscal year compared to nil percent for the fiscal year ended March 31, 2015, reflecting a change in the mix of contracts in process in the current fiscal year. Gross profit margins on contract services for the fiscal year ended March 31, 2015 decreased to nil compared to 18 percent for the fiscal year ended March 31, 2014, reflecting a change in the mix of contracts in process.
Costs and Expenses
Research and development expenditures for the fiscal year ended March 31, 2016 were $3,459,746 compared to $1,131,159 and $219,887 for the fiscal years ended March 31, 2015 and 2014, respectively. Coincident with the contractual end of the DOE Grant on January 12, 2015, we launched and re-deployed resources to several new internally funded projects aimed at developing and significantly improving our product portfolio. The reallocation of expenses from production engineering to research and development led to the significant increase in research and development expenditures for fiscal years ending March 31, 2016 and 2015.
Production engineering costs were $0 for the fiscal year ended March 31, 2016 versus $3,406,923 and $4,644,646 for the prior two fiscal years, respectively. With the expiration of the Grant, we re-deployed resources from production engineering activities to several new internally funded research and development activities, which led to the reduction in production engineering costs in the current fiscal year. The decrease for the fiscal year ended March 31, 2015 was attributable to decreased levels of product qualification and testing activities.
Reimbursement of costs under the DOE Grant were $0 in fiscal year 2016 versus $1,901,109 and $3,625,853 for each of the two prior fiscal years, respectively. The decrease for the current fiscal is attributable to the expiration of the Grant which occurred during the fourth quarter of fiscal year 2015. During the fiscal year ended March 31, 2014, 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 fiscal 2015 were 57 percent of production engineering expenditures versus 85 percent for the fiscal year ended March 31, 2014, reflecting a decrease in our estimated reimbursable overhead costs.
Selling, general and administrative expenses this fiscal year were $5,406,628 compared to $5,337,795 and $5,143,864 for the fiscal years ended March 31, 2015 and 2014, respectively. The increase this fiscal year is attributable to an increase in legal and business development expenses. The increase for the fiscal year ended March 31, 2015 is attributable to higher marketing and business development expenses.
Other
Recovery of impaired assets was $585,800 for fiscal year ended March 31, 2016 and $0 for fiscal year ended March 31, 2015 compared to recovery of impaired assets of $868,475 for the fiscal year ended March 31, 2014. During the fiscal year ended March 31, 2016, we reduced the carrying value of the accrued vendor settlement liability by $585,800, due to the settlement with a vendor. 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.
Interest income decreased to $8,122 for the current fiscal year compared to $12,306 and $1,787 for the fiscal years ended March 31, 2015 and 2014, respectively. The decrease this fiscal year versus fiscal year 2015 is attributable to lower yields and lower levels of invested cash balances prior to the registered direct offering in October, 2015. The increase for fiscal 2015 compared to fiscal 2014 is attributable to higher yields on invested cash balances.
Other income for the fiscal year ended March 31, 2016 was $30,054 versus $859,055 and $7,472 for the fiscal years ended March 31, 2015 and 2014, respectively. The decrease for fiscal year 2016 compared to fiscal year 2015 is attributable to insurance proceeds received under a key-man life insurance policy.
Net Loss
As a result, net loss for the fiscal year ended March 31, 2016 was $6,938,351, or $0.16 per common share, compared to a net loss of $5,988,530, or $0.15 per common share, and $2,773,244, or $0.07 per common share, for the fiscal years ended March 31, 2015 and 2014, respectively.
Liquidity and Capital Resources
Our cash balances and liquidity throughout the fiscal year ended March 31, 2016 were adequate to meet operating needs. At March 31, 2016, we had cash and cash equivalents of $7,030,230 and working capital of $8,765,522 compared to $6,585,703 and $15,605,555 at March 31, 2015, respectively. Working capital declined as of March 31, 2016 because we reclassified some inventory as non-current to reflect the timing of sales projections anticipated in our new long-term supply agreement with ITL.
For the year ended March 31, 2016, net cash used in operating activities was $5,104,097 compared to net cash used in operating activities of $3,363,094 and $622,732 for the years ended March 31, 2015 and 2014, respectively. The increase in cash used in operating activities for the current fiscal year versus fiscal 2015 is primarily attributable to increased net losses due to the DOE Grant ending in the fourth quarter of fiscal 2015 and the settlement of a lawsuit. The increase in cash used in operating activities for fiscal 2015 compared to fiscal 2014 is primarily attributable to increased net losses due to lower product sales revenue during fiscal 2015 and an adjustment recorded in fiscal year 2014 to our cumulative estimate of reimbursable rates under the Grant which resulted in a one-time pick-up of $958,000. These changes were partially offset by decreased levels of inventory and decreased levels of costs and estimated earnings in excess of billings on uncompleted contracts.
Net cash used in investing activities for the fiscal year ended March 31, 2016 was $176,625 compared to cash used by investing activities of $153,127 and cash provided by investing activities of $1,348,248 for the fiscal years ended March 31, 2015 and 2014, respectively. The change for the current fiscal year is primarily due to decreased levels of net investments in property and equipment during the current year. The decrease in cash provided for the fiscal year ended March 31, 2015 versus fiscal 2014 was primarily due to higher levels of net investments in property and equipment during the current year, and proceeds from the sale of our former facility during fiscal 2014.
Net cash provided by financing activities was $5,725,249for the fiscal year ended March 31, 2016 versus cash used by financing activities of $145,188 for fiscal year 2015 and cash provided by financing activities of $4,993,697 for the fiscal year ended March 31, 2014. The change in cash provided in the current fiscal year was primarily attributable to the cash received by the registered direct offering in October, 2015. The change in cash used in financing activities in fiscal year 2015 was primarily attributable to completion of a follow-on offering during fiscal 2014.
We expect to fund our operations over the next year from existing cash and cash equivalent balances and the reduction of inventories. Although we expect to manage our operations and working capital requirements to minimize the future level of operating losses and working capital usage, our working capital requirements may increase in the future. If customer demand accelerates substantially, our working capital requirements may also increase substantially.
If our existing financial resources are not sufficient to execute our business plan, we may issue equity or debt securities in the future, although we cannot assure that we will be able to secure additional capital should it be required to implement our current business plan. In the event financing or equity capital to fund future growth is not available on terms acceptable to us, or at all, we will modify our strategy to align our operations with then available financial resources. Based on our current level of operations, we believe we have sufficient cash and cash equivalents to fund our operations for at least the next twelve months.
Contractual Obligations
The following table presents information about our contractual obligations and commitments as of March 31, 2016:
| | | | | | | | | | | | | | | | |
| | | | | Payments due by Period | |
| | | | | Less Than | | | | | | | | More than | |
| | Total | | 1 Year | | 2 - 3 Years | | 4 - 5 Years | | 5 Years | |
Purchase obligations | | $ | 292,650 | | $ | 292,650 | | $ | - | | $ | - | | $ | - | |
Executive employment agreements (1) | | | 132,222 | | | - | | | 132,222 | | | - | | | - | |
Total | | $ | 424,872 | | $ | 292,650 | | $ | 132,222 | | $ | — | | $ | — | |
| (1)
| | Includes retention bonus payable under executive employment agreements if our officers remain employees of UQM continuously through June 30, 2017, but not annual cash compensation under the agreements. This is reflected in other long-term liabilities in the accompanying Consolidated Balance Sheets.
|
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 as appropriate.
As of March 31, 2016, we had approximately $7.7 million of PowerPhase Pro® inventory originally purchased or manufactured for a former customer who subsequently filed for bankruptcy protection. We evaluate PowerPhase Pro® inventory separately from our other inventory to determine whether the inventory is impaired. We considered the following factors in our evaluation of the need for a reserve of the PowerPhase Pro® inventory as of March 31, 2016, 2015 and 2014:
| ·
| | Demand from customers who had purchased the system in the past and the prospects for future purchases.
|
| ·
| | Potential demand for the system from identified customers who were considering purchasing the system, but had not yet done so.
|
| ·
| | The potential to identify additional customers for the system who were not currently engagedSchedule 13G filed on February 25, 2019 with the Company in the sales cycle.
|
| ·
| | Our ability to sell this inventory as is or with only minor modifications.
|
| ·
| | Our ability to sell the systems at prices above our inventory cost.
|
| ·
| | The risk of technical obsolescence for the system over the expected selling period.SEC by Roger M. Kline.
|
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. We have analyzed sales forecasts of current and potential customers for this product, including the forecasts anticipated in the new long-term supply agreement with ITL, although at lower margins, and believe that there is sufficient market demand to consume the balance of the PowerPhase Pro® inventory currently on hand. We continue to sell this product at selling prices in excess of inventory cost and believe that we will be able to do so in the future. As of March 31, 2016 and 2015, no impairment of this inventory was recorded.
During the fiscal years ended March 31, 2016, 2015 and 2014, we recorded inventory impairments for obsolescence other than PowerPhase Pro® inventory of $9,906, $44,451 and $5,047, respectively.
It is reasonably possible that future events or changes in circumstances could cause the realizable value of our inventories to decline materially, resulting in material impairment losses.
Accounts Receivable
Our trade accounts receivable are subject to credit risks associated with the financial condition of our customers and their liquidity. We evaluate all customers periodically to assess their financial condition and liquidity and set appropriate credit limits based on this analysis. As a result, the collectability of accounts receivable may change due to changing general economic conditions and factors associated with each customer’s particular business. In light of current economic conditions, we may need to maintain an allowance for bad debts in the future. It is also reasonably possible that future events or changes in circumstances could cause the realizable value of our trade accounts receivable to decline materially, resulting in material losses.
Percentage of Completion Revenue Recognition on Long-term Contracts: Costs and Estimated Earnings in Excess of Billings onCompany Equity Compensation Plans 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, 2016 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. 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.
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 sheet of UQM Technologies, Inc. and subsidiaries as of March 31, 2016, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of UQM Technologies, Inc. and subsidiaries as of March 31, 2016 and the results of their operations and their cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.
/s/ Hein & Associates LLP
Denver, Colorado
June 7 2016
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
UQM Technologies, Inc.
We have audited the accompanying consolidated balance sheet of UQM Technologies, Inc. (a Colorado corporation) and subsidiaries (the “Company”) as of March 31, 2015, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the two years in the period ended March 31, 2015. 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, 2015, and the results of their operations and their cash flows for each of the two years in the period ended March 31, 2015, in conformity with accounting principles generally accepted in the United States of America.
/s/ GRANT THORNTON LLP
Denver, Colorado
May 28, 2015
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
| | | | | | | |
| | Fiscal Year Ended March 31, | |
| | 2016 | | 2015 | |
Assets | | | | | | | |
Current assets: | | | | | | | |
Cash and cash equivalents | | $ | 7,030,230 | | $ | 6,585,703 | |
Accounts receivable | | | 481,404 | | | 522,417 | |
Other receivable | | | - | | | 855,000 | |
Costs and estimated earnings in excess of billings on uncompleted contracts | | | 60,296 | | | 49,917 | |
Inventories | | | 2,271,271 | | | 9,354,053 | |
Prepaid expenses and other current assets | | | 272,597 | | | 266,448 | |
Total current assets | | | 10,115,798 | | | 17,633,538 | |
| | | | | | | |
Property and equipment, at cost: | | | | | | | |
Land | | | 1,683,330 | | | 1,683,330 | |
Building | | | 4,516,301 | | | 4,516,301 | |
Machinery and equipment | | | 7,089,332 | | | 7,037,200 | |
| | | 13,288,963 | | | 13,236,831 | |
Less accumulated depreciation | | | (7,241,769) | | | (6,410,242) | |
Net property and equipment | | | 6,047,194 | | | 6,826,589 | |
| | | | | | | |
Patent costs, net of accumulated amortization of $916,960 and $895,227, respectively | | | 249,414 | | | 239,043 | |
| | | | | | | |
Trademark costs, net of accumulated amortization of $77,514 and $73,018, respectively | | | 98,327 | | | 102,823 | |
| | | | | | | |
Noncurrent inventories | | | 6,840,170 | | | - | |
| | | | | | | |
Total assets | | $ | 23,350,903 | | $ | 24,801,993 | |
See accompanying notes to consolidated financial statements.
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
| | | | | | | |
| | Fiscal Year Ended March 31, | |
| | 2016 | | 2015 | |
Liabilities and Stockholders’ Equity | | | | | | | |
Current liabilities: | | | | | | | |
Accounts payable | | $ | 364,841 | | $ | 398,568 | |
Other current liabilities | | | 985,435 | | | 1,544,971 | |
Billings in excess of costs and estimated earnings on uncompleted contracts | | | - | | | 84,444 | |
Total current liabilities | | | 1,350,276 | | | 2,027,983 | |
| | | | | | | |
Other long-term liabilities | | | 288,889 | | | 445,024 | |
| | | | | | | |
Total liabilities | | | 1,639,165 | | | 2,473,007 | |
| | | | | | | |
Commitments and contingencies (Note 7) | | | | | | | |
| | | | | | | |
Stockholders’ equity: | | | | | | | |
Common stock, $0.01 par value, 75,000,000 and 50,000,000 shares authorized; 48,330,286 and 39,999,984 shares issued and outstanding, respectively | | | 483,303 | | | 400,000 | |
Additional paid-in capital | | | 128,103,861 | | | 121,866,061 | |
Accumulated deficit | | | (106,875,426) | | | (99,937,075) | |
Total stockholders’ equity | | | 21,711,738 | | | 22,328,986 | |
| | | | | | | |
Total liabilities and stockholders’ equity | | $ | 23,350,903 | | $ | 24,801,993 | |
See accompanying notes to consolidated financial statements.
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
| | | | | | | | | | |
| | Fiscal Year Ended March 31, | |
| | 2016 | | 2015 | | 2014 | |
Revenue: | | | | | | | | | | |
Product sales | | $ | 4,592,852 | | $ | 3,218,616 | | $ | 6,136,305 | |
Contract services | | | 713,947 | | | 797,128 | | | 909,895 | |
| | | 5,306,799 | | | 4,015,744 | | | 7,046,200 | |
Operating costs and expenses: | | | | | | | | | | |
Costs of product sales | | | 3,343,508 | | | 2,101,610 | | | 3,609,028 | |
Costs of contract services | | | 659,244 | | | 798,038 | | | 743,068 | |
Research and development | | | 3,459,746 | | | 1,131,159 | | | 219,887 | |
Production engineering | | | - | | | 3,406,923 | | | 4,644,646 | |
Reimbursement of costs under DOE grant | | | - | | | (1,901,109) | | | (3,625,853) | |
Selling, general and administrative | | | 5,406,628 | | | 5,337,795 | | | 5,143,864 | |
Recovery of impaired assets | | | (585,800) | | | - | | | (868,475) | |
Loss (gain) on disposal of long- lived assets | | | - | | | 1,219 | | | (37,462) | |
| | | 12,283,326 | | | 10,875,635 | | | 9,828,703 | |
| | | | | | | | | | |
Loss before other income | | | (6,976,527) | | | (6,859,891) | | | (2,782,503) | |
| | | | | | | | | | |
Other income: | | | | | | | | | | |
Interest income | | | 8,122 | | | 12,306 | | | 1,787 | |
Other | | | 30,054 | | | 859,055 | | | 7,472 | |
| | | 38,176 | | | 871,361 | | | 9,259 | |
| | | | | | | | | | |
Net loss | | $ | (6,938,351) | | $ | (5,988,530) | | $ | (2,773,244) | |
| | | | | | | | | | |
Net loss per common share - basic and diluted | | $ | (0.16) | | $ | (0.15) | | $ | (0.07) | |
| | | | | | | | | | |
Weighted average number of shares of common stock outstanding - basic and diluted | | | 43,574,137 | | | 39,940,795 | | | 37,253,066 | |
See accompanying notes to consolidated financial statements.
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity
| | | | | | | | | | | | | | | | |
| | Number of | | | | | | | | | | | | | |
| | common | | | | | Additional | | | | | Total | |
| | shares | | Common | | paid-in | | Accumulated | | stockholders’ | |
| | issued | | stock | | capital | | deficit | | equity | |
| | | | | | | | | | | | | | | | |
Balances at April 1, 2013 | | | 36,664,097 | | $ | 366,641 | | $ | 115,573,331 | | $ | (91,175,301) | | $ | 24,764,671 | |
| | | | | | | | | | | | | | | | |
Issuance of common stock under employee stock purchase plan | | | 62,421 | | | 624 | | | 60,065 | | | - | | | 60,689 | |
Issuance of common stock in follow-on
offering, net of offering costs | | | 2,864,872 | | | 28,649 | | | 4,883,284 | | | - | | | 4,911,933 | |
Issuance of common stock under stock bonus plan | | | 166,231 | | | 1,663 | | | 34,836 | | | - | | | 36,499 | |
Issuance of common stock upon exercise of employee options | | | 20,146 | | | 201 | | | 20,874 | | | - | | | 21,075 | |
Compensation expense from employee and director stock option and common stock grants | | | - | | | - | | | 753,372 | | | - | | | 753,372 | |
Net loss | | | - | | | - | | | - | | | (2,773,244) | | | (2,773,244) | |
Balances at March 31, 2014 | | | 39,777,767 | | $ | 397,778 | | $ | 121,325,762 | | $ | (93,948,545) | | $ | 27,774,995 | |
| | | | | | | | | | | | | | | | |
Issuance of common stock under employee stock purchase plan | | | 12,052 | | | 120 | | | 21,935 | | | - | | | 22,055 | |
Issuance of common stock under stock bonus plan | | | 288,051 | | | 2,881 | | | 29,563 | | | - | | | 32,444 | |
Issuance of common stock upon exercise of employee options | | | 5,053 | | | 50 | | | 4,447 | | | - | | | 4,497 | |
Retirement of vested shares | | | (82,939) | | | (829) | | | (170,911) | | | - | | | (171,740) | |
Compensation expense from employee and director stock option and common stock grants | | | - | | | - | | | 655,265 | | | - | | | 655,265 | |
Net loss | | | - | | | - | | | - | | | (5,988,530) | | | (5,988,530) | |
Balances at March 31, 2015 | | | 39,999,984 | | $ | 400,000 | | $ | 121,866,061 | | $ | (99,937,075) | | $ | 22,328,986 | |
| | | | | | | | | | | | | | | | |
Issuance of common stock under employee stock purchase plan | | | 62,932 | | $ | 629 | | $ | 38,748 | | $ | - | | $ | 39,377 | |
Issuance of common stock under registered direct offering | | | 8,000,000 | | | 80,000 | | | 5,698,463 | | | - | | | 5,778,463 | |
Issuance of common stock under stock bonus plan | | | 377,047 | | | 3,771 | | | 11,805 | | | - | | | 15,576 | |
Common stock used for tax withholdings | | | (109,677) | | | (1,097) | | | (91,494) | | | - | | | (92,591) | |
Compensation expense from employee and director stock option and common stock grants | | | - | | | - | | | 580,278 | | | - | | | 580,278 | |
Net loss | | | | | | | | | | | | (6,938,351) | | | (6,938,351) | |
Balances at March 31, 2016 | | | 48,330,286 | | $ | 483,303 | | $ | 128,103,861 | | $ | (106,875,426) | | $ | 21,711,738 | |
See accompanying notes to consolidated financial statements.
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
| | | | | | | | | | |
| | Fiscal Year Ended March 31, | |
| | 2016 | | 2015 | | 2014 | |
Cash flows from operating activities: | | | | | | | | | | |
Net loss | | $ | (6,938,351) | | $ | (5,988,530) | | $ | (2,773,244) | |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | | | |
Depreciation and amortization | | | 950,145 | | | 1,061,312 | | | 1,136,021 | |
Non-cash equity based compensation | | | 595,854 | | | 687,709 | | | 789,871 | |
Recovery of assets | | | (585,800) | | | - | | | (868,475) | |
Loss (gain) on disposal of long-lived assets | | | - | | | 1,219 | | | (37,462) | |
Impairment of inventories | | | 9,906 | | | 44,451 | | | 5,047 | |
Change in operating assets and liabilities: | | | | | | | | | | |
Accounts receivable | | | 41,013 | | | 328,080 | | | 1,218,971 | |
Other receivable | | | 855,000 | | | (855,000) | | | - | |
Costs and estimated earnings on uncompleted contracts | | | (10,379) | | | 291,338 | | | (162,991) | |
Inventories | | | 232,706 | | | 655,918 | | | 938,992 | |
Prepaid expenses and other current assets | | | (6,149) | | | (2,460) | | | 45,969 | |
Accounts payable and other current liabilities | | | (7,463) | | | 65,501 | | | (470,119) | |
Billings in excess of costs and estimated earnings on uncompleted contracts | | | (84,444) | | | 84,444 | | | - | |
Other long-term liabilities | | | (156,135) | | | 262,924 | | | (445,312) | |
Net cash used in operating activities | | | (5,104,097) | | | (3,363,094) | | | (622,732) | |
| | | | | | | | | | |
Cash flows from investing activities: | | | | | | | | | | |
Purchases of short-term investments | | | - | | | - | | | (593) | |
Maturities of short-term investments | | | - | | | 63,029 | | | - | |
Acquisition of property and equipment | | | (144,522) | | | (558,755) | | | (377,224) | |
Property and equipment reimbursements received from DOE under grant | | | - | | | 371,140 | | | 215,754 | |
Cash paid for patent and trademark fees | | | (32,103) | | | (28,541) | | | (54,721) | |
Cash proceeds from the sale of building and equipment | | | - | | | - | | | 1,565,032 | |
Net cash (used in) provided by investing activities | | | (176,625) | | | (153,127) | | | 1,348,248 | |
| | | | | | | | | | |
Cash flows from financing activities: | | | | | | | | | | |
Cash received for shares exercised under employee stock purchase plan | | | 39,377 | | | 4,497 | | | 21,075 | |
Cash received for exercise of employee options | | | - | | | 22,055 | | | 60,689 | |
Issuance of common stock in registered direct offering, net of offering costs | | | 5,778,463 | | | - | | | 4,911,933 | |
Payment of employee tax withholdings in exchange for return of common stock | | | (92,591) | | | (171,740) | | | - | |
Net cash provided by (used in) financing activities | | | 5,725,249 | | | (145,188) | | | 4,993,697 | |
| | | | | | | | | | |
Increase (decrease) in cash and cash equivalents | | | 444,527 | | | (3,661,409) | | | 5,719,213 | |
Cash and cash equivalents at beginning of period | | | 6,585,703 | | | 10,247,112 | | | 4,527,899 | |
Cash and cash equivalents at end of period | | $ | 7,030,230 | | $ | 6,585,703 | | $ | 10,247,112 | |
See accompanying notes to consolidated financial statements.
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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, military, and industrial markets, and from contract research and development services. We are impacted by other factors such as the continued receipt of contracts from industrial and governmental parties, our ability to protect and maintain the proprietary nature of our technology, continued product and technological advances and our ability, together with our partners, to commercialize our products and technology.
(b) Principles of Consolidation
The consolidated financial statements include the accounts of UQM Technologies, Inc. and its majority-owned subsidiary. All intercompany accounts and transactions have been eliminated in consolidation.
(c) Cash and Cash Equivalents
We consider cash on hand and investments with original maturities of three months or less to be cash and cash equivalents.
We limit our cash and cash equivalents to high quality financial institutions in order to minimize our credit risk. We maintain cash and cash equivalent balances with financial institutions that exceed federally insured limits. We have not experienced any losses related to these balances and management believes our credit risk to be minimal.
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UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(d) 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 both March 31, 2016 and 2015, we had no allowance for doubtful accounts receivable. The following represents activity under our allowance for doubtful accounts receivable for the fiscal years ended March 31, 2016, 2015 and 2014:
| | | | | | | | | | | | | |
| | | | | Additions | | | | | | |
| | Balance at | | Charged to | | Charged to | | | | | | |
| | Beginning | | Costs and | | Other | | | | Balance at | |
| | of Year | | Expenses | | Accounts | | Deductions | | End of Year | |
Year ended March 31, 2016 | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Allowance for doubtful accounts- deducted from accounts receivable | | $ | — | | — | | — | | — | | $ | — | |
| | | | | | | | | | | | | |
Year ended March 31, 2015 | | | | | | | | | | | | | |
Allowance for doubtful accounts- deducted from accounts receivable | | $ | — | | — | | — | | — | | $ | — | |
| | | | | | | | | | | | | |
Year ended March 31, 2014 | | | | | | | | | | | | | |
Allowance for doubtful accounts- deducted from accounts receivable | | $ | 3,838,092 | | — | | — | | 3,838,092 | | $ | — | |
(e) Inventories
Inventories are stated at the lower of cost or market. Cost is determined by the first-in, first-out method. We analyze slow-moving and excess inventory on a periodic basis and we charge directly to expense obsolete inventory items during the period we assess the value of such inventory to be impaired. For the fiscal years ended March 31, 2016, 2015 and 2014, we recognized impaired inventory of $9,906, $44,451 and $5,047, respectively. See Footnote 3.
(f) Property and Equipment
Property and equipment are stated at cost, unless the asset was acquired, in part, with U.S. Department of Energy (“DOE”) grant funds, in which case it is stated at cost net of DOE reimbursements. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range from three to five years, except for buildings, 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, 2016, 2015 and 2014 was $923,917, $1,040,499 and $1,098,622, respectively, and was reported in operating costs and expenses on the Consolidated Statements of Operations.
(g) Patent and Trademark Costs
Patent and trademark costs consist primarily of legal expenses, and represent those costs incurred by us for the filing of patent and trademark applications. Amortization of patent and trademark costs is computed using the straight-line method over the estimated useful life of the asset, typically 8 years for patents, and 40 years for
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UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
trademarks. Amortization expense for the fiscal years ended March 31, 2016, 2015 and 2014 was $26,228, $20,813, and $37,399, respectively.
(h) Impairment of Long-Lived Assets
We periodically evaluate whether circumstances or events have affected the recoverability of long-lived assets including intangible assets with finite useful lives. The assessment of possible impairment is based on our ability to recover the carrying value of the asset or groups of assets from expected future cash flows (undiscounted and without interest charges) estimated by management. If expected future cash flows are less than the carrying value, an impairment loss is recognized to adjust the asset to fair value as determined by expected discounted future cash flows.
(i)Product Warranties
Our warranty policy generally provides three months to four years of coverage depending on the product. We record a liability for estimated warranty obligations at the date products are sold. The estimated cost of warranty coverage is based on our actual historical experience with our current products or similar products. For new products, the required reserve is based on historical experience of similar products until sufficient historical data has been collected on the new product. Adjustments are made as new information becomes available. The following is a summary of warranty activity for the fiscal years ended March 31, 2016, 2015 and 2014:
| | | | | | | | | | | | | |
| | | | | Additions | | | | | | |
| | Balance at | | Charged to | | Charged to | | | | | | |
| | Beginning | | Costs and | | Other | | | | Balance at | |
| | of Year | | Expenses | | Accounts | | Deductions (A) | | End of Year | |
Year ended March 31, 2016 | | | | | | | | | | | | | |
Accrued warranty cost | | $ | 184,920 | | 102,247 | | - | | (42,857) | | $ | 244,310 | |
| | | | | | | | | | | | | |
Year ended March 31, 2015 | | | | | | | | | | | | | |
Accrued warranty cost | | $ | 175,661 | | 73,678 | | - | | (64,419) | | $ | 184,920 | |
| | | | | | | | | | | | | |
Year ended March 31, 2014 | | | | | | | | | | | | | |
Accrued warranty cost | | $ | 77,393 | | 164,567 | | - | | (66,299) | | $ | 175,661 | |
Note (A) Represents actual warranty payments for units covered under warranty
(j) Revenue and Cost Recognition
Revenue from sales of products is generally recognized at the time title to the goods and the benefits and risks of ownership passes to the customer, which is typically when products are shipped based on the terms of the customer purchase agreement.
Revenue relating to long-term fixed price contracts is recognized using the percentage of completion method. Under the percentage of completion method, contract revenues and related costs are recognized based on the percentage that costs incurred to date bear to total estimated costs. Changes in job performance, estimated profitability and final contract settlements may result in revisions to cost and revenue, and are recognized in the period in which the revisions are determined. Contract costs include all direct materials, subcontract and labor costs and other indirect costs. Selling, general and administrative costs are charged to expense as incurred. At the time a loss on a contract becomes known, the entire amount of the estimated loss is accrued.
The aggregate of costs incurred and estimated earnings recognized on uncompleted contracts in excess of related billings is shown as a current asset, and billings on uncompleted contracts in excess of costs incurred and estimated earnings is shown as a current liability.
(k) Government Grants
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UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
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.
(l) 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.
(m) Research and Development
Costs of researching and developing new technology, or significantly altering existing technology, are expensed as incurred.
(n) Loss Per Common Share
The following table sets forth information as of December 31, 2018, with respect to the computation of basic and diluted net loss per share for the fiscal years ended March 31, 2016, 2015 and 2014:Company’s equity compensation plans:
| | | | | | | | | | |
| | Fiscal Year Ended March 31, | |
| | 2016 | | 2015 | | 2014 | |
Numerator: | | | | | | | | | | |
Net loss | | $ | (6,938,351) | | $ | (5,988,530) | | $ | (2,773,244) | |
Denominator for basic and diluted net loss per common share: | | | | | | | | | | |
Weighted average number of shares of common stock outstanding - basic and diluted | | | 43,574,137 | | | 39,940,795 | | | 37,253,066 | |
| | | | | | | | | | |
Net loss per common share - basic and diluted | | $ | (0.16) | | $ | (0.15) | | $ | (0.07) | |
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UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The following table sets forth the potential shares of common stock that are not included in the calculation of diluted net loss per share because to do so would be anti-dilutive as of the end of each period presented:
| | | | | | | | | | |
| | March 31, | |
| | 2016 | | 2015 | | 2014 | |
| | | | | | | | | | |
Non-vested stock bonus plan shares | | | 88,214 | | | 432,039 | | | 640,979 | |
Stock options outstanding | | | 2,561,769 | | | 3,006,009 | | | 3,342,627 | |
Warrants to purchase common stock | | | 5,489,733 | | | 1,489,733 | | | 1,489,733 | |
(o) 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, obsolescence reserves, and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
(p) New Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued a new standard to achieve a consistent application of revenue recognition within the U.S., resulting in a single revenue model to be applied by reporting companies under U.S. generally accepted accounting principles. Under the new model, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that reporting companies disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new standard is effective for us for the first fiscal year beginning after December 15, 2017. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The new standard is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application. We are in the process of determining the impact of this guidance on our financial statements.
In August 2014, the FASB issued guidance on determining when and how to disclose going-concern uncertainties in the financial statements. The new standard provides guidance around management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. The new guidance applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. We expect the new standard to increase the disclosures we provide regarding our liquidity and cash obligations.
In July 2015, the FASB issued guidance on simplifying the measurement of inventory from the lower of cost or market to the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This guidance is effective for years beginning after December 15, 2016, including interim periods within those fiscal years. Prospective application is allowed as of the beginning of an interim or annual reporting period. An entity is only required to disclose the nature of and reason for the change in accounting principle in the first interim and annual period of adoption. We are in the process of determining the impact of this guidance on our financial statements.
In March 2016, the FASB issued guidance on improvements to employee share-based payment accounting for stock compensation. The new standard addresses the topics of accounting for income taxes, classification of excess tax benefits on the Statement of Cash Flows, forfeitures, minimum statutory tax withholding requirements, classification of employee taxes paid on the Statement of Cash Flows when an employer
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UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
withholds shares for tax withholding purposes. This is effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods. Early adoption is permitted within any interim or annual period. Any adjustments should be reflective as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all the amendments in the same period. We are in the process of determining the impact of this guidance on our financial statements.
(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, 2016 and March 31, 2015, the estimated period to complete contracts in process ranged from one to six months and one to thirteen months, respectively. We expect to collect all accounts receivable arising from these contracts within sixty days of billing.
The following summarizes contracts in process:
| | | | | | | |
| | Fiscal Year Ended March 31, | |
| | 2016 | | 2015 | |
Costs incurred on uncompleted contracts | | $ | 2,607,764 | | $ | 2,327,816 | |
Estimated earnings | | | 717,771 | | | 626,075 | |
| | | 3,325,535 | | | 2,953,891 | |
Less billings to date | | | (3,265,239) | | | (2,988,418) | |
| | | | | | | |
Contracts in process | | $ | 60,296 | | $ | (34,527) | |
| | | | | | | |
Included in the accompanying Consolidated Balance Sheets as follows: | | | | | | | |
| | | | | | | |
Costs and estimated earnings in excess of billings on uncompleted contracts | | $ | 60,296 | | $ | 49,917 | |
Billings in excess of costs and estimated earnings on uncompleted contracts | | | - | | | (84,444) | |
Contracts in process | | $ | 60,296 | | $ | (34,527) | |
(3) Inventories
Inventories consist of:
| | | | | | | |
| | Fiscal Year Ended March 31, | |
| | 2016 | | 2015 | |
Raw materials | | $ | 7,279,633 | | $ | 7,261,568 | |
Work-in-process | | | 45,506 | | | 25,842 | |
Finished products | | | 1,786,302 | | | 2,066,643 | |
| | $ | 9,111,441 | | $ | 9,354,053 | |
| | | | | | |
| | Fiscal Year Ended March 31, |
| | 2016 | | 2015 |
Inventories- current | | $ | 2,271,271 | | $ | 9,354,053 |
Inventories- noncurrent | | | 6,840,170 | | | - |
| | $ | 9,111,441 | | $ | 9,354,053 |
During the fiscal year ended March 31, 2016, the Company entered into a ten year supply agreement (“Agreement”) with ITL Efficiency Corporation (“ITL”) in China. The Agreement anticipates that development, test and
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UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
certification programs will take place during calendar 2016, and that production will commence in early calendar 2017. The Company also received a purchase order for the first 3,000 units which are planned to ship in calendar year 2017. It is expected that the majority of the first 3,000 units shipped will be PP135 electric propulsion systems to address the 6-8 meter shuttle bus market in China.
Due to the fact of this new Agreement and that management believes the majority of sales of current PP135 inventory will be to ITL, at March 31, 2016, inventory of $6,840,170 was reclassified as a noncurrent asset on the Consolidated Balance Sheet representing that portion of inventory in excess of amounts expected to be sold in the next twelve months, given the parameters and expectations of the Agreement.
(4) Patents and Trademarks
Patents owned by the Company had a gross carrying amount of $1,166,374 and $1,134,270, accumulated amortization of $916,960 and $895,227, and a net carrying amount of $249,414 and $239,043, at March 31, 2016 and 2015, respectively. Trademarks owned by the Company had a gross carrying amount of $175,841 and $175,841, accumulated amortization of $77,514 and $73,018, and a net carrying value of $98,327 and $102,823 at March 31, 2016 and 2015, 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 8 years for patents, and 40 years for trademarks.
Estimated future amortization of these intangible assets by fiscal year is as follows:
| | | | | | | |
| | Patents | | Trademarks | |
2017 | | $ | 21,566 | | $ | 4,496 | |
2018 | | | 21,089 | | | 4,496 | |
2019 | | | 17,347 | | | 4,496 | |
2020 | | | 11,354 | | | 4,496 | |
2021 | | | 8,627 | | | 4,496 | |
Thereafter | | | 169,431 | | | 75,847 | |
| | $ | 249,414 | | $ | 98,327 | |
(5) Government Grant
We had a grant (the “Grant”) with the DOE under the American Recovery and Reinvestment Act. The Grant provided funds to facilitate the manufacture and deployment of electric drive vehicles, batteries and electric drive vehicle components in the United States. Under the terms of the Agreement, the DOE reimbursed 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 and other products. The Grant ended on January 12, 2015.
The Grant was also subject to our compliance with certain reporting requirements. The American Recovery and Reinvestment Act imposed minimum construction wages and labor standards for projects funded by the Grant. If we dispose of assets acquired using Grant funding, we may be required to reimburse the DOE upon such sale date if the fair value of the asset on the date of disposition exceeds $5,000. The amount of any such reimbursement shall be equal to 50 percent of the fair value of the asset on the date of disposition.
At March 31, 2015, we had received reimbursements from the DOE under the Grant totaling approximately $27.1 million.
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UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The application of grant funds to the recorded value of eligible capital asset purchases under the Grant as of March 31, 2015 is as follows:
| | | | | | | | | | |
| | March 31, 2015 | |
| | Purchase Cost | | Grant Funding | | Recorded Value | |
Land | | $ | 896,388 | | $ | 448,194 | | $ | 448,194 | |
Building | | | 9,906,736 | | | 4,953,368 | | | 4,953,368 | |
Machinery and Equipment | | | 8,462,961 | | | 4,231,480 | | | 4,231,481 | |
| | $ | 19,266,085 | | $ | 9,633,042 | | $ | 9,633,043 | |
(6) Other Current Liabilities
Other current liabilities consist of:
| | | | | | | |
| | Fiscal Year Ended March 31, | |
| | 2016 | | 2015 | |
Accrued payroll and employee benefits | | $ | 141,544 | | $ | 183,245 | |
Accrued personal property and real estate taxes | | | 174,260 | | | 208,162 | |
Accrued warranty costs | | | 244,310 | | | 184,920 | |
Unearned revenue | | | 79,956 | | | 37,000 | |
Accrued royalties | | | 48,336 | | | 48,336 | |
Accrued import duties | | | 87,100 | | | 87,100 | |
Accrued vendor settlements | | | 189,175 | | | 774,974 | |
Other | | | 20,754 | | | 21,234 | |
| | $ | 985,435 | | $ | 1,544,971 | |
(7) Commitments and Contingencies
Employment Agreements
On July 21, 2015, the Company entered into new employment agreements with its executive officers that expire on June 30, 2017. The aggregate future base salary payable to the executive officers over their remaining terms is $1,347,975. The July, 2015 employment agreements provide for future retention payments under the conditions and for the amounts specified in the agreements. These retention payments are being recorded over the required service period and as a result, we have recorded a liability of $132,222 at March 31, 2016. As of March 31, 2015 we had a liability of $268,357 representing the potential future compensation payable under the retirement and voluntary termination provisions of the previous employment agreements of the Company’s officers. These retirement and voluntary termination provisions were eliminated from the employment agreements when they were renewed in July, 2015.
Lease Commitments
At March 31, 2016, there were no operating leases and there was no rental expense during the years ended March 31, 2016, 2015 and 2014.
Litigation
In November, 2015, we were notified that a supplier of electronic components under the former CODA automotive program had filed a lawsuit against us alleging breach of contract. This lawsuit has been settled as of March 31, 2016 and we have adjusted our Consolidated Financial Statements accordingly.
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UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
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.
(8) 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.
(9) 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. Warrants to acquire 1,489,733 shares of our common stock were outstanding at both March 31, 2016 and 2015.
In October, 2015, we completed a follow-on offering consisting of 8,000,000 shares of common stock, and common stock warrants to purchase 4,000,000 shares of our common stock. The warrants have an exercise price of $1.31 per whole share of common stock and are exercisable for a period beginning April 30, 2016 through October 20, 2020. Warrants from this offering to acquire 4,000,000 were outstanding at March 31, 2016. Cash proceeds, net of offering costs, were $5,778,463.
(10) Stock-Based Compensation
Stock Option Plans
As of March 31, 2016, we had 2,100,000 shares of common stock authorized and 525,095 shares of common stock available for future grant to employees and consultants under our 2012 Equity Incentive Plan (“Plan”). The term of the 2012 Plan is ten years. Under the 2012 Plan, the exercise price of each option is set at the fair value of the common stock on the date of grant and the maximum term of the option is ten years from the date of grant. Options granted to employees generally have a ten year term and vest ratably over a three-year period. The maximum number of options that may be granted to an employee under the Plan in any calendar year is 500,000 options. Forfeitures under the Plan are available for re-issuance at any time prior to expiration of the Plan in 2022. Options granted under the Plan to employees require the option holder to abide by certain Company policies, which restrict their ability to sell the underlying common stock. Prior to the adoption of the 2012 Plan, we issued stock options under our 2002 Equity Incentive Plan. Forfeitures under the 2002 Equity Incentive Plan may not be re-issued.
We also have a Stock Option Plan for Non-Employee Directors (“Directors Plan”) pursuant to which Directors may elect to receive stock options in lieu of cash compensation for their services as directors. As of March 31, 2016, we had 1,000,000 shares of common stock authorized and 435,935 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.
| | | | | | | |
Plan category | | Number of securities to be issued upon exercise of outstanding options, warrants, and rights | | | Weighted-average exercise price of outstanding options, warrants and rights | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
| | (a) | | | (b) | | (c) |
Equity compensation plans approved by security holders: | | | | | | | |
Equity Incentive Plan | | 3,717,806 | | $ | 1.23 | | 3,661,320 |
Non–Employee Director Stock Option Plan | | 472,664 | | $ | 1.14 | | 446,635 |
Stock Bonus Plan | | We have a Stock Bonus Plan (“Stock Plan”) administered169,872
| | $ | 1.25 | | 538,747 |
Equity compensation plans not approved by security holders | | - | | | - | | - |
Total | | 4,360,342 | | $ | 1.22 | | 4,646,702 |
Item 13.Certain Relationships and Related Transactions, and Director Independence
The Company has entered into indemnification agreements with all members of the Board and with all of its officers. These agreements require that the Company to indemnify such officer or director, under the circumstances and to the extent provided for therein, for expenses, damages, judgments, fines and settlements he or she may be required to pay in actions or proceedings which he or she is or may be made a party by reason of his or her position as a director, officer or other agent of the Company, and otherwise to the fullest extent permitted under Colorado law and the Company’s Bylaws.
Certain Relationships and Related Transactions
The Company does not have a written policy regarding the identification, review, consideration and approval or ratification of “related person’s transactions.” Rather, such policy is evidenced by long standing principles set forth in the Company’s Code of Business Conduct Ethics and adhered to by the Board and the Audit Committee. The Company does not endorse insider transactions and there have been no insider transactions during the reported periods. The Audit Committee approves any transaction between the Company and a related person. A related person is any executive officer, director, or more than five percent shareholder of the Company’s stock, including any of their immediate family members, and any entity owned or controlled by such persons.
The following is a summary of transactions since January 1, 2018 to which the Company has been a participant that involved amounts that exceeded or will exceed the lesser of (i) $120,000 or (ii) one percent of the average of the Company’s total assets at December 31, 2018 , and in which any of the Company’s directors, executive officers or any other “related person” as defined in Item 404(a) of Regulation S-K had or will have a direct or indirect material interest.
In light of the continued focus and strategy to obtain necessary capital to expand our presence into key markets outside the U.S., on January 21, 2019, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Danfoss Power Solutions (US) Company, a Delaware corporation (“Danfoss”), and Danfoss-2019 Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Danfoss (the “Merger Sub”). Under the terms of the Merger Agreement, Merger Sub will be merged with and into the Company (the “Merger”), as a result of which the Company will continue as the surviving corporation and a wholly-owned subsidiary of Danfoss.
Under the terms of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each issued and outstanding share of the Company’s common stock (each a “Company Share”), other than shares owned by Danfoss, Merger Sub, or any wholly-owned subsidiary of the Company, or held in the Company’s treasury, will be cancelled and converted into the right to receive $1.71 per share in cash (the “Merger Consideration”). Each option to purchase Company Shares that is outstanding as of the Effective Time (whether vested or unvested) will be cancelled in exchange for the right to receive the excess of the Merger Consideration over the exercise price of such option, less applicable taxes required to be withheld. Restricted stock that is not vested immediately prior to the Effective Time will be automatically fully vested and free of any restrictions immediately prior to the Effective Time, and will be treated as Company Shares for all purposes of the Merger Agreement, including the right to receive the Merger Consideration, subject to applicable withholdings. Outstanding warrants that are outstanding at the Effective Time will be cancelled and the holders issued a replacement warrant that will be exercisable for an amount in cash equal to the aggregate number of Common Shares underlying the warrant multiplied by the excess, if any of the Merger Consideration over the per share exercise price of the warrant.
The Board unanimously approved and declared advisable the Merger, the Merger Agreement, and the other transactions contemplated thereby.
If the transactions contemplated by the Merger Agreement are consummated, the Company Shares will be delisted from the NYSE American stock exchange and deregistered under the Securities Exchange Act of 1934, as amended.
None of the directors of UQM have any interest in Danfoss or any relationship with Danfoss other than from association with Danfoss and its executives through the course of the negotiation of the Merger Agreement. However, some of our directors and executive officers have interests in the Merger that are different from, or in addition to, the interests of shareholders generally. Interests of our directors and executive officers may be different from or in addition to the interests of shareholders for the following reasons, among others:
| · | | potential employment of our executive officers following the BoardMerger; |
| · | | the accelerated vesting and/or cash-out of Directors. AsCompany equity awards held by them; |
| · | | potential change in control severance compensation and benefits payable to them under existing agreements with certain officers of March 31, 2016, we had 2,254,994 shares of common stock authorizedthe Company; and there were 233,641 shares of common stock available for future grant |
| · | | our directors’ and officers’ rights under the Stock Plan. Under the Stock Plan, shares of common stock may be grantedMerger Agreement to employees, key Table of Contents
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
consultants,ongoing indemnification 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.insurance coverage.
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, 2016, we had 700,000 shares of common stock authorized and 232,666 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, 2016, 2015 and 2014 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, 2016, 2015 and 2014, were based on estimates at the date of grant as follows:
|
Following the closing of the Merger, UQM’s existing management will continue as the management of UQM, subject to such subsequent election or removal of such member of management as are approved by the Company’s Board following the closing of the Merger. Mr. Mitchell and our other executive officers are parties to employment agreements with the Company, each with terms that end on December 31, 2019. The agreements will thereafter automatically renew on the same terms and conditions for successive twenty-four (24) month periods, unless either party to the applicable agreement gives written notice of non-renewal to the other party at least sixty (60) days prior to December 31, 2019 or any such renewal term then in effect. The agreements for these officers contain certain severance provisions, including severance provisions arising from a change in control of the Company.
Each of the employment agreements with our executive officers provides certain rights in certain circumstances to our executive officers upon a change in control of the Company. Consummation of the Merger would constitute a change in control pursuant to the terms of the employment agreements. Upon a change in control of the Company, all stock options and unvested restricted stock awards held by our executive officers will immediately and automatically vested under the terms of the employment agreements.
The following table sets forth the cash consideration that each of the Company’s directors and executive officers would be entitled to receive in respect of any outstanding stock options and unvested restricted stock held by the executive officer or director as of March 4, 2019, taking into account any regularly scheduled vesting and settlement of awards on or prior to the Effective Time. The values shown were calculated assuming (i) that the price per Company Share was $1.71, which equals the per share Merger Consideration, (ii) that no additional equity-based awards will be granted to any directors or executive officers between the date of the Merger Agreement and the consummation of the Merger, and (iii) that all stock options held by each director or executive officer remain unexercised immediately prior to the consummation of the Merger.
| | | | | | | | | | | | | |
Name | | Number of Company Shares Subject to Options | | Total Consideration for Options | | Number of Shares of Unvested Restricted Stock | | Total Consideration for Unvested Restricted Stock | | Aggregate Consideration for Equity Awards |
| | | | | | | | | | | | | |
Joseph R. Mitchell | | 766,872 | | $ | 560,987 | | | 69,831 | | $ | 119,411 | $ | 680,398 |
| | | | | | | | | | | | | |
David I. Rosenthal | | 441,147 | | $ | 318,994 | | | 33,770 | | $ | 57,747 | $ | 376,741 |
| | | | | | | | | | | | | |
Adrian P. Schaffer | | 391,250 | | $ | 285,166 | | | 26,515 | | $ | 45,341 | $ | 330,507 |
| | | | | | | | | | | | | |
Josh M. Ley | | 283,378 | | $ | 205,517 | | | 20,308 | | $ | 34,727 | $ | 240,244 |
| | | | | | | | | | | | | |
Donald W. Vanlandingham | | 106,966 | | $ | 73,379 | | | - | | $ | - | $ | 73,379 |
| | | | | | | | | | | | | |
Stephen J. Roy | | 140,382 | | $ | 107,829 | | | - | | $ | - | $ | 107,829 |
| | | | | | | | | | | | | |
Joseph P. Sellinger | | 118,346 | | $ | 60,706 | | | - | | $ | - | $ | 60,706 |
| | | | | | | | | | | | | |
John E. Sztykiel | | 89,162 | | $ | 60,706 | | | - | | $ | - | $ | 60,706 |
| | | | | | | | | | | | | |
Severance Agreements. If the executive’s employment is terminated by the Company without cause, other than upon a change in control event, the executive will be paid a lump sum equal to six months’ base salary (twenty-four months’ base salary in the case of Mr. Mitchell, because Mr. Mitchell’s employment agreement mandates that, in the event of termination, Mr. Mitchell would be prohibited from working with any competitor for twenty-four months). Further, each executive’s employment agreement provides that if a Change in Control Event (as defined in the agreement) occurs and, if within the twenty-four month period immediately following such event, (a) the Company or its successor terminates an Officer’s employment without cause, or (b) an officer terminates his employment on account of a “Material Change” (as defined in the Agreements), such officer shall be entitled to: (i) vested employment benefits, if any; and (ii) a cash payment equal to twenty-four months (in the case of Mr. Mitchell) or twelve months (in the case of Messrs. Rosenthal and Schaffer) of such officer’s then base salary plus the average annual discretionary cash bonus paid to such officer for
the preceding three calendar years plus an amount equal to the product of (y) 66% and (z) six times the monthly amount that is charged to COBRA qualified beneficiaries for the same medical coverage options elected by such Officer immediately prior to the termination date. In addition, all outstanding but unvested options and restricted stock awards of the Company held by such officer will become fully vested and exercisable for the remainder of their original term. For an estimate of the amounts that would become payable to the Company’s executive officers upon a qualifying termination of employment immediately following consummation of the Merger please refer to section, “Golden Parachute Compensation” in the definitive proxy filed with the SEC on March 7, 2019.
Director Independence
The NYSE American Company Guide rules require that a majority of the Board be independent. Pursuant to such rules, “independent director” means a person other than an executive officer or employee of the Company. Additionally, no director qualifies as independent unless the Board affirmatively determines that the director does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The Board has affirmatively determined that each of Messrs. Vanlandingham, Roy, Sztykiel and Sellinger is independent under the NYSE American Company Guide rules.
In addition to the independence guidelines discussed above, members of the committees of the Board also must satisfy additional independence requirements established by the applicable rules of the NYSE American and the SEC. See the section entitled “Committees of the Board” in Part III, Item 10 of this report for additional information.
Item 14.Principal Accountant Fees and Services
Independent Auditor’s Fees
Effective November 16, 2017, Hein & Associates LLP (“Hein”), the independent registered public accounting firm for the Company, combined with Moss Adams LLP (“Moss Adams”). As a result of this transaction, on November 16, 2017, Hein resigned and must be replaced as the independent registered public accounting firm for the Company. Concurrent with such resignation of Hein, the Company’s audit committee approved the engagement of Moss Adams as the new independent registered public accounting firm for the Company effective for the year ended December 31, 2017.
The following table represents aggregate fees billed to the Company by Moss Adams LLP and Hein & Associates LLP for the years ended December 31, 2018 and 2017, respectively:
| | | | | | | | |
| | | 2018 | | 2017 | |
| | | Moss Adams | | Moss Adams | | Hein | |
| | | ($) | | ($) | | ($) | |
| Audit Fees (1) | | 125,000 | | 80,590 | | 43,435 | |
| Audit - Related Fees (2) | | - | | - | | 2,730 | |
| Tax Fees | | - | | - | | - | |
| All Other Fees | | - | | - | | - | |
| | | | | | | | |
(1) | Audit Fees consist of fees for professional services rendered for the audit of our annual consolidated financial statements, review of the interim consolidated financial statements included in quarterly reports on Form 10-Q and professional services rendered related to comfort letter procedures for stock offering and providing consent to include the auditor's opinion in registration statements. | |
| | | | | | | | |
(2) | Audit - Related Fees consist of fees for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported in Audit Fees. | |
All fees described above incurred in connection with services performed by Moss Adams LLP and Hein & Associates LLP were approved by the Audit Committee.
Pre-Approval Policies and Procedures
The Audit Committee pre-approves all auditing services and permitted non-audit services (including the fees and terms thereof) to be performed for the Company by our independent auditor, Moss Adams LLP (subject to de minimis exceptions for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act which are approved by the Audit Committee prior to completion of the audit). The Audit Committee pre-approved all audit and other non-audit services for the years ended December 31, 2018 and 2017. The Audit Committee may form and delegate authority to subcommittees consisting of one or more members when appropriate, including the authority to grant pre-approvals of audit and permitted non-audit services, provided that decisions of such subcommittee to grant pre-approvals shall be presented to the full Audit Committee at its next scheduled meeting.
Disagreements with Auditors
There have been no disagreements with Moss Adams LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure.
PART IV
Item 15.Exhibits and Financial Statement Schedules
The following documents are being filed as part of this report on Form 10-K/A and are in addition to (but are not replacing) the exhibits filed with the Form 10-K filed on March 27, 2019:
(b) Exhibits
| | | | | | | | | | | | |
| | Fiscal Year Ended March 31, | |
| | 2016 | | 2015 | 2014 | |
| | | | | | | | | | | | |
Weighted average estimated fair value of grant | | $ | 0.45 | per option | | $ | 1.12 | per option | $ | 0.68 | per option | |
Expected life (in years) | | | 6.5 | years | | | 6.5 | years | | 4.8 | years | |
Risk free interest rate | | | 2.05 | % | | | 2.18 | % | | 2.30 | % | |
Expected volatility | | | 79.03 | % | | | 74.66 | % | | 73.91 | % | |
Expected dividend yield | | | 0.00 | % | | | 0.00 | % | | 0.00 | % | |
| Total share-based compensation expense and the classification
| |
Exhibit
Number | | Description of these expenses for the last three fiscal years were as follows:Exhibit |
31.3 | | | | | | | | | | | | | | Fiscal Year Ended March 31, | | | | 2016 | | 2015 | | 2014 | | Costs of contract services | | $ | 6,345 | | $ | 17,626 | | $ | 18,738 | | Costs of product sales | | | 15,301 | | | 27,696 | | | 40,559 | | Research and development | | | 36,561 | | | 14,255 | | | 8,981 | | Production engineering | | | - | | | 72,712 | | | 140,811 | | Selling, general and administrative | | | 537,645 | | | 555,420 | | | 580,782 | | | | $ | 595,852 | | $ | 687,709 | | $ | 789,871 | |
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UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Stock Option Plans Activity
Additional information with respect to stock option activity during the year ended March 31, 2016 under our Stock Option Plans is as follows:
| | | | | | | | | | | | | | | | | | | | Weighted- | | | | | | | | | Weighted- | | Average | | | | | | | Shares | | Average | | Remaining | | Aggregate | | | | Under | | Exercise | | Contractual | | Intrinsic | | | | Option | | Price | | Life | | Value | | Outstanding at April 1, 2015 | | 2,969,075 | | $ | 1.79 | | | 5.5 years | | $ | 311,101 | | Granted | | 424,713 | | $ | 0.66 | | | | | | | | Exercised | | - | | $ | - | | | | | $ | - | | Forfeited | | (832,019) | | $ | 2.43 | | | | | | | | | | | | | | | | | | | | | Outstanding at March 31, 2016 | | 2,561,769 | | $ | 1.40 | | | 6.2 years | | $ | - | | | | | | | | | | | | | | | Exercisable at March 31, 2016 | | 2,107,828 | | $ | 1.50 | | | 5.5 years | | $ | - | | | | | | | | | | | | | | | Vested and expected to vest at March 31, 2016 | | 2,534,662 | | $ | 1.40 | | | 6.2 years | | $ | - | |
Additional information with respect to stock option activity during the year ended March 31, 2015 under our Stock Option Plans is as follows:
| | | | | | | | | | | | | | | | | | | | Weighted- | | | | | | | | | Weighted- | | Average | | | | | | | Shares | | Average | | Remaining | | Aggregate | | | | Under | | Exercise | | Contractual | | Intrinsic | | | | Option | | Price | | Life | | Value | | Outstanding at April 1, 2014 | | 3,330,575 | | $ | 1.98 | | | 4.8 years | | $ | 2,931,885 | | Granted | | 369,287 | | $ | 1.71 | | | | | | | | Exercised | | (5,053) | | $ | 0.89 | | | | | $ | 6,720 | | Forfeited | | (725,734) | | $ | 2.60 | | | | | | | | | | | | | | | | | | | | | Outstanding at March 31, 2015 | | 2,969,075 | | $ | 1.79 | | | 5.5 years | | $ | 311,101 | | | | | | | | | | | | | | | Exercisable at March 31, 2015 | | 2,391,625 | | $ | 1.91 | | | 4.6 years | | $ | 251,329 | | | | | | | | | | | | | | | Vested and expected to vest at March 31, 2015 | | 2,948,647 | | $ | 1.79 | | | 5.5 years | | $ | 309,935 | |
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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, 2014 under our Stock Option Plans is as follows:
| | | | | | | | | | | | | | | | | | | | Weighted- | | | | | | | | | Weighted- | | Average | | | | | | | Shares | | Average | | Remaining | | Aggregate | | | | Under | | Exercise | | Contractual | | Intrinsic | | | | Option | | Price | | Life | | Value | | Outstanding at April 1, 2013 | | 4,251,695 | | $ | 2.14 | | | 4.7 years | | $ | - | | Granted | | 89,340 | | $ | 1.11 | | | | | | | | Exercised | | (20,146) | | $ | 1.05 | | | | | $ | 27,462 | | Forfeited | | (990,314) | | $ | 2.62 | | | | | | | | | | | | | | | | | | | | | Outstanding at March 31, 2014 | | 3,330,575 | | $ | 1.98 | | | 4.8 years | | $ | 2,931,885 | | | | | | | | | | | | | | | Exercisable at March 31, 2014 | | 2,634,589 | | $ | 2.21 | | | 3.9 years | | $ | 1,848,784 | | | | | | | | | | | | | | | Vested and expected to vest at March 31, 2014 | | 3,306,339 | | $ | 1.98 | | | 4.8 years | | $ | 2,891,654 | |
The weighted-average grant date fair value of options granted during the years ended March 31, 2016, 2015 and 2014 was $0.45, $1.12 and $0.68, respectively.
As of March 31, 2016, there was $210,378 of total unrecognized compensation costs related to stock options granted under our Stock Option Plans. The unrecognized compensation cost is expected to be recognized over a weighted-average period of twenty-six months. The total fair value of stock options that vested during the years ended March 31, 2016, 2015 and 2014 was $414,981, $377,375 and $493,271, respectively.
Cash received by us upon the exercise of stock options for the years ended March 31, 2016, 2015 and 2014 was zero, $4,497 and $21,075, respectively. The source of shares of common stock issuable upon the exercise of stock options is from authorized and previously unissued common shares.
Stock Bonus Plan Activity
Activity with respect to non-vested shares under the Stock Bonus Plan as of March 31, 2016, 2015 and 2014 and changes during the years ended March 31, 2016, 2015 and 2014 are presented below:
| | | | | | | | | | | | | | | | | | | Fiscal Year Ended March 31, | | | | 2016 | | 2015 | | 2014 | | | | | | Weighted-
Average | | | | Weighted-
Average | | | | Weighted-
Average | | | | Shares Under | | Grant Date | | Shares Under | | Grant Date | | Shares Under | | Grant Date | | | | Contract | | Fair Value | | Contract | | Fair Value | | Contract | | Fair Value | | Unvested at April 1 | | 432,039 | | $ | 1.26 | | 640,979 | | $ | 1.17 | | 358,855 | | $ | 1.22 | | Granted | | 23,600 | | $ | 0.66 | | 136,144 | | $ | 1.71 | | 452,195 | | $ | 1.18 | | Vested | | (362,411) | | $ | 1.22 | | (303,862) | | $ | 1.21 | | (166,231) | | $ | 1.34 | | Forfeited | | (5,014) | | $ | 3.95 | | (41,222) | | $ | 1.28 | | (3,840) | | $ | 1.25 | | Unvested at March 31 | | 88,214 | | $ | 1.36 | | 432,039 | | $ | 1.26 | | 640,979 | | $ | 1.17 | |
As of March 31, 2016, there was $56,104 of total unrecognized compensation costs related to common stock granted under our Stock Bonus Plan. The unrecognized compensation cost at March 31, 2016 is expected to be recognized over a weighted-average period of eight months.
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UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Stock Purchase Plan Activity
During the years ended March 31, 2016, 2015 and 2014, we issued 62,932, 12,052 and 62,421 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, 2016, 2015 and 2014 was $39,377, $22,055 and $60,689, respectively.
(11) 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, 2016, 2015 and 2014:
| | | | | | | | | | | | | | | | | | | | | Fiscal Year Ended March 31, | | | | 2016 | | | 2015 | | | 2014 | | Customer A | | $ | 174,565 | | 3 | % | | $ | 394,922 | | 10 | % | | $ | 727,683 | | 10 | % | Customer B | | $ | 480,454 | | 9 | % | | $ | 160,000 | | 4 | % | | $ | 323,000 | | 5 | % | Customer C | | $ | 564,636 | | 11 | % | | $ | 822,929 | | 20 | % | | $ | 615,081 | | 9 | % | Customer D | | $ | 625,947 | | 12 | % | | $ | 479,678 | | 12 | % | | $ | 880,145 | | 12 | % | Customer E | | $ | 859,964 | | 16 | % | | $ | 142,128 | | 4 | % | | $ | 608,222 | | 9 | % | Customer F | | $ | 1,075,861 | | 20 | % | | $ | 32,771 | | 1 | % | | $ | - | | - | % |
The following table summarizes accounts receivable from significant customers as of March 31, 2016 and 2015:
| | | | | | | | Fiscal Year Ended March 31, | | | | 2016 | | 2015 | | Customer A | | - | % | 2 | % | Customer B | | 20 | % | - | % | Customer C | | 12 | % | 24 | % | Customer D | | 32 | % | - | % | Customer E | | 22 | % | 11 | % | Customer F | | - | % | - | % |
(12) 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 resultCertification of the following:
| | | | | | | | | | | | | Fiscal Year Ended March 31, | | | | 2016 | | 2015 | | 2014 | | Computed "expected" tax benefit | | $ | (2,359,039) | | $ | (2,036,100) | | $ | (942,903) | | Increase (decrease) in taxes resulting from: | | | | | | | | | | | Increase (decrease) in valuation allowance for net deferred tax assets | | | 2,495,540 | | | 2,489,012 | | | 875,016 | | Other, net | | | (136,501) | | | (452,912) | | | 67,887 | | Income tax expense | | $ | — | | $ | — | | $ | — | |
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UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The tax effects of temporary difference that give rise to significant portions of the net deferred tax asset are presented below:
| | | | | | | | | | Fiscal Year Ended March 31, | | | | 2016 | | 2015 | | Deferred tax assets: | | | | | | | | Research and development credit carry-forwards | | $ | 4,073 | | $ | 4,073 | | Net operating loss carry-forwards | | | 29,451,289 | | | 26,742,134 | | Deferred compensation | | | 50,021 | | | 104,559 | | Property and equipment | | | 133,085 | | | 131,440 | | Stock Compensation | | | 981,829 | | | 993,216 | | Other | | | 505,883 | | | 653,578 | | Total deferred tax assets | | | 31,126,180 | | | 28,629,000 | | | | | | | | | | Deferred tax liabilities: | | | | | | | | Intangible assets | | | 54,666 | | | 53,023 | | Total deferred tax liabilities | | | 54,666 | | | 53,023 | | | | | | | | | | Net deferred tax assets | | | 31,071,514 | | | 28,575,977 | | | | | | | | | | Less valuation allowance | | | (31,071,514) | | | (28,575,977) | | | | | | | | | | Deferred tax assets, net of valuation allowance | | $ | — | | $ | — | |
As of March 31, 2016 and March 31, 2015, respectively, we had net operating loss (“NOL”) carry-forwards of approximately $84.8 million and $77.4 million for U.S. income tax purposes that expire in varying amounts through 2036. 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 $31.1 million and $28.6 million at March 31, 2016 and 2015, respectively, relates principally to the uncertainty of the utilization of deferred tax assets in various tax jurisdictions. The Company continually assesses both positive and negative evidence to determine whether it is more-likely-than-not that the deferred tax assets can be realized prior to their expiration. Based on the Company’s assessment it has determined the deferred tax assets are not currently realizable.
We have not recorded any potential liability for uncertain tax positions taken on our tax returns.
We may, from time to time, be assessed interest or penalties by major tax jurisdictions, although any such assessments historically have been minimal and immaterial to our financial results. Penalties are recorded in selling, general and administrative expenses and interest paid or received is recorded in interest expense or interest income, respectively, in the consolidated statements of operations.
(13) 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
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UQM TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
matching contributions vest ratably over a three-year period. Matching contributions to the 401K Plan were $115,789, $117,222, and $132,471, for the years ended March 31, 2016, 2015, and 2014, respectively.
(14) Interim Financial Data (Unaudited)
| | | | | | | | | | | | | | | | Quarters Ended | | | | June 30, | | September 30, | | December 31, | | March 31, | | Fiscal year 2016 | | | | | | | | | | | | | | Sales | | $ | 740,529 | | $ | 1,734,810 | | $ | 1,327,172 | | $ | 1,504,288 | | Gross profit | | $ | 98,285 | | $ | 349,466 | | $ | 465,283 | | $ | 391,013 | | Net loss | | $ | (2,224,251) | | $ | (2,409,047) | | $ | (1,374,134) | | $ | (930,919) | | | | | | | | | | | | | | | | Net loss per common share basic and diluted: | | $ | (0.06) | | $ | (0.06) | | $ | (0.03) | | $ | (0.01) | |
| | | | | | | | | | | | | | | | Quarters Ended | | | | June 30, | | September 30, | | December 31, | | March 31, | | Fiscal year 2015 | | | | | | | | | | | | | | Sales | | $ | 1,019,548 | | $ | 1,116,779 | | $ | 835,635 | | $ | 1,043,782 | | Gross profit | | $ | 407,286 | | $ | 399,631 | | $ | 174,165 | | $ | 135,014 | | Net loss | | $ | (1,310,037) | | $ | (1,990,714) | | $ | (1,371,465) | | $ | (1,316,314) | | | | | | | | | | | | | | | | Net loss per common share basic and diluted: | | $ | (0.03) | | $ | (0.05) | | $ | (0.03) | | $ | (0.04) | |
ITEM 9. CHANGE IN AND DISAGREEMENTS WITH INDEPENDENT ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
As previously reported in our Current Report on Form 8-K filed August 14, 2015 and incorporated herein by reference, effective August 14, 2015, our board of directors dismissed Grant Thornton LLP, who was previously engaged as our principal accountant to audit our financial statements for the fiscal years ended March 31, 2014 and March 31, 2015, and effective August 14, 2015 we retained Hein & Associates LLP as our new independent accountants engaged as the principal accountant to audit our financial statements for the fiscal year ending March 31, 2016.
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, 2016 under the supervision and with the participation of management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”).
Based on their evaluation aspursuant to Section 302 of March 31, 2016, 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 ExchangeSarbanes-Oxley 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, 2016. In making this assessment, it used the criteria described in the 1992 “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”)2002. Based on this assessment, management has concluded that, as of March 31, 2016, our internal control over financial reporting is effective. Management reviewed the results of its assessment with the Audit Committee of our Board of Directors who oversees the financial reporting process.
Attestation Report of the Registered Public Accounting Firm
This Form 10-K does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Form 10-K.
Changes in Internal Control Over Financial Reporting
There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal year ended March 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
June 7, 2016
| | | | | | Joseph Mitchell
| | David I. Rosenthal
| President and Chief Executive Officer
| | Treasurer, Secretary and
| | | Chief Financial Officer
|
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Additional information required by Item 10 is incorporated by reference from and contained under the headings “Election of Directors”, “Management” “Section 16(a) Beneficial Ownership Reporting Compliance” and “Code of Ethics” in our Definitive Proxy Statement for the 2016 Annual Meeting of Shareholders.
ITEM 11.EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference from and contained under the headings “Executive Compensation”, “Option Grants during Fiscal Year 2015,” “Aggregate Option Exercises During Fiscal Year 2015,” “Option Values at the End of Fiscal Year 2015,” “Director Compensation,” “Compensation discussion and Analysis,” “Compensation and Benefits Committee Report,” and “Compensation Committee Interlocks” in our definitive Proxy Statement for the 2016 Annual Meeting of Shareholders.
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 2016 Annual Meeting of Shareholders.
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 2016 Annual Meeting of Shareholders.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The information required by Item 14 is incorporated by reference from and contained under the heading “Ratification of Selection of Independent Auditors” in our definitive Proxy Statement for the 2016 Annual Meeting of Shareholders.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)
| 1.
| Financial Statements
| | | | | | UQM Technologies, Inc. (included in Part II):
| | | | | | Reports of Independent Registered Public Accounting Firm.
| | | | | | Consolidated Balance Sheets, March 31, 2016 and March 31, 2015.
| | | | | | Consolidated Statements of Operations for the Years Ended March 31, 2016, 2015, and 2014.
| | | | | | Consolidated Statements of Stockholders’ Equity for the Years Ended March 31, 2016, 2015, and 2014.
| | | | | | Consolidated Statements of Cash Flows for the Years Ended March 31, 2016, 2015, and 2014.
| | | | | | Notes to Consolidated Financial Statements.
| | | | | 2.
| Financial Statement Schedules:
| | | | | | Valuation and Qualifying Accounts. See note 1(e) to the Consolidated Financial Statements above.
| | | | | 3.
| Exhibits:
| | | | 3.1
| | Amended and Restated Articles of Incorporation as further amended.
| | | | 3.2
| | Bylaws, as amended. Reference is made to Exhibit 3.2 of our Annual Report on Form 10-K filed May 30, 2014, which is incorporated herein by reference.
| | | | 4.1
| | Specimen Stock Certificate. Reference is made to Exhibit 3.1 of our Registration Statement on Form 10 dated February 27, 1980, which is incorporated herein by reference.
| | | | 4.2
| | Form of Common Stock Purchase Warrant (expiration August 5, 2018). Reference is made to Exhibit 4.1 of our current report on Form 8-K, filed February 5, 2014, which is incorporated herein by reference.
| | | | 4.3
| | Form of Common Stock Purchase Warrant (expiration October 30, 2020). Reference is made to Exhibit 4.1 of our current report on Form 8-K, filed October 30, 2015, which is incorporated herein by reference.
| | | | 10.1
| | Supply Agreement dated October 20, 2015 by and between ITL and UQM Technologies, Inc. Reference is made to Exhibit 10.1 of our Form 8-K filed on October 26, 2015, which is incorporated herein by reference.
| | | | 10.2
| | Employment Agreement dated as of January 5, 2016, between UQM and Joseph Mitchell. ** Reference is made to Exhibit 10.1 of our Form 8-K filed on January 5, 2016, which is incorporated herein by reference.
| | | | 10.3
| | Employment Agreement dated July 20, 2015, between the Company and David I. Rosenthal. ** Reference is made to Exhibit 10.2 of our Quarterly Report on Form 10-Q filed on July 30, 2015, which is incorporated herein by reference.
| | | | 10.4
| | Employment Agreement dated July 20, 2015, between the Company and Adrian P. Schaffer. ** Reference is made to Exhibit 10.3 of our Quarterly Report on Form 10-Q filed on July 30, 2015, which is incorporated herein by reference.
| | | |
|
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 Amendment No. 1 to Annual Report on Form 10-K/A to be signed on its behalf by the undersigned, thereunto duly authorized, in Longmont, Colorado on the 24th day of April, 2019.
UQM TECHNOLOGIES, INC.,
a Colorado Corporation
10.5
| | Employment Agreement dated July 20, 2015, between the Company and Josh M. Ley. ** Reference is made to Exhibit 10.4 of our Quarterly Report on Form 10-Q filed on July 30, 2015, which is incorporated herein by reference.
|
| | |
10.6
| | Form of Amendment to the Employment Agreements between UQM and each of David I. Rosenthal, Adrian P. Schaffer and Josh M. Ley.** Reference is made to Exhibit 10.2 of our Form 8-K filed on January 5, 2016, which is incorporated herein by reference.
|
| | |
10.7
| | Stock Bonus Plan. ** Reference is made to Exhibit 10.2 of our Current Report on Form 8-K filed on August 12, 2005, which is incorporated herein by reference.
|
| | |
10.8
| | Amendment to UQM Technologies, Inc. Stock Bonus Plan dated May 9, 2012. ** Reference is made to Exhibit 10.22 of our Form 10-K filed May 24, 2012, which is incorporated herein by reference.
|
| | |
10.9
| | Amendment to UQM Technologies, Inc. Stock Bonus Plan adopted August 13, 2014.** Reference is made to Appendix B of our Proxy Statement filed July 2, 2014, which is incorporated herein by reference.
|
| | |
10.10
| | UQM Technologies, Inc. 2012 Equity Incentive Plan adopted April 11, 2012.** Reference is made to Exhibit 10.19 of our Form 10-K filed May 24, 2012, which is incorporated herein by reference.
|
| | |
10.11
| | Amendment to UQM Technologies, Inc. 2012 Equity Incentive Plan adopted August 13, 2014.** Reference is made to Appendix A of our Proxy Statement filed July 2, 2015, which is incorporated herein by reference.
|
| | |
10.12
| | Amended and Restated UQM Technologies, Inc. Employee Stock Purchase Plan. ** Reference is made to Exhibit 4.1 to the Company’s Registration Statement on Form S-8 (No. 333-164705) filed on February 5, 2010, which is incorporated herein by reference.
|
| | |
10.13
| | UQM Technologies, Inc. Outside Director Stock Option Plan amended November 2, 2011. ** Reference is made to Exhibit 10.21 of our Form 10-K filed May 24, 2012, which is incorporated herein by reference.
|
| | |
10.14
| | Form of Incentive Stock Option Agreement. ** Reference is made to Exhibit 10.6 of our Annual Report on Form 10-K, filed on May 22, 2008, which is incorporated herein by reference.
|
| | |
10.15
| | Form of Non-Qualified Stock Option Agreement. ** Reference is made to Exhibit 10.7 of our Annual Report on Form 10-K, filed on May 22, 2008, which is incorporated herein by reference.
|
| | |
10.16
| | Form of Restricted Stock Agreement, amended May 9, 2012. ** Reference is made to Exhibit 10.20 of our Form 10-K filed May 24, 2012, which is incorporated herein by reference.
|
| | |
21.1
| | Subsidiaries of the Company.
|
| | |
23.1
| | Consent of Hein & Associates, LLP.
|
| | |
23.2
| | Consent of Grant Thornton LLP.
|
| | |
31.1
| | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
| | |
31.2
| | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
| | |
32.1
| | Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act 2002.
|
| | |
101.INS
| | XBRL Instance Document
|
| | |
101.SCH
| | XBRL Taxonomy Extension Schema Document
|
| | |
| Table of ContentsBy:
101.CAL
| | XBRL Taxonomy Extension Calculation Linkbase Document
| /s/DAVID I. ROSENTHAL | | | David I. Rosenthal | | | Chief Financial Officer, Treasurer and Secretary | | | | 101.LAB
| | XBRL Taxonomy Extension Label Linkbase Document
| | | | 101.PRE
| | XBRL Taxonomy Extension Presentation Linkbase Document
| | | | 101.DEF
| | XBRL Taxonomy Extension Definition Linkbase Document
|
**management contract or compensation plan.
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 7th day of June, 2016.
UQM TECHNOLOGIES, INC.,
a Colorado Corporation
| | | | By:
| /s/ JOSEPH MITCHELL
| | | Joseph Mitchell
| | | President and
| | | Chief Executive Officer
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K
Pursuant to the requirements of the Securities Exchange Act of 1934, this Amendment No. 1 to Annual Report on Form 10-K/A 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 | | Chairman of the Board | | April 24, 2019 | Donald W. Vanlandingham | | | | | | | | | /s/JOSEPH R. MITCHELL | | President, Chief Executive Officer, and Director (Principal Executive Officer) | | April 24, 2019 | Joseph R. Mitchell | | | | | | | | | /s/DAVID I. ROSENTHAL | | Chief Financial Officer, Treasurer and Secretary (Principal Financial and Accounting Officer) | | April 24, 2019 | David I. Rosenthal | | | | | | | | | /s/STEPHEN J. ROY | | Director | | April 24, 2019 | Stephen J. Roy | | | | | | | | | | s/JOSEPH P. SELLINGER | | Director | | April 24, 2019 | Joseph P. Sellinger | | | | | | | | | | /s/JOHN E. SZTYKIEL | | Director | | April 24, 2019 | John E. Sztykiel | | | | | /s/ DONALD W. VANLANDINGHAM
| | Chairman of the Board of Directors
| | June 7, 2016
| | Donald W. Vanlandingham
| | | | | | | | | | | /s/JOSEPH R. MITCHELL
| | President and Chief Executive Officer
| | June 7, 2016
| | Joseph R. Mitchell
| | | | | | | | | | | /s/DAVID I. ROSENTHAL
| | Treasurer and Secretary (Principal Financial and Accounting Officer)
| | June 7, 2016
| | David I. Rosenthal
| | | | | | | | | | | /s/STEPHEN J. ROY
| | Director
| | June 7, 2016
| | Stephen J. Roy
| | | | | | | | | | | s/JOSEPH P. SELLINGER
| | Director
| | June 7, 2016
| | Joseph P. Sellinger
| | | | | | | | | | | /s/JOHN E. SZTYKIEL
| | Director
| | June 7, 2016
| | John E. Sztykiel
| | | | |
|