-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q6s5SPm63EJsc0hHo7d07+d7aLhE1Ts4xo449Ay95BrWjsCoD7/il1sWXc2dUTYX yzhPVsWgaDONpt7DsLrn3A== 0000899733-01-500043.txt : 20010618 0000899733-01-500043.hdr.sgml : 20010618 ACCESSION NUMBER: 0000899733-01-500043 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010615 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UQM TECHNOLOGIES INC CENTRAL INDEX KEY: 0000315449 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 840579156 STATE OF INCORPORATION: CO FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-10869 FILM NUMBER: 1661956 BUSINESS ADDRESS: STREET 1: 425 CORPORATE CIRCLE CITY: GOLDEN STATE: CO ZIP: 80401 BUSINESS PHONE: 3032782002 MAIL ADDRESS: STREET 1: 425 CORPORATE CIRCLE CITY: GOLDEN STATE: CO ZIP: 80401 10-K 1 annrep01.txt 2001 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Year Ended March 31, 2001 Commission file number 1-10869 UQM TECHNOLOGIES, INC. (Formerly Unique Mobility, Inc.) ------------------------------------------------------- (Exact name of registrant as specified in its charter) Colorado 84-0579156 - ----------- --------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 425 Corporate Circle, Golden, Colorado 80401 ---------------------------------------- -------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (303) 278-2002 Securities registered pursuant to Section 12(b) of the Act: Common stock, $.01 par value Name of each exchange on which registered: American Stock Exchange Pacific Stock Exchange Chicago Stock Exchange Frankfurt Stock Exchange Berlin Stock Exchange Securities registered pursuant to Section 12(g) of the Act: Common stock, $.01 par value 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 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. Yes X No _ The aggregate market value of the voting stock held by nonaffiliates of the registrant (17,077,166 shares) computed by reference to the closing price of such stock on the American Stock Exchange, as of June 13, 2001: $112,709,296 The number of shares outstanding (including shares held by affiliates) of each of the registrant's classes of common stock, as of June 13, 2001: 17,451,518 shares of the registrant's common stock, $.01 par value. DOCUMENTS INCORPORATED BY REFERENCE In Part III certain information is incorporated by reference from the Company's definitive Proxy Statement for the August 22, 2001 Annual Meeting of Shareholders. ITEM 1. BUSINESS This Report may contain forward-looking statements that involve risks and uncertainties. These statements may differ materially from actual future events or results. Readers are referred to the Risk Factors section of the Registration Statement on Form S-3 (File No. 333-78525) filed by the Company with the SEC, which identifies important risk factors that could cause actual results to differ from those contained in the forward-looking statements, including the Company's ability to obtain additional financing, the Company's reliance on major customers and suppliers and the possibility that product liability insurance may become unavailable. These forward-looking statements represent the Company's judgment as of the date of this Report. The Company disclaims, however, any intent or obligation to update these forward-looking statements. General UQM Technologies, Inc., formerly Unique Mobility, Inc. ("UQM" or the "Company") is recognized worldwide as a technology leader in the development and manufacture of energy efficient, power dense, electric motors, generators and power electronic inverters. The primary focus of the Company is incorporating its advanced technology into products aimed at high growth and emerging markets including power systems for clean electric, hybrid electric and fuel cell electric on-road and off-road vehicles, under-the-hood power accessories including 42 volt systems and environmentally friendly, distributed power generators. The Company operates its business in three segments; 1) technology - which encompasses the further advancement and application of the Company's proprietary motors, generator, power electronics and software; 2) mechanical products - which encompasses the manufacture of motors, gears and gear assemblies; and 3) electronic products which encompasses the manufacture of electronic printed circuit assemblies, wire harnesses and complete electronic boxes. The Company's $0.01 par value common stock trades on the American, Chicago, Pacific, Frankfurt and Berlin stock exchanges under the symbol "UQM". The Company's revenue is derived from two principle sources; 1) funded contract research and development services performed for strategic partners, customers and the U.S. government directed toward either the advancement of the Company's proprietary technology portfolio or the application of proprietary technology to customer's products; and 2) the manufacture and sale of products engineered by the Company and the contract manufacture of products designed by others. The Company's objective is to leverage its technology base and name recognition to develop and manufacture products for its customers that are superior in performance at competitive prices. To this end, the Company has initially focused its attention on four market areas that have significant growth potential; 1) electric propulsion systems, generators and power electronic inverters for electric, hybrid electric and fuel cell electric vehicles. Virtually every automobile and truck manufacturer worldwide are developing such vehicles. In the case of hybrid electric powerplants, additional customers include Tier I and Tier II automotive suppliers who hope to provide complete hybrid electric systems to their automotive customers; 2) electric propulsion systems and electronic inverters for small vehicles, such as electric wheelchairs, golf carts, small industrial vehicles, lawn and grounds care equipment and the like; 3) under-the-hood power accessories, such as electric air conditioning compressors and electric power steering which are expected to replace existing belt-driven parasitic components now in use as part of the automotive industry's adoption of a new 42 volt standard and fuel cell I-1 components such as air compressor drive motors and electronic inverters to manage the operation of the fuel cell, its power generation and the conversion of DC power output of the fuel cell to AC for home use; and 4) distributed power generation products such as wind generators, engine generators and electronic power inverters for both residential and commercial customers that need standby or backup power, remote stand-alone power, as well as, grid-connected power. Fundamental to this strategy is the continual advancement of the Company's proprietary motor, generator, power electronic inverter and software technology portfolio and the maintenance of a high quality and competitive manufacturing capability for products developed by the Company. Substantially all of the Company's research and development activities are funded by its customers, and in most cases, the Company maintains all or substantially all of the intellectual property rights in technology enhancements. The Company has three principal operating units; 1) UQM Technologies, Inc., located in Golden, Colorado, which includes the Corporate Headquarters and Engineering and Product Development Center; 2) wholly owned subsidiary UQM Power Products, Inc., ("UQM Power") located in Frederick, Colorado, which manufactures permanent magnet electric motors, generators, precision gears and gear assemblies; and 3) wholly owned subsidiary UQM Electronics, Inc. ("UQM Electronics"), located in St. Charles, Missouri which manufactures electronic printed circuit board assemblies, cable harness assemblies and complete electronic boxes. The Company also holds minority ownership positions in Taiwan UQM Electric Co., Ltd. ("Taiwan UQM"), EV Global Motors Company ("EV Global"), and Windemere Eco Development Limited ("WED") and Aeromax Corporation ("Aero"). The carrying value of all of these investments on the Company's balance sheet has been reduced to zero due to the development stage status of these companies in potentially emerging markets. Taiwan UQM is a joint venture with Kwang Yang Motor Company, Ltd. ("KYMCO") and Turn-Luckily Technology Co., Ltd. Taiwan UQM, located in Taipei, Taiwan, is a licensee of the Company and manufacturer of starter motors and alternators for gasoline scooters and electric propulsion systems for an all electric scooter. The Company holds a 38.25 percent ownership interest in Taiwan UQM. EV Global, based in Los Angeles, is a developer and distributor of electric bicycles. WED is an environmentally sensitive development of Windemere Island in the Bahamas. Aeromax Corporation is a developer and manufacturer of wind turbine generators and associated products for residential use. Technology Segment The technology segment of the Company encompasses the operations of the Engineering and Product Development Center and the administrative and management functions performed by the Corporate Headquarters staff and senior executives. The Company's Engineering and Product Development Center occupies a 25,000 square foot facility located in Golden, Colorado equipped with research and development laboratories, prototype build and test facilities for electric motors, generators, power electronic inverters, software, and vehicle integration activities. The technology segment conducts sponsored and internally-funded engineering activities directed toward the development of new products and the engineering of motors, generators, and power electronic inverters to meet the requirements of our customers' specific product applications and is the source of engineering services for both the mechanical and electronic product segments. During fiscal 2001, the technology segment generated revenue of $3,378,396 consisting of $2,283,292 of contract services revenue and $1,095,104 from the sale of low volume motor and control products. Net losses from operations for the technology segment amounted to $604,623, compared to net losses from operations of $5,285,807 last year. EBITDA for the fiscal year ended March 31, 2001 was $(160,484) compared to $(4,871,428) last year. I-2 Mechanical Products Segment The mechanical products segment of the Company encompasses the operations of the Company's wholly-owned subsidiary, UQM Power Products, Inc. UQM Power occupies a 25,000 square foot manufacturing plant located in Frederick, Colorado which houses the Company's gear and motor manufacturing operations. Gear manufacturing operations consist of the precision grinding of both commercial and aerospace grade gears and the manufacture of complete gear assemblies. Motor manufacturing operations consist of the high volume manufacture of the Company's proprietary permanent magnet motors. During fiscal 2001, the mechanical products segment generated revenue of $4,407,721 a 7.1 percent increase over the prior year's revenue of $4,115,557. Net losses from operations for the segment amounted to $1,195,219 compared to net losses from operations of $1,190,423 last year. EBITDA for the fiscal year ended March 31, 2001 was $(700) compared to $(586) last year. Electronic Products Segment The electronic products segment of the Company encompasses the operations of the Company's wholly-owned subsidiary UQM Electronics, Inc. and includes the manufacture of thru-hole and surface mount electronic printed circuit board assemblies, wire harness assemblies, value-added component assemblies incorporating either printed circuit board assemblies, wire harness assemblies or both, and complete turn-key electronic product builds. In addition, UQM Electronics is a wholesale distributor of over 20 lines of passive electronic components. UQM Electronics conducts its operations from a 31,000 square foot manufacturing plant located in St. Charles, Missouri. During fiscal 2001, the electronic products segment generated revenue of $19,110,954, a 36.0 percent increase over the prior year's revenue of $14,056,151. Net loss from operations for the segment amounted to $1,340,280 compared to a net profit from operations of $4,423 last year. EBITDA for the fiscal year ended March 31, 2001 was $(164,655) compared to $1,003,998 last year. Technology The Company's technology base includes a number of proprietary technologies and patents relating to brushless permanent magnet motors, generators and power electronic inverters, together with software code to intelligently manage the operation of the system. See also "Patents" below. The typical architecture (picture of motor omitted) of a UQM(R) motor consists of a stator winding employing a high pole count configuration, which allows for high copper utilization (minimizing energy loss and cost) and a hollow rotor upon which powerful rare earth magnets are mounted on the outer circumference. The stator is affixed to an aluminum housing containing a mounting ring and bearing which allows the rotor to be suspended I-3 within the stator. Commutation of the machine is accomplished electronically by sensing the position of the rotor in relation to the stator and intelligently pulsing electrical energy into the stator such that the electric field generated by the stator interacts with the magnetic field generated by the stator producing rotational motion ("motor operation"). Conversely, the application of rotational motion to the rotor by an external force results in the generation of electrical power ("generator operation"). UQM(R) machines can be operated in either a forward or reverse direction of rotation and either in motor or generator mode and can dynamically change from one mode of operation to another in millisecond response time. The hollow design of the rotor permits the packaging of other components such as gears and electromechanical brakes in the interior of the machine. These design features contribute to lower usage of copper and iron and other materials generally (due to smaller package dimensions), reducing manufacturing cost over those for conventional machines of similar power. In addition, the utilization of (neodymium iron boron "NdFeB") magnet material in a wide range of consumer devices, such as cell phones, disk drives and medical devices, has dramatically improved the availability, performance and price of this material, allowing the Company to price its advanced motors and controls competitively with lesser performing conventional motors which management believes will accelerate the rate of commercialization of the Company's technology. Attributes of the Company's permanent magnet motor technology include brushless electronic commutation; a relatively large air-gap dimension; the use of powerful rare earth NdFeB magnet material; good heat rejection; low iron content; and low mechanical losses. As a result, UQM(R) motors have high operating efficiencies (>90%), high power density (high power output to weight ratio) and generally have smaller external dimensions and weight for a given power output, improving packageability. Attributes of the Company's microprocessor-based digital power electronic inverters include high power operation (600 amps at 400 volts), four quadrant control (forward/reverse and motoring/generation), reduced switching losses (minimizing energy loss), intelligent control and controller area network capability. In addition, the Company has developed and patented a method of control embodied in electronic component architecture and software code (Phase Advance Control) which allows UQM(R) motors to deliver high output torque at low operating speeds and low torque at high operating speeds from the same machine. Conventional permanent magnet motor designs are limited to operating at either high torque and low speeds or low torque at high speeds; but not both. In most vehicle propulsion applications, high torque is required to launch the vehicle from a standing stop transitioning to high power as the vehicle is accelerated to highway speeds. In conventional internal combustion powered vehicles, the transition from high torque to high power is typically accomplished through the multiple gear changes performed by a mechanical transmission. UQM(R) motors, incorporating phase advance technology, are ideally suited as propulsion drives in electric, hybrid electric and fuel cell electric vehicles due to the ability to power a vehicle from a standing stop to highway speeds without mechanical gear changes, thereby eliminating the size, weight and cost of mechanical transmissions. The Company is currently developing the next generation of its motor technology for vehicle propulsion applications which maximizes the advantages of the UQM(R) motor architecture by packaging a single speed gear reduction and differential inside the hollow rotor and integrating the power electronic inverter with the machine. The resulting system is expected to achieve greater power density, be I-4 manufacturable at lower costs due to the commonality of component parts, and have improved packageability over existing UQM(R) systems. Similarly, the Company is simultaneously developing a line of modular motors, that are expected to improve the continuous power output of the Company's existing motors and generators by about 25 percent without increasing size or weight. Substantially all of the Company's research and development activities are funded by customers, with the Company typically retaining intellectual property rights in the resulting technology developed. Customer funded development activities are recorded as contract services revenue and the associated development costs are shown as cost of contract services in the Company's financial statements. For the year ended March 31, 2001, revenues from customer funded research and development activities amounted to $2,283,292 an increase of 34.1 percent over the prior year level of $1,702,937. Internally-funded research and development expenditures were $103,231 for the fiscal year versus $378,954 for the prior year. In recent years, the Company has focused its research and development activities on the development of commercial products and production engineering activities to lower the cost of manufacture, as well as enhance the performance and capability of its technology portfolio, as opposed to basic research in the field. Management believes that the Company's future growth is dependent, in part, on the continued advancement of its technology portfolio and its ability to commercialize its technology in additional product applications and markets. Accordingly, the Company expects to continue to pursue additional customer funded programs to accomplish this objective. Competition All of the markets in which the Company operates are highly competitive. The markets served by the technology segment are additionally characterized by rapid changes due to technological advances that can render existing technologies and products obsolete. The technology segment has developed advanced electric propulsion systems and components which it hopes to market to vehicle OEM's throughout the world for use in electric, hybrid electric and fuel cell electric vehicles. At present, the market for such systems is not significant, although various legislative mandates and incentives are expected to accelerate the development of a market for vehicles propelled by such systems. There are numerous companies developing products that do or soon will compete with the Company's drive systems. Some of these companies possess significantly greater financial, personnel and other resources than the Company, including established supply arrangements and volume manufacturing operations. The Company believes its principal competitors include Hitachi, Matsushita, Siemens, Delphi, EcoStar and Visteon. The mechanical products segment competes primarily in the automotive, heavy equipment, aerospace and medical products industries. Each of these industries is extremely competitive. The Company will face substantial competition on a continuing basis from numerous competitors, many of whom possess longer operating histories, significantly greater financial resources, marketing, distribution and manufacturing capability. The Company believes its principal competitors include Advanced DC, Owosso Corporation, Emerson Electric, General Electric, Rockwell International, Baldor, ABB, Fairfield Manufacturing, Precision Gear and Fairlane Gear. I-5 The electronic products segment competes primarily in the automotive, telecommunications, medical, computer and industrial markets. Each of these markets is extremely competitive. The Company will face substantial competition on a continuing basis from numerous competitors, many of whom possess longer operating histories, significantly greater financial resources, marketing, distribution and manufacturing capability. The Company believes its principal competitors include Jabil Circuit, Plexus, EFTC Corporation, Flextronics International, Solestica Corporation and Baldwin. Patents The Company holds U.S. Patent No. 5,004,944, issued on April 2, 1991,entitled "Lightweight high power electromagnetic transducer". Corresponding applications were filed in foreign countries, and many of these foreign applications have issued as patents. U.S. Patent 5,311,092, issued on May 10, 1994, is directed to additional subject matter regarding lightweight, high power electromagnetic transducers. In April 1992, the Company was issued U.S. Patent No. 5,107,151 entitled "Switching circuit employing electronic devices in series with an inductor to avoid commutation breakdown and extending the current range of switching circuits by using IGBT devices in place of MOSFETs". This patent is directed to certain proprietary aspects of electronic control circuitry. Corresponding applications were filed in foreign countries, and many of these foreign applications have issued as patents. The Company was granted U.S. Patent No. 5,319,844, issued June 14, 1994, entitled "Method of making an electromagnetic transducer". This patent is directed to a method of constructing the motor disclosed in U.S. Patent No. 5,004,944. Corresponding applications were filed in foreign countries, and many of these foreign applications have issued as patents. The Company was granted U.S. Patent No. 5,382,859, issued January 17, 1995, entitled "Stator and method of constructing same for high power density electric motors and generators". The Company also holds U.S. Patent No. 5,592,731, issued on January 14, 1997 and entitled "Method of constructing a stator". These patents relate to the Company's enhancement to its motor technology. Corresponding applications were filed in foreign countries, and many of these foreign applications have issued as patents. The Company was granted U.S. Patent No. 5,677,605, issued October 14, 1997 entitled "Brushless DC motor using phase timing advancement". This patent describes a low cost method of controlling the drive current to a motor to achieve operating characteristics ideal for vehicle traction drives. Corresponding applications were filed in foreign countries, and some of these foreign applications have issued as patents. The Company was granted U.S. Patent No. 5,982,063, issued November 9, 1999, entitled "Electric motor with internal brake". This patent relates to current developments in electric wheelchair drives. Corresponding applications are pending in foreign countries. In July 1998 the Company filed a new U.S. patent application titled "Accurate Rotor Position Sensor and Method Using Magnet Ring and Linear Output Hall Effect Sensors" which is pending. Corresponding applications are pending in foreign countries. I-6 Trademarks The Company owns three U.S. Trademark Registrations for "UNIQ" (International Class 7 for power transducers, and Class 12 for utility land vehicles and Class 16 for Publications). The Class 12 trademark is subject to renewal in June 2006; the Class 7 trademark is subject to renewal in August 2006; and the Class 16 trademark is subject to renewal in February 2007. The Company registered the letters "UQM" and a stylized version thereof in the U.S. Counterpart applications have been filed in 26 countries throughout the world and 25 of those countries have granted registrations or indicated them to be allowable. These trademarks are directed to the same trademark classes as for the mark "UNIQ". The foreign trademark registrations and applications include major markets where the company is doing business or establishing business contacts. The Company has registered "POWERPHASE" as a trademark in the same trademark classes as for the mark "UNIQ". Corresponding applications for trademark registration were filed in 11 countries. The trademark was registered in the European community on March 21, 1997. Trademark registrations have been granted in Mexico, Canada, China, Israel, Japan, Singapore, South Korea, Taiwan and Thailand. The Company's future success depends, in part, on the diligent prosecution of its issued and pending motor and electronic patents, as well as the filing and prosecution of patents on future technological advances, if any. There can be no assurance that the Company will possess the financial resources necessary to prosecute and maintain existing applications or to pursue additional patents. If the Company is not able to prosecute and maintain its existing patent applications, they will lapse. There can be no assurance that the Company's patents will not be circumvented, invalidated or infringed, or that the Company will possess the financial resources to enforce its existing patents and patent applications in the event of an infringement. Further, new technology may be developed by third parties or may already exist unknown to the Company causing the Company's proprietary technology to be obsolete. The Company also intends to rely on the un-patented proprietary know-how it has developed and now utilizes in its products. There can be no assurance that others will not independently develop, acquire or obtain access to the Company's technology. Although the Company protects its proprietary rights by executing confidentiality agreements with its management, employees and others with access to the Company's technology, these measures may not be adequate to protect the Company from disclosure or misappropriation of its proprietary information. Backlog The Company's technology segment had unperformed service contracts from customers which will provide payments to the Company upon completion aggregating approximately $1.3 million and an order backlog for prototype motors and controls of approximately $.2 million at May 31, 2001. All such service contracts are subject to amendment, modification or cancellation. The Company expects to perform all unperformed service contracts and ship motor and controller backlog products over the next twelve months. I-7 The Company's mechanical products segment had an order backlog of approximately $1.9 million at May 31, 2001. The Company expects to ship all backlog products within the next twelve months. The Company's electronic products segment had an order backlog of approximately $8.7 million at May 31, 2001. The Company expects to ship all backlog products within the next twelve months. Customers and Suppliers The Company has two significant customers in its electronic products segment, Tyco International, Ltd., and Handera which accounted for revenue of $4,706,810 and $6,427,983, respectively representing 17.5 percent and 23.9 percent of consolidated revenue, respectively. Principal raw materials and components purchased by the Company include iron, steel, electronic components, magnet material and copper wire. Most of the above items are available from several suppliers and the Company generally relies on more than one supplier for each item. Certain components used by the Company are custom designs and if the Company's current supplier no longer made them available to the Company, the Company could experience production delays. U.S. Government Contracts For the year ended March 31, 2001, $853,341, or approximately 3.2 percent of the Company's consolidated revenue was derived from contracts with agencies of the U.S. Government and from subcontracts with U.S. Government prime contractors. For the year ended March 31, 2000, $910,770, or approximately 4.4 percent of consolidated revenue was derived from contracts with agencies of the U.S. Government and from subcontracts with U.S. Government prime contractors. Some of the Company's contracts with the U.S. Government provide for the reimbursement of costs on a 50 percent cost sharing basis based on not-to-exceed billing rates negotiated between the Company and the U.S. Government. Other U.S. Government business is performed under firm fixed price contracts. On "cost-share" and "firm fixed price" contracts, the Company can incur an actual loss in the performance thereof if incurred costs exceed the contract amount. All U.S. Government contracts with the Company are subject to modification or cancellation at the convenience of the Government. Employee and Labor Relations As of May 31, 2001, the Company had 165 full-time employees. The Company has entered into employment contracts with two of its executive officers which expire December 31, 2002. None of the Company's employees are covered by a collective bargaining agreement. The Company's management believes that its relationship with its employees has been generally satisfactory. In addition to its full-time staff, the Company from time to time engages the services of outside consultants and contract labor to meet peak workload or specialized program requirements. The Company does not anticipate any difficulty in locating additional qualified professional engineers, technicians and production workers, if so required, to meet expanded research and development or manufacturing operations. I-8 ITEM 2. PROPERTIES The Company owns or leases its offices and manufacturing facilities and believes these facilities to be well maintained, adequately insured and suitable for their present and intended uses. Information concerning facilities of the Company as of May 31, 2001, is set forth in the table below: Ownership or Square Expiration Date Location Feet of Lease Use Golden, Colorado (1) 40,000 (2) September 2002 manufacturing, laboratories and offices Frederick, Colorado 25,000 Own manufacturing and offices St. Charles, Missouri 31,000 March 2007 manufacturing, warehouse and offices (1) The Company sold its fifty percent member interest in a limited liability company which owns this facility in January 2001. (2) The Company occupies 25,000 square feet and sub-leases the remaining 15,000 square feet. ITEM 3. LEGAL PROCEEDINGS There is no material litigation with respect to which the Company is a party. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------ A special meeting of the shareholders of the Company was held on January 24, 2001. The following is a summary of the matters submitted to a vote of security holders and the results of the voting thereon: Proposal to amend our Certificate of Incorporation to change our name to UQM Technologies, Inc. For Against Abstain 15,014,651 36,017 37,606 Outstanding votable shares: 17,363,517 Total voted shares represented in person and by proxy: 15,088,274 Percentage of the outstanding votable shares: 86.9% II-1 ITEM 5. MARKET PRICE OF COMMON STOCK The Company's common stock trades on the American, Chicago, Pacific, Frankfurt and Berlin Stock Exchanges. The high and low closing prices, by fiscal quarter, as reported by the American Stock Exchange for the last two years are as follows: 2001 High Low Fourth Quarter $ 7.75 $6.13 Third Quarter $ 8.38 $6.50 Second Quarter $ 8.38 $7.19 First Quarter $ 9.00 $6.25 2000 High Low Fourth Quarter $10.88 $3.69 Third Quarter $ 4.38 $3.50 Second Quarter $ 4.63 $4.06 First Quarter $ 6.44 $4.31 On June 13, 2001 the closing price of the Company's common stock, as reported on the American Stock Exchange, was $6.60 per share and there were 896 holders of record of the Company's common stock. The Company has not paid any cash dividends on its common stock since inception and intends for the foreseeable future to retain any earnings to finance the growth of its business. Future dividend policy will be determined by the Board of Directors of the Company based upon consideration of the Company's earnings, capital needs and other factors then relevant. ITEM 6. SELECTED FINANCIAL DATA
UQM Technologies, Inc. Consolidated Selected Financial Data Year Year Year Year Five Months Year Ended Ended Ended Ended Ended Ended March 31, March 31, March 31, March 31, March 31, October 31, 2001 2000 1999 1998 1997 1996 --------- --------- --------- ----------- ----------- ------- Contract Services Revenue $ 2,283,292 1,702,937 1,517,960 2,790,496 700,132 1,436,484 Product Sales $ 24,613,779 18,894,923 14,280,458 1,274,236 152,016 611,213 Operating Loss $ (2,758,606) (5,688,774) (3,144,592) (3,007,599) (1,120,900) (2,744,606) Net Loss $ (3,140,122) (6,471,807) (3,754,070) (3,266,360) (1,201,085) (2,904,743) Net Loss Per Common Share- basic and diluted $ (.18) (.39) (.24) (.23) (.12) (.26) Total Assets $ 27,481,593 24,257,843 27,206,578 19,585,551 12,370,699 8,712,649 Long-Term Obligations $ 2,606,075 3,422,459 4,396,127 1,029,924 726,218 744,389 Cash Dividend Declared Per Common Share $ -0- -0- -0- -0- -0- -0-
V-1 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND - ------ RESULTS OF OPERATIONS Financial Condition Cash and cash equivalents at March 31, 2001 was $2,399,006 and working capital (the excess of current assets over current liabilities) was $4,737,780 compared with $2,085,115 and $5,672,559,respectively, at March 31, 2000. Accounts receivable rose $1,077,147 to $3,899,041 at March 31, 2001 from $2,821,894 at March 31, 2000. The increase is primarily attributable to record revenue levels during the fiscal year ended March 31, 2001 and extended payment terms offered to selected customers of the Company's mechanical products and electronic products segments. Costs and estimated earnings in excess of billings on uncompleted contracts increased $242,898 to $572,009 at March 31, 2001 from $329,111 at March 31, 2000. The increase is attributable to higher levels of unbilled work in process on engineering contracts. Estimated earnings on contracts in process rose to $720,333 at March 31, 2001 on costs incurred on contracts in process of $1,974,471 compared to estimated earnings on contracts in process of $180,293 on costs incurred on contracts in process of $645,425 at March 31, 2000. The increase in estimated earnings on contracts in process is attributable to higher levels of contracts in process at March 31, 2001. Inventories rose $3,535,957 to $6,656,236 at March 31, 2001 from $3,120,279 at March 31, 2000. Of this amount, raw material inventories rose $2,712,853 reflecting higher revenue levels, periodic electronic component shortages which necessitated higher stocking levels for all related parts used in the manufacture of affected products, and delays in customer production release authorizations. Finished products inventories rose $1,097,603 reflecting the stocking of certain completed electronic products in anticipation of future shipment release orders. Other current assets declined $348,003 to $52,065 at March 31, 2001 reflecting the collection of amounts due from the disposition of the Company's remaining equity interest in its German joint venture. The Company invested $2,381,564 for the acquisition of property and equipment during fiscal 2001 compared to $483,716 for the prior fiscal year. $1,862,851 of the increase represents expenditures for manufacturing equipment at the Company's electronic products segment to improve manufacturing throughput and component placement density. Land and Buildings declined $335,500 and $1,438,090, respectively, reflecting the sale of real estate held by Unique Building Partners Limited Liability Co. (UBPL). Goodwill, net of accumulated amortization, declined $332,666 to $5,662,797 at March 31, 2001 from $5,995,463 at March 31, 2000 due to the amortization of this asset over its 20 year useful life. Accounts payable increased $1,087,943 to $2,467,259 at March 31, 2001 from $1,379,316 at March 31, 2000. The increase is primarily attributable to higher levels of inventory purchases from suppliers. VII-1 Other current liabilities rose $496,044 to $1,341,506 at March 31, 2001 from $845,462 at March 31, 2000. The increase is primarily attributable to higher payroll associated with higher staffing levels at the Company's electronics products segment and prepayments on engineering contracts not yet in process at year-end in the Company's technology segment. In January, 2001, UBPL a limited partnership in which the Company was a 50 percent owner sold its principal asset, the Company's headquarters building in Golden, Colorado, and was subsequently liquidated. As a result of this transaction, the Company received cash proceeds of $1.2 million and recorded a deferred gain that will be recognized over the remaining term of the Company's lease, including extensions. At March 31, 2001 the current portion of the deferred gain was $115,713 and the long-term portion of the deferred gain was $636,423. Current portion of long-term debt decreased $106,438 to lease including $865,685 at March 31, 2001 from $972,123 at March 31, 2000 primarily due to the retirement of the mortgage upon sale of the Company's headquarters building in Golden, Colorado by UBPL. Revolving line-of-credit rose to $4,037,000 at March 31, 2001 due to expanded working capital requirements during the fiscal year associated with higher levels of trade accounts receivable and inventory. Billings in excess of costs and estimated earnings on uncompleted contracts rose $118,320 to $197,819 at March 31, 2001 from $79,499 at March 31, 2000 reflecting payments by customers for certain sponsored development contracts in advance of the performance of the associated project work. Long-term debt declined $816,384 to $2,606,075 at March 31, 2001 primarily due to scheduled principal repayments on the Company's term bank debt during the fiscal year, and the retirement of the mortgage upon sale of the Company's headquarters in Golden, Colorado, by UBPL. Minority interest in consolidated subsidiary decreased to zero at March 31, 2001 from $413,066 at March 31, 2000 reflecting the liquidation of UBPL. Common stock and additional paid-in capital increased to $174,233 and $50,626,120 at March 31, 2001, respectively, compared to $171,942 and $49,382,877 at March 31, 2000. The increases in these accounts totaling $1,245,534 is attributable to the cash received upon the exercise of stock options by employees of $994,721; cash from the sale of common stock under the Company's Employee Stock Purchase Plan of $29,270 and cash received upon the exercise of warrants of $96,000. Results of Operations Operations for the year ended March 31, 2001, resulted in a net loss of $3,140,122, or $0.18 per share on total revenue of $26,897,071, compared to a net loss of $6,471,807, or $0.39 per share on total revenue of $20,597,860 for the year ended March 31, 2000 and a net loss of $3,754,070 or $0.24 per share on total revenue of $15,798,418 for the year ended March 31, 1999. Operations for the fiscal year ended March 31, 2001, excluding asset write-down charges of $712,599 or $0.04 per common share, resulted in a net loss of $2,427,523 or $0.14 per common share compared to a net loss of $2,367,179 or $0.14 per common share and $3,754,070 or $0.24 per common share for the fiscal years ended March 31, 2000 and 1999, respectively. Earnings before interest, VII-2 taxes, depreciation and amortization ("EBITDA") for the fiscal year before the foregoing charges improved by $150,148 to $386,760 versus EBITDA of $236,612 last fiscal year and $(1,590,351) for the fiscal year ended March 31, 1999. EBITDA for the fiscal year ended March 31, 2001 including charges was $(325,839) compared to $ (3,868,016) and $(1,590,351) for the comparable fiscal years ended March 31, 2000 and 1999, respectively. Revenue from contract services increased 34 percent to $2,283,292 during fiscal 2001 from $1,702,937 for the year ended March 31, 2000 and 50 percent over revenue for the year ended March 31, 1999. The increase in contract services revenue is attributable to continued strong demand for development programs. Product sales for the year increased 30 percent to $24,613,779 compared to $18,894,923 for the year ended March 31, 2000 and 72 percent compared to $14,280,458 for the year ended March 31, 1999. Product sales for the fiscal year ended March 31, 2001 by the mechanical products segment increased $292,164 or 7 percent to $4,407,721 compared to $4,115,557 for the comparable fiscal year ended March 31, 2000. The growth in revenue in the mechanical products segment is primarily attributable to increased shipments of wheelchair motors. Product sales during fiscal 2001 for the electronic products segment increased 36 percent to $19,110,954 compared to $14,056,151 for the year ended March 31, 2000. The growth in revenue in the electronic products segment is primarily attributable to the launch of a value added product for an existing customer, higher production volumes for certain customers and new business launches during the fiscal year. Product sales for the year by the technology segment increased 51 percent to $1,095,104 compared to $723,215 for the year ended March 31, 2000. The growth in revenue in the technology segment is primarily attributable to increased shipment of Powerphase 100(R) systems during the year. Consolidated gross profit margin for fiscal 2001 was 8.8 percent compared to 15.4 and 8.2 percent for the comparable fiscal years ended March 31, 2000 and March 31, 1999, respectively. Gross profit on contract services was 15.4 percent this year compared to 23.7 and 3.0 percent for fiscal 2000 and fiscal 1999, respectively. The decline in contract services margins for the current year versus last year is attributable to cost overruns on development programs. The improvement in contract services margins for the current year versus fiscal 1999 is attributable to reduced levels of cost overruns on development programs and improved pricing. Gross profit margins on product sales this year were 8.2 percent compared to 14.6 and 8.7 percent in fiscal 2000 and fiscal 1999, respectively. The decrease in margins on product sales for this year versus fiscal 2000 and fiscal 1999 is primarily attributable to product launch costs and pricing pressure on selected accounts and lower than expected overhead absorption on gear manufacturing operations in the Company's mechanical products segment. Research and development expenditures for the fiscal year ended March 31, 2001 declined to $ 103,231 compared to $378,954 and $667,989 for the fiscal years ended March 31, 2000 and 1999, respectively. The decrease in this year versus fiscal 2000 and 1999 is generally attributable to lower levels of internally-funded development activities and cost-share type contracts. General and administrative expense for the year was $3,990,301 compared to $4,036,732 and $3,461,161 for fiscal years ended March 31, 2000 and 1999, respectively. The decrease in general and administrative expenses this year versus last year is primarily due to compensation payable to the Company's former CEO under the terms of his employment agreement last year. The increase in general and administrative expenses for this year versus the fiscal year ended March 31, 1999 is primarily attributable to increased marketing VII-3 expenditures, investment banking fees associated with acquisition activities, and increased reserves for bad debts. Write-down of investments and other assets this year of $320,401 are attributable to the retirement of obsolete electronic equipment and the impairment write-down of the Company's investment in Aeromax Corporation, which did not meet the Company's expectation of near term profitable operations. Write-down of investments and other assets for the year ended March 31, 2000 represents write-downs of the Company's investments in EV Global, Unique Mobility Europa, Taiwan UQM Electric Company and a note receivable from Windemere Eco Development, all of which did not meet the Company's expectation of near term profitable operations. Write-down of inventory for the year ended March 31, 2001 is attributable to the write-down of slow moving and not readily marketable electronic component inventory, reflecting deteriorating economic climate during the last half of the fiscal year. Interest income for fiscal 2001 rose to $66,833 compared to $59,369 in fiscal 2000. The increase is generally attributable to higher yields on invested cash balances. Interest income this year declined $44,532 compared to $111,365 in fiscal 1999. The decrease is attributable to lower levels of cash and cash equivalents throughout this fiscal year. Interest expense declined to $450,322 for the year ended March 31, 2001 compared to $483,298 last year. The decrease is attributable to lower levels of term-debt throughout the fiscal year. Interest expense rose $111,926 this year from $338,396 for fiscal 1999. The increase is attributable to higher levels of borrowings throughout this fiscal year on the Company's lines-of-credit. Equity in loss of joint ventures was zero this year versus $280,170 and $417,801 for the years ended March 31, 2000 and 1999, respectively. The decrease for this year versus last year and fiscal 1999 is due to the Company's write-down of its investment in Taiwan UQM, EV Global, Europa, and WED last year at which time it ceased recording its pro-rata shares of the operating losses of these entities. Liquidity and Capital Resources The Company's cash balances and liquidity throughout the fiscal year ended March 31, 2001 were adequate to meet operating needs. For the year ended March 31, 2001 net cash used by operations was $3,522,690 compared to $1,744,746 for the comparable prior year. The increase in cash used by operating activities is primarily attributable to higher levels of accounts receivables resulting from increased revenues and the granting of extended terms to selected customers and higher inventory levels somewhat offset by higher levels of trade accounts payable. Cash used by investing activities for the year ended March 31, 2001 was $342,750 compared to $1,015,393 for the prior fiscal year. The change is primarily attributable to the proceeds of $1,752,365 from the sale of the Unique Building Partners Limited Liability Co's principal asset, the Company's headquarters building located in Golden, Colorado and the subsequent liquidation of the Limited Liability Company offset by increased capital expenditures for property and equipment of $1,897,848. The Company's cash requirements throughout the period were funded primarily from existing cash balances, cash proceeds from the exercise of warrants and employee stock options, proceeds for the sale of the Company's Headquarters Building by UBPL and from borrowings on the Company's revolving lines-of-credit. VII-4 UQM Power Products has a line-of-credit facility with a commercial bank in the amount of $750,000 which is scheduled for renewal in December 2001. At March 31, 2001 no amount was drawn against this facility. All financing of UQM Power has been unconditionally guaranteed by UQM Technologies as the parent entity. UQM Electronics has a line-of-credit with a commercial bank in the amount of $5.0 million expiring in August 2001 which the Company either expects to renew or replace with a similar facility. At March 31, 2001, approximately $4.0 million was drawn against this facility. All financing of UQM Electronics has been unconditionally guaranteed by UQM Technologies as the parent entity. The Company believes that its existing cash balances and bank lines-of-credit will be sufficient to meet its operating capital requirements for at least the next twelve months, exclusive of acquisition financing requirements. For the longer-term, the Company expects to continue its strategy of growing its business through expanding its product line of permanent magnet motors and controllers, securing production orders from new and existing customers for gear and component assemblies, design and introduce new products for manufacture, seek strategic alliances to accelerate the commercialization of its technology and pursue synergistic and accretive acquisitions. The Company expects to finance its future growth from existing cash resources, cash flow from operations, and through the issuance of equity or debt securities or a combination thereof. There can, however, be no assurance that such financing or capital will be available on terms acceptable to the Company. In the event financing or capital for future growth as envisioned under the Company's strategy is not available, the Company will modify its strategy to align its operations with its then available financial resources. 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. The Company does not use financial instruments to any degree to manage these risks and does not hold or issue financial instruments for trading purposes. Subsequently, all of the Company's product sales, and related receivables are payable in U.S. dollars. The Company is subject to interest rate risk on its debt obligations. Long-term debt obligations have fixed interest rates and the Company's lines-of-credit have variable rates of interest indexed to the prime rate. Interest rates on these instruments approximate current market rates as of March 31, 2001. VII-6 ITEM 8. Financial Statements Independent Auditors' Report The Board of Directors UQM Technologies, Inc.: We have audited the accompanying consolidated balance sheets of UQM Technologies, Inc. (formerly Unique Mobility, Inc.) and subsidiaries (Company) as of March 31, 2001 and 2000, and the related consolidated statements of operations, stockholders' equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended March 31, 2001. These consolidated 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 did not audit the financial statements of Taiwan UQM Electric Co., Ltd., (a 38.25 percent owned investee company). For the year ended March 31, 1999 the Company recognized equity in the losses of Taiwan UQM Electric Co., Ltd. of $417,801. The financial statements of Taiwan UQM Electric Co., Ltd. were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Taiwan UQM Electric Co., Ltd. for the year ended March 31, 1999 is based solely on the report of the other auditors. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of the other auditors, 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, 2001 and 2000, and the results of their operations and their cash flows for each of the years in the three-year period ended March 31, 2001, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Denver, Colorado May 18, 2001 VIII-1
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Consolidated Balance Sheets March 31, March 31, Assets 2001 2000 - ------ --------- --------- Current assets: Cash and cash equivalents $ 2,399,006 2,085,115 Accounts receivable (notes 11 and 16) 3,899,041 2,821,894 Costs and estimated earnings in excess of billings on uncompleted contracts (note 2) 572,009 329,111 Inventories (notes 3 and 16) 6,656,236 3,120,279 Prepaid expenses 184,405 192,492 Other 52,065 400,068 ---------- ---------- Total current assets 13,762,762 8,948,959 ---------- ---------- Property and equipment, at cost: Land (notes 4 and 6) 181,580 517,080 Building (notes 4 and 6) 1,240,435 2,678,525 Machinery and equipment (note 6) 12,433,475 10,711,392 ---------- ---------- 13,855,490 13,906,997 Less accumulated depreciation (6,577,035) (5,365,304) ---------- ---------- Net property and equipment 7,278,455 8,541,693 ---------- ---------- Patent and trademark costs, net of accumulated amortization of $170,204 and $125,078 731,707 731,282 Goodwill, net of accumulated amortization of $989,362 and $656,696 5,662,797 5,995,463 Other assets 45,872 40,446 ---------- ---------- $ 27,481,593 24,257,843 ========== ==========
(Continued) VIII-2
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Consolidated Balance Sheets, Continued March 31, March 31, Liabilities and Stockholders' Equity 2001 2000 - ------------------------------------ --------- --------- Current liabilities: Accounts payable $ 2,467,259 1,379,316 Other current liabilities (notes 5 and 16) 1,341,506 845,462 Current portion of long-term deferred gain on sale of real estate (note 4) 115,713 - Current portion of long-term debt (note 6) 865,685 972,123 Revolving line-of-credit (note 6) 4,037,000 - Billings in excess of costs and estimated earnings on uncompleted contracts (note 2) 197,819 79,499 ---------- ---------- Total current liabilities 9,024,982 3,276,400 Long-term deferred gain on sale of real estate (note 4) 636,423 - Long-term debt, less current portion (note 6) 2,606,075 3,422,459 ---------- ---------- Total liabilities 12,267,480 6,698,859 Minority interest in consolidated subsidiary (note 4) - 413,066 Stockholders' equity (notes 8 and 9): Common stock, $.01 par value, 50,000,000 shares authorized; 17,423,358 and 17,194,192 shares issued 174,233 171,942 Additional paid-in capital 50,626,120 49,382,877 Accumulated deficit (35,164,723) (32,024,601) Accumulated other comprehensive income (384,300) (384,300) Note receivable from officer (37,217) - ---------- --- Total stockholders' equity 15,214,113 17,145,918 ---------- ---------- Commitments (notes 6, 13, and 15) $ 27,481,593 24,257,843 ========== ==========
See accompanying notes to consolidated financial statements. VIII-3
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Consolidated Statements of Operations Year Ended Year Ended Year Ended March 31, March 31, March 31, 2001 2000 1999 ----------- ---------- ---------- Contract services $ 2,283,292 1,702,937 1,517,960 Product sales 24,613,779 18,894,923 14,280,458 ---------- ---------- ---------- 26,897,071 20,597,860 15,798,418 ---------- ---------- ---------- Operating costs and expenses: Costs of contract services 1,930,601 1,300,052 1,471,827 Costs of product sales 22,586,279 16,133,891 13,033,930 Research and development 103,231 378,954 667,989 General and administrative 3,990,301 4,036,732 3,461,161 Amortization of goodwill 332,666 332,377 308,103 Write-down of investments and other assets 320,401 4,104,628 - Write-down of inventory 392,198 - - ---------- --- --- 29,655,677 26,286,634 18,943,010 ---------- ---------- ---------- Operating loss (2,758,606) (5,688,774) (3,144,592) Other income (expense): Interest income 66,833 59,369 111,365 Interest expense (450,322) (483,298) (338,396) Equity in loss of joint ventures - (280,170) (417,801) Minority interest share of earnings of consolidated subsidiary (65,426) (80,823) (72,596) Other 67,399 1,889 107,950 ---------- ---------- ---------- (381,516) (783,033) (609,478) ---------- --------- ---------- Net loss $ (3,140,122) (6,471,807) (3,754,070) ========== ========== ========== Net loss per common share - basic and diluted (note 1o) (.18) (.39) (.24) === === === Weighted average number of shares of common stock outstanding 17,314,891 16,573,391 15,960,966 ========== ========== ==========
See accompanying notes to consolidated financial statements. VIII-4
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity and Comprehensive Income (Loss) Number of Accumulated Notes common Additional Accumu- other receivable Total shares Common paid-in lated comprehensive due from Treasury stockholders' issued stock capital deficit loss officers stock equity --------- ------ ---------- ------- ------------- ---------- -------- ----------- Balances at March 31, 1998 15,394,621 $153,946 38,852,446 (21,798,724) (420,480) (56,056) - 16,731,132 Issuance of common stock in private offerings, net of offering costs of $33,671 123,125 1,231 950,098 - - - - 951,329 Issuance of common stock upon exercise of employee and directors options 329,339 3,294 942,316 - - (794,341) - 151,269 Issuance of common stock upon exercise of warrants 68,600 686 297,689 - - - - 298,375 Issuance of common stock under employee stock purchase plan 3,120 31 15,089 - - - - 15,120 Issuance of common stock for services 17,845 179 91,303 - - - - 91,482 Compensation expense accrued for issuance of common stock options granted for services - - 19,000 - - - - 19,000 Issuance of common stock for acquisition of UQM Electronics 286,282 2,863 2,244,449 - - - - 2,247,312 Comprehensive income (loss): Net loss - - - (3,754,070) - - - (3,754,070) Translation adjustment - - - - (31,159) - - (31,159) ---------- ------- - - -------- Total comprehensive income (loss) (3,754,070) (31,159) (3,785,229) ---------- ------- ----------- Repayment of officers' notes - - - - - 396,334 - 396,334 ---------- ------- ---------- ---------- ------- ------- ------ -------- Balances at March 31, 1999 16,222,932 162,230 43,412,390 (25,552,794) 451,639) (454,063) - 17,116,124 Issuance of common stock in private offerings, net of offering costs of $11,235 88,900 889 487,939 - - - - 488,828 Issuance of common stock upon exercise of employee and directors options 204,970 2,050 774,671 - - - (3,062) 773,659 Issuance of common stock upon exercise of warrants 493,087 4,931 3,771,728 - - - - 3,776,659 Issuance of common stock under employee stock purchase plan 9,072 91 33,730 - - - - 33,821 Compensation expense accrued for issuance of common stock options granted for services - - 46,368 - - - - 46,368 Issuance of common stock for investment in Germany joint venture 208,333 2,083 1,147,811 - - - - 1,149,894 Adjustment in purchase price of UQM Electronics and UQM Power Products - - - - - - (167,395) (167,395) Comprehensive income (loss): Net loss - - - (6,471,807) - - - (6,471,807) Translation adjustment - - - - 67,339 - - 67,339 ---------- ------- ------- Total comprehensive income (loss) (6,471,807) 67,339 (6,404,468) ---------- ------- ----------- Retirement of treasury shares (33,102) (332) (291,760) - - - 292,092 - Repayment of officers' notes - - - - - 454,063 (121,635) 332,428 ---------- ------- ---------- ---------- ------- ------- ------- ------- Balances at March 31, 2000 17,194,192 $171,942 49,382,877 (32,024,601) (384,300) - - 17,145,918
(Continued) VIII-5
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity and Comprehensive Income (Loss), Continued Number of Accumulated Notes common Additional Accumu- other receivable Total shares Common paid-in lated comprehensive due from Treasury stockholders' issued stock capital deficit loss officers stock equity --------- ------ ---------- ------- ------------- ---------- -------- ----------- Issuance of common stock upon exercise of employee and directors options 212,408 $ 2,124 1,094,961 - - (38,500) (63,864) 994,721 Issuance of common stock upon exercise of warrants 12,000 120 95,880 - - - - 96,000 Issuance of common stock under employee stock purchase plan 6,774 68 29,202 - - - - 29,270 Issuance of common stock for services 5,967 59 44,944 - - - - 45,003 Compensation expense accrued for issuance of common stock options granted for services - - 42,040 - - - - 42,040 Retirement of treasury shares (7,983) (80) (63,784) - - - 63,864 - Comprehensive income (loss): Net loss - - - (3,140,122) - - - (3,140,122) Translation adjustment - - - - - - - - ---------- ----------- Total comprehensive income (loss) - - - (3,140,122) - - - (3,140,122) ---------- ----------- Repayment of officers' notes - - - - - 1,283 - 1,283 ---------- ------- ---------- ---------- ------- ------- ------- ----- Balances at March 31, 2001 17,423,358 $ 174,233 50,626,120 (35,164,723) (384,300) (37,217) - 15,214,113 ========== ======= ========== ========== ======= ======= ======= ==========
See accompanying notes to consolidated financial statements. VIII-6
UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Year Ended Year Ended Year Ended March 31, March 31, March 31, 2001 2000 1999 ---------- ---------- ---------- Cash flows used by operating activities: Net loss $ (3,140,122) (6,471,807) (3,754,070) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 2,363,961 2,120,493 1,825,323 Gain on sale of real estate by consolidated subsidiary, net of minority interest (771,421) - - Deferred gain on sale of building 752,136 - - Write-down of investments and other assets 320,401 4,104,628 - Write-down of inventory 392,198 - - Minority interest share of earnings of consolidated subsidiary 65,426 80,823 72,596 Non-cash compensation expense for common stock, stock options and warrants issued for services 87,043 46,368 110,482 Equity in loss of joint ventures - 280,170 417,801 Loss (gain) on sale of property and equipment 2,917 (1,875) - Other (5,426) (16,241) (8,373) Change in operating assets and liabilities: Accounts receivable and costs and estimated earnings in excess of billings on uncompleted contracts (1,320,045) (452,207) 231,768 Inventories (3,928,155) (423,027) (1,444,538) Prepaid expenses and other current assets (43,910) (50,313) (361,498) Accounts payable and other current liabilities 1,583,987 (971,864) 506,805 Billings in excess of costs and estimated earnings on uncompleted contracts 118,320 10,106 68,943 ---------- ---------- ---------- Net cash used by operating activities (3,522,690) (1,744,746) (2,334,761) ---------- ---------- ---------- Cash flows used by investing activities: Cash paid for acquisition of subsidiary, net - - (3,848,640) Acquisition of property and equipment (2,381,564) (483,716) (4,399,114) Increase in patent and trademark costs (45,551) (79,296) (137,537) Proceeds from sale of property and equipment 7,000 63,327 - Proceeds from sale of real estate by subsidiary, net 2,961,158 - - Distribution to minority interest on liquidation of consolidated subsidiary (1,208,793) - - Investment in other long-term assets (75,000) (515,708) - Proceeds from sale of Germany joint venture 400,000 - - ---------- ---------- ---------- Net cash used by investing activities (342,750) (1,015,393) (8,385,291) ---------- ---------- ---------- Cash flows provided by financing activities: Proceeds from borrowings 6,198,000 10,898,494 10,827,358 Repayment of debt (2,502,422) (12,928,740) (7,320,466) Repayment of mortgage on sale of real estate by subsidiary (581,400) - - Proceeds from sale of common stock, net - 488,828 951,329 Issuance of common stock upon exercise of employee options, net of note repayments 996,004 1,106,087 547,603 Issuance of common stock under employee stock purchase plan 29,270 33,821 15,120 Issuance of common stock upon exercise of warrants 96,000 3,776,659 298,375 Distributions paid to holders of minority interest (56,121) (67,348) (67,347) ---------- ---------- ---------- Net cash provided by financing activities 4,179,331 3,307,801 5,251,972 ---------- ---------- ---------- Increase (decrease) in cash and cash equivalents 313,891 547,662 (5,468,080) Cash and cash equivalents at beginning of period 2,085,115 1,537,453 7,005,533 ----------- ---------- ---------- Cash and cash equivalents at end of period $ 2,399,006 2,085,115 1,537,453 ========== ========== ========== Interest paid in cash during the period $ 429,764 488,601 314,983 ========== ========== ========== (Continued)
VIII-7 UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows, Continued Non-cash investing and financing transactions: Translation adjustments of $(67,339) and $31,159, were recorded for the years ended March 31, 2000 and 1999, respectively. In February 2000, the Company accepted 10,675 shares of its $0.01 par value common stock with a fair market value of $90,742 in satisfaction of purchase price adjustments arising subsequent to the acquisition of UQM Electronics in accordance with the provisions of the Purchase Agreement. In March 2000, the Company accepted 7,762 shares of its $0.01 per share common stock with a fair market value of $76,653 in satisfaction of purchase price adjustments arising subsequent to the acquisition of UQM Power Products in accordance with the provisions of the Purchase Agreement. In May 1999, the Company acquired a 33.6 percent ownership interest in a Germany Joint Venture. Pursuant to this transaction the Company issued 208,333 shares of common stock with an aggregate value of $1,149,894 in exchange for its ownership interest. In April 1998, the Company purchased all of the outstanding stock of UQM Electronics for $4 million cash and 286,282 shares of the Company's common stock. In accordance with the provisions of the Company's stock option plans, the Company accepts as payment of the exercise price or as repayment of promissory notes from officers issued under the option plans, mature shares of the Company's common stock held by the option holder for a period of six months prior to the date of the option exercise or promissory note repayment. For the years ended March 31, 2001 and 2000, the Company issued 20,045 and 5,000 shares of common stock for an aggregate exercise price of $63,864 and $3,750, respectively, for which the Company received 7,983 and 355 shares of common stock as payment for the exercise price. In accordance with the provisions of the Company's stock option plans, the Company accepts promissory notes from officers of the Company in satisfaction of the exercise price of options exercised. These notes receivable are recorded as a reduction of shareholders' equity in the consolidated financial statements. For the years ended March 31, 2001 and 1999, the Company issued 11,000 and 267,362 shares of common stock for an aggregate exercise price of $38,500 and $794,341, respectively, for which the Company received promissory notes for the same amount. For the year ended March 31, 2000 the Company received 14,310 shares of common stock with a fair market value of $121,635 in repayment of promissory notes issued under the option plans. The shares received were recorded at cost as treasury stock and subsequently retired. See accompanying notes to consolidated financial statements. VIII-8 UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (1) Summary of Significant Accounting Policies (a) Description of Business UQM Technologies, Inc., formerly Unique Mobility, Inc. and subsidiaries (the "Company") is engaged in the research, development and commercialization of permanent magnet electric motors and the electronic controls for such motors, the grinding and manufacturing of high precision gears and the manufacture and sale of electronic printed circuit board assemblies, wire harness assemblies and other electronic products. The Company's revenue is derived primarily from product sales to customers in the automotive, agriculture, telecommunications, industrial, medical and aerospace markets, and from contract research and development services. The Company is impacted by other factors such as the continued receipt of contracts from industrial and governmental parties, its ability to protect and maintain the proprietary nature of its technology, its continued product and technological advances and the ability of the Company and its partners to commercialize its products and technology. (b) Principles of Consolidation The consolidated financial statements include the accounts of UQM Technologies, Inc. and those of all majority-owned or controlled subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Investments in affiliated entities in which the Company has less than a 50 percent ownership interest and the ability to exercise significant influence are accounted for by the equity method. Under the equity method, the investment is originally recorded at cost and subsequently adjusted to recognize the Company's share of the net income or losses of the affiliates. Recognition of any such losses is generally limited to the extent of the Company's investment in, advances to, commitments and guarantees for the investee. Other investments, in which the Company has a minimal ownership interest and does not exercise significant influence, are carried at cost. The minority interests as of March 31, 2000, consisted of the other stockholders' ownership interests in a subsidiary of the Company. See Note 4. (c) Cash and Cash Equivalents The Company considers cash on hand and investments with original maturities of three months or less to be cash equivalents. VIII-9 UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (d) Inventories Inventories are stated at the lower of cost or market. Cost is determined by the first-in, first-out method. (e) Property and Equipment Property and equipment is stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets which range from three to five years, except for buildings, which are depreciated over 31 years. Maintenance and repairs are charged to expense as incurred. (f) Patent and Trademark Costs Patent and trademark costs consist primarily of legal expenses, and represent those costs incurred by the Company for the filing of patent and trademark applications and the costs to maintain the patents in good standing. Amortization of patent and trademark costs is computed using the straight-line method over the estimated useful life of the asset, typically 17 years for patents, and 40 years for trademarks. (g) Goodwill The excess of the consideration exchanged over the fair value of the net assets obtained in acquisitions is recorded as goodwill. Amortization of goodwill is calculated using the straight-line method over a period of 20 years. (h) Long-Lived Assets The Company accounts for long-lived assets in accordance with the provisions of Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of ("SFAS 121"). SFAS 121 requires that long-lived assets, investments and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. (i) Contract Services Revenue and Cost Recognition 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. VIII-10 UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Contract costs include all direct materials, subcontract and labor costs and other indirect costs. 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. (j) Income Taxes Income Taxes The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. Under the asset and liability method of Statement 109, 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 bases and operating loss and tax credit carryforwards. 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 effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. (k) Research and Development Costs of researching and developing new technology or significantly altering existing technology are charged to operations as incurred. (l) Equity Instruments Issued for Non-Employee Services The Company periodically issues common stock or stock options to non-employees for services rendered. The cost of these services is recorded based upon the fair market value of the Company's common stock on the date of issuance or the fair market value of the stock option determined using an appropriate option pricing model. (m) Foreign Currency Translation The net assets of foreign investments of the Company are translated at the appropriate period-end exchange rates. Income and expense accounts are translated at average monthly exchange rates. Net exchange gains or losses resulting from such translation are excluded from results of operations and accumulated as a separate component of stockholders' equity until realized or investments are disposed of. Gains and losses from foreign currency transactions are included in other income (expense). VIII-11 UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (n) Comprehensive Income (Loss) Comprehensive income (loss) consists of net loss and other comprehensive income (loss) items which under generally accepted accounting principles are excluded from net loss but included as a component of stockholders' equity. At March 31, 2001 and 2000, accumulated other comprehensive loss consisted entirely of unrealized foreign currency losses. (o) Loss Per Common Share Statement of Financial Accounting Standards No. 128, Earnings per Share ("SFAS 128"), requires presentation of both basic earnings per share and diluted earnings per share. Basic earnings per share is computed by dividing income or loss available to common shareholders by the weighted average number of common shares outstanding during the periods presented. Diluted earnings per share is computed by dividing income or loss available to common shareholders by all outstanding and dilutive potential shares during the periods presented, unless the effect is antidilutive. (p) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (q) Reclassifications Certain prior year amounts have been reclassified to conform to the current period presentation. (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, 2001, the estimated period to complete contracts in process ranged from 1 to 15 months, and the Company expects to collect substantially all related accounts receivable arising therefrom within sixteen months. VIII-12 UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued
The following summarizes contracts in process at March 31, 2001, and 2000: March 31, March 31, 2001 2000 Costs incurred on uncompleted contracts $ 1,974,471 645,425 Estimated earnings 720,333 180,293 --------- ------- 2,694,804 825,718 Less billings to date (2,320,614) (576,106) --------- ------- $ 374,190 249,612 ========= ======= Included in the accompanying balance sheets as follows: Costs and estimated earnings in excess of billings on uncompleted contracts $ 572,009 329,111 Billings in excess of costs and estimated earnings on uncompleted contracts (197,819) (79,499) --------- ------- $ 374,190 249,612 ========= =======
(3) Inventories Inventories at March 31, 2001, and 2000 consist of: March 31, March 31, 2001 2000 --------- --------- Raw materials $ 5,159,632 2,446,779 Work in process 352,632 627,131 Finished products 1,143,972 46,369 --------- --------- $ 6,656,236 3,120,279 ========= ========= (4) Limited Liability Company In September 1992, the Company and a private investor formed a Colorado limited liability company to acquire, own and maintain a 40,000 square-foot facility in Golden, Colorado, and the surrounding land. This facility serves as the Company's corporate headquarters. Ownership in this limited liability company is divided equally between the Company and the private investor. However, the Company is deemed to have a controlling interest in the limited liability company by virtue of the operating agreement which authorizes the Company to make all decisions with respect to the business of the limited liability company, subject only to certain protective rights of the private investor, and by virtue of the lease agreement with the limited liability company covering the entire facility. VIII-13 UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued The limited liability company is, therefore, accounted for as a consolidated subsidiary. Minority interest in consolidated subsidiary represents the private investor's allocable portion of the equity of the consolidated subsidiary. In January 2001, the Limited Liability Company sold the Golden, Colorado real estate held by it for $3.0 million in cash. Subsequent to the sale the Limited Liability Company was liquidated. Cash proceeds to the Company from the transaction and the subsequent liquidation were $1.2 million. The Company's lease on the facility expires in September 2002, and the Company has an option to extend the lease for an additional term of five years at the then prevailing market lease rate. Recognition of the Company's gain on the transaction of $752,136 is being deferred over the remaining term of the Company's lease of the facility, including available extensions. (5) Other Current Liabilities Other current liabilities at March 31, 2001 and 2000, consist of: March 31, March 31, 2001 2000 Accrued interest $ 41,917 21,360 Accrued legal and accounting fees 85,110 71,275 Accrued payroll, consulting, personal property taxes and real estate taxes 684,296 339,263 Customer deposits 44,575 - Accrued material purchases 310,478 327,828 Accrued warranty costs 34,275 6,473 Other 140,855 79,263 --------- ------- $ 1,341,506 845,462 ========= ======= (6) Long-term debt
Long-term debt at March 31, 2001 and 2000 consists of: March 31, March 31, 2001 2000 Note payable to bank, payable in monthly installments with interest at 8.65%; matures July 2003; secured by land and building $ 838,357 871,675 Note payable to bank, payable in monthly installments with interest at 9.1%; matures October 2007; secured by land and building - 622,486 Notes payable to bank, payable in monthly installments with interest at 8.5%; matures November 2001, April, September, and November 2005; secured by equipment 906,423 1,190,456 VIII-14 UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Note payable to bank, payable in monthly installments with interest at 9.50%; matures June 2006; secured by equipment 46,207 52,753 Note payable to bank, payable in monthly installments with interest at 8.125%; matures July 2001; secured by accounts receivable, inventory and equipment 104,167 416,667 Note payable to bank, payable in monthly installments with interest at 7.70%; matures March 2004; secured by equipment 964,879 1,240,545 Note payable to bank, payable in monthly installments with interest at 8.75%; matures August 2004 611,727 - -------- --------- Total long-term debt 3,471,760 4,394,582 Less current portion 865,685 972,123 --------- --------- Long-term debt, less current portion $ 2,606,075 3,422,459 ========= =========
Certain of the above loan agreements require the Company to maintain certain financial ratios as defined in the agreements. As of March 31, 2001, the Company was in compliance with the required ratios or they had been waived by the lender. The annual aggregate maturities of long-term debt for each of the next five fiscal years and thereafter are as follows: 2002 $ 865,685 2003 721,405 2004 780,037 2005 349,157 2006 137,110 Thereafter 618,366 -------- $ 3,471,760 Lines of credit At March 31, 2001, the Company has lines of credit of $.75 million and $5.0 million. The $.75 million line-of-credit expires in December 2001 and had no amount outstanding at March 31, 2001. The $5.0 million line-of-credit is due on demand, but if no demand is made, it is due August 15, 2001. The Company expects that its lines-of-credit will be renewed or replaced with similar facilities. At March 31, 2001, $4,037,000 was outstanding on this facility. Interest on the lines-of-credit is payable monthly at prime plus .75% (8.75% at March 31, 2001) and prime (8.0% at March 31, 2001), respectively. Outstanding borrowings under both lines of credit are secured by accounts receivable, inventory and general intangibles, and are limited to certain percentages of eligible accounts receivable and inventory. Both lines have various covenants which limit the Company's ability to dispose of assets, merge with another entity, and pledge trade receivables and inventories as collateral. The Company is also required to maintain certain financial ratios as defined in the VIII-15 UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued agreements. As of March 31, 2001, the Company was in compliance with the required ratios or they had been waived by the lender. (7) Income Taxes Income tax benefit attributable to loss from continuing operations differed from the amounts computed by applying the U.S. federal income tax rate of 34% as a result of the following: Year Ended Year Ended Year Ended March 31, March 31, March 31, 2001 2000 1999 ---------- ---------- ----------- Computed "expected" tax benefit $ (1,067,641) (2,200,414) (1,276,384) Increase (decrease) in taxes resulting from: Amortization of goodwill not deductible for tax 91,820 107,286 97,915 Expiration of net operating loss (NOL) carry-forwards 126,992 76,822 89,369 Increase in valuation allowance for net deferred tax assets 884,072 2,160,758 906,668 Other, net (35,243) (144,452) 182,432 --------- --------- --------- Income tax benefit $ - - - ========= ========= =========
The tax effects of temporary differences that give rise to significant portions of the net deferred tax asset are presented below: March 31, March 31, 2001 2000 --------- --------- Deferred tax assets: Research and development credit carryforwards $ 78,568 78,568 Net operating loss carryforwards - Federal 10,089,638 9,631,018 Net operating loss carryforwards - State, net of valuation allowance - - Accruals and reserves 349,655 41,149 Property and equipment 23,693 - Write-down of investments 1,029,311 1,029,311 ---------- ---------- Total deferred tax assets 11,570,865 10,780,046 Less valuation allowance 11,570,865 10,686,792 ---------- ---------- Net deferred tax assets, net of valuation allowance - 93,254 ---------- ---------- Deferred tax liabilities - property and equipment - 93,254 ---------- ---------- Net deferred tax liability $ - - ========== ==========
VIII-16 UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued As of March 31, 2001, the Company had net operating loss carryforwards (NOL) of approximately $32 million for U.S. income tax purposes which expire in varying amounts through 2021. Approximately $2.8 million of the net operating loss carryforwards 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 is limited. Future ownership changes under Section 382 could occur that would result in a Section 382 limitation which would restrict the use of NOLs. In addition, any Section 382 limitation could be further reduced to zero if the Company fails to satisfy the continuity of business enterprise requirement for the two-year period following an ownership change. (8) Stockholders' Equity During the year ended March 31, 2000, the Company completed a private placement of 88,900 shares of common stock with an institutional investor. Cash proceeds to the Company, net of offering costs was $488,828. (9) Common Stock Options and Warrants Incentive and Non-Qualified Option Plans The Company has reserved 6,104,000 shares of common stock for key employees, consultants and key suppliers under its Incentive and Non-Qualified Option Plans of 1992 and 1982. Under these option plans the exercise price of each option is set at the fair market value of the common stock on the date of grant and the maximum term of the options is 10 years from the date of grant. Options granted to employees vest ratably over a three-year period. The maximum number of options that may be granted to any eligible employee during the term of the 1982 and 1992 plans is 1,000,000 options. Options granted under the Company's plans to employees require the option holder to abide by certain Company policies which restrict their ability to sell the underlying common stock. The following table summarizes activity under the plans: Shares Under Weighted-Average Option Exercise Price ------------ --------------- Outstanding at March 31, 1998 2,828,352 5.34 Granted 650,000 5.20 Exercised (331,647) 2.90 Forfeited (109,151) 7.68 --------- Outstanding at March 31, 1999 3,037,554 5.49 Granted 495,000 8.31 Exercised (204,970) 3.79 Forfeited (96,190) 6.12 --------- VIII-17 UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Outstanding at March 31, 2000 3,231,394 6.01 Granted 472,633 7.18 Exercised (212,408) 5.16 Forfeited (676,799) 7.31 --------- Outstanding at March 31, 2001 2,814,820 $5.96 ========= Exercisable at March 31, 2001 1,995,630 $5.47 ========= The following table presents summarized information about stock options outstanding at March 31, 2001:
Options Outstanding Options Exercisable --------------------------------------- ----------------------- Weighted Weighted Weighted Number Average Average Number Average Range of Outstanding Remaining Exercise Exercisable Exercise Exercise Prices at 3/31/01 Contractual Life Price at 3/31/01 Price --------------- ----------- ---------------- -------- ----------- -------- $2.25 - 3.31 452,198 4.5 years $3.02 452,198 $3.02 $3.50 - 5.00 816,405 5.1 years $4.24 684,478 $4.21 $5.38 - 8.75 1,546,217 7.2 years $7.73 858,954 $7.77 --------- --------- $2.25 - 8.75 (2,814,820) 6.1 years $5.96 1,995,630 $5.47 ========= =========
Non-Employee Director Stock Option Plan In February 1994, the Company's Board of Directors ratified a Stock Option Plan for Non-Employee Directors pursuant to which Directors may elect to receive stock options in lieu of cash compensation for their services as directors. The Company has reserved 500,000 shares of common stock for issuance pursuant to the exercise of options under the Plan. The options are exercisable from 3 to 10 years from the date of grant. Option prices are equal to the fair market value of common shares at the date of grant. The following table presents summarized activity under the plan: Weighted Shares Under Average Option Exercise Price Outstanding at March 31, 1998 189,333 5.86 Granted 64,000 5.06 ------- Outstanding at March 31, 1999 253,333 5.66 Granted 9,275 4.25 Forfeited (221,333) 5.59 ------- Outstanding at March 31, 2000 41,275 5.68 Granted 5,785 7.94 ----- Outstanding at March 31, 2001 47,060 $5.96 ======= Exercisable at March 31, 2001 29,758 $6.09 ======= VIII-18 UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued
The following table presents summarized information about stock options outstanding for non-employee directors: Options Outstanding Options Exercisable --------------------------------------- ----------------------- Weighted Weighted Weighted Number Average Average Number Average Range of Outstanding Remaining Exercise Exercisable Exercise Exercise Prices at 3/31/01 Contractual Life Price at 3/31/01 Price --------------- ----------- ---------------- -------- ----------- -------- $4.25 - 6.00 25,275 5.6 years $4.76 13,758 $4.88 $6.25 - 7.13 21,785 5.7 years $7.34 16,000 $7.13 ------ ------ $4.25 - 7.13 47,060 5.6 years $5.96 29,758 $6.09 ====== ======
Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS 123") defines a fair value method of accounting for employee stock options and similar equity instruments. SFAS 123 permits an entity to choose to recognize compensation expense by adopting the new fair value method of accounting or continue to measure compensation costs using the intrinsic value methods prescribed by APB25. The Company accounts for stock options granted to employees and directors of the Company under the intrinsic value method. Stock options granted to non-employees under the Company's 1992 Stock Option Plan are accounted for under the fair value method. Had the Company reported compensation costs as determined by the fair value method of accounting for option grants to employees and directors, net loss and net loss per common share would have been the pro forma amounts indicated in the following table:
Year Ended Year Ended Year Ended March 31, 2001 March 31, 2000 March 31, 1999 -------------- -------------- -------------- Net loss - as reported $ (3,140,122) (6,471,807) (3,754,070) Compensation expense - current period option grants (219,753) (163,069) (129,406) Compensation expense - prior period option grants (778,689) (1,390,466) (1,274,213) --------- --------- ---------- Net loss - pro forma $ (4,138,564) (8,025,342) (5,157,689) --------- --------- --------- Net loss per common share - as reported $ (.18) (.39) (.24) Net loss per common share - pro forma $ (.24) (.48) (.32)
The fair value of stock options granted was calculated using the Black Scholes option pricing model based on the following weighted average assumptions:
Year Ended Year Ended Year Ended March 31, 2001 March 31, 2000 March 31, 1999 -------------- -------------- -------------- Expected volatility 48.4% 48.7% 48.3% Expected dividend yield 0.0% 0.0% 0.0% Risk free interest rate 5.3% 6.8% 5.4% Expected life of option granted 6 years 6 years 6 years Fair value of options granted as computed under the Black Scholes option pricing models $4.75 per share $4.78 per share $2.74 per share
VIII-19 UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Future pro forma compensation cost by fiscal year, assuming no additional grants by the Company to employees and directors, is as follows: Fiscal Year Pro Forma Ended Compensation March 31, Expense ----------- ---------- 2002 $1,480,006 2003 $1,129,214 2004 $ 507,524 Warrants The Company completed a private placement in fiscal 1998 of 750,000 units consisting of one common share and one warrant. Of the 750,000 units privately placed, 626,875 were issued in March 1998 and the remaining 123,125 were issued in April 1998. Also in connection with the 1998 private placement, the placement agents were issued warrants in March 1998, to acquire 176,588 shares of the Company's common stock at an exercise price of $8.00 per share. The warrants expire two years from the date of issuance. During the years ended March 31, 2001 and 2000 warrants to acquire 12,000 and 436,212 shares of the Company's common stock at $8.00 per share were exercised resulting in cash proceeds to the Company of $96,000 and $3,489,696, respectively. In March 2000, warrants to acquire 179,000 shares expired unexercised. Warrants to purchase 299,375 shares of common stock were extended in fiscal 2000 for a period of eighteen months at the fair value of such extension resulting in cash proceeds to the Company of $78,151 and all remain outstanding at March 31, 2001. (10) Alcan Royalty Agreement During 1994, the Company and Alcan Aluminum Limited ("Alcan") executed an agreement in which Alcan assigned to the Company all of its rights, title and interests in certain motor technology developed under a program funded by Alcan. This agreement further provides that the Company shall pay to Alcan royalties of one-half of one percent on revenue derived from the manufacture and sale of products or processes embodying the related technology. For the years ended March 31, 2001, 2000 and 1999 the Company recorded royalty expense of $30,162, $23,612 and $14,240, respectively, under this agreement. (11) Significant Customers The Company has historically derived significant revenue from a few key customers. The customers from which more than 10% of total revenue has been derived and the percentage of revenue is summarized as follows: VIII-20 UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Year Ended Year Ended Year Ended March 31, March 31, March 31, 2001 2000 1999 ---------- ---------- ---------- Customer A $ 4,706,810 4,434,454 3,108,929 B 6,427,983 647,584 - ---------- --------- --------- $ 11,134,793 5,082,038 3,108,929 ============ ========= ========= Percentage of revenue 41% 25% 20% === === === The significant customers for the years ended March 31, 2001, 2000 and 1999, were customers in the Company's Electronic Products Segment. These customers, in total, also represented 66%, 29% and 19% of total accounts receivable at March 31, 2001, 2000 and 1999, respectively. Contract services revenue derived from contracts with agencies of the U.S. Government and from sub-contracts with U.S. Government prime contractors totaled $853,341, $910,770, and $758,853 and for the years ended March 31, 2001, 2000 and 1999, respectively. (12) Fair Value of Financial Instruments The following methods and assumptions were used to estimate the fair value of each class of financial instruments: Cash and cash equivalents, certificates of deposit, accounts receivable and accounts payable: The carrying amounts approximate fair value because of the short maturity of these instruments. Long-term debt and revolving line-of-credit: The carrying amount of the Company's long-term debt and revolving line-of-credit approximates fair value since the interest rate on this debt represents the current market rate for similar financing available to the Company providing comparable security to the lender. (13) Employee Benefit Plans 401(k) Plan The Company has established a 401(k) Savings Plan (the Plan) under which eligible employees may contribute up to 15% of their compensation. At the direction of the participants, contributions are invested in several investment options offered by the Plan. The Company currently matches 33% of participants contributions, subject to certain limitations. These VIII-21 UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued contributions vest ratably over a three-year period. Matching contributions to the Plan by the Company were $99,179, $97,715 and $107,455 for the years ended March 31, 2001, 2000 and 1999, respectively. Stock Purchase Plan The Company has established a Stock Purchase Plan which allows eligible employees to purchase, through payroll deductions, shares of the Company's common stock at 85% of the fair market value at specified dates. The Company has reserved 200,000 shares of common stock for issuance under the Stock Purchase Plan. During the years ended March 31, 2001, 2000 and 1999, the Company issued 6,774, 9,072 and 3,120 shares of common stock, respectively, under the Stock Purchase Plan. (14) Segments The Company has three reportable segments: technology, mechanical products and electronic products. The technology segment encompasses the Company's technology-based operations including core research to advance its technology, application engineering and product development and job shop production of prototype components. Salaries of the executive officers and corporate general and administrative expense is allocated equally to each segment. The mechanical products segment encompasses the manufacture and sale of permanent magnet motors, precision gears, gear assemblies and related mechanical products. The electronic products segment encompasses the manufacture and sale of wire harness assemblies, electronic printed circuit board assemblies and electronic products. For the year ended March 31, 2000, intersegment sales or transfers were $96,894. During the years ended March 31, 2001 and 1999 intersegment sales or transfers were immaterial. The Company's reportable segments are strategic business units that offer different products and services. They are managed separately because each business requires different business strategies. The following table summarizes significant financial statement information for each of the reportable segments for the year ended March 31, 2001: VIII-22 UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued
Mechanical Electronic Technology Products Products Total Revenue $ 3,378,396 4,407,721 19,110,954 26,897,071 Interest income 58,782 8,051 - 66,833 Interest expense (45,795) (168,479) (236,048) (450,322) Depreciation and amortization (398,344) (963,722) (669,229) (2,031,295) Goodwill amortization - (62,318) (270,348) (332,666) Write-down of investments and other assets 75,000 28,583 216,818 320,401 Write-down of inventory - - 392,198 392,198 Segment loss (604,623) (1,195,219) (1,340,280) (3,140,122) Segment assets 5,623,473 5,977,966 15,880,154 (27,481,593) Expenditures for segment assets $ (401,024) (238,240) (1,862,851) (2,502,115)
Segment information has been reclassified to reflect corporate overhead allocation consistent with the current year presentation. The following table summarizes significant financial statement information for each of the reportable segments for the year ended March 31, 2000:
Mechanical Electronic Technology Products Products Total Revenue $ 2,426,152 4,115,557 14,056,151 20,597,860 Interest income 56,621 2,748 - 59,369 Interest expense (61,894) (194,427) (226,977) (483,298) Depreciation and amortization (352,485) (933,092) (502,538) (1,788,115) Goodwill amortization - (62,318) (270,060) (332,378) Write-down of investments (4,104,628) - - (4,104,628) Equity in loss of joint ventures (280,170) - - (280,170) Segment earnings (loss) (5,285,807) (1,190,423) 4,423 (6,471,807) Segment assets 7,955,110 6,396,297 9,906,436 24,257,843 Expenditures for segment assets $ (777,314) (141,912) (159,494) (1,078,720)
Segment information has been reclassified to reflect corporate overhead allocation consistent with the current year presentation. The following table summarizes significant financial statement information for each of the reportable segments for the year ended March 31, 1999: VIII-23 UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued
Mechanical Electronic Technology Products Products Total Revenue $ 2,135,818 3,532,871 10,129,729 15,798,418 Interest income 88,307 23,058 - 111,365 Interest expense (67,306) (165,473) (105,617) (338,396) Depreciation and amortization (399,823) (804,246) (313,151) (1,517,220) Goodwill amortization - (61,682) (246,421) (308,103) Equity in loss of joint ventures (417,801) - (417,801) Segment loss (1,806,442) (1,625,556) (322,072) (3,754,070) Segment assets 8,032,683 7,495,481 11,678,414 27,206,578 Expenditures for segment assets $ (487,550) (2,418,688) (1,630,413) (4,536,651)
(15) Commitments and Contingencies Employment Agreements The Company has entered into employment agreement with two of its officers which expire December 31, 2002. The aggregate future compensation under the employment agreements is $726,250. Lease Commitments The Company has entered into operating lease agreements for office space and equipment which expire at various times through 2007. As of March 31, 2001, the future minimum lease payments under operating leases with initial noncancelable terms in excess of one year are as follows: Year ending March 31: 2002 $ 522,883 2003 531,729 2004 534,246 2005 530,212 2006 521,872 Thereafter 360,475 -------- $ 3,031,417 Rental expense under these leases totaled approximately $349,837, $377,000, and $327,000 for the years ended March 31, 2001, 2000 and 1999, respectively. Litigation The Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company's financial position. VIII-24 UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (16) Schedule of Valuation and Qualifying Accounts
Additions -------------------- Balance at Charged to Charged Beginning Costs and to Other Balance End of Year Expenses Accounts Deductions of Year ----------- ---------- --------- ---------- ----------- Year ended March 31, 2001 Deducted from asset accounts: Allowance for doubtful accounts $ 2,674 57,257 - 18,391(A) $ 41,540 Inventory obsolescence reserve $81,829 400,822(C) - 112,499(B) $370,152 Accrued warranty cost $ 6,473 44,657 - 16,855(B) $ 34,275 Year ended March 31, 2000 Deducted from asset accounts: Allowance for doubtful accounts $ 9,358 - - 6,684(A) $ 2,674 Inventory obsolescence reserve - 95,125 - 13,296(B) $ 81,829 Accrued warranty cost - 28,706 - 22,233(B) $ 6,473 Year ended March 31, 1999 Deducted from asset accounts: Allowance for doubtful accounts $ 9,358 - - - $ 9,358
Note (A) Uncollectible accounts written off, net of recoveries. Note (B) Amounts written off or payments incurred. Note (C) Includes write down of inventory in 2001 of approximately $392,000. VIII-24 ITEM 9. CHANGE IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL - ------ DISCLOSURE. None. IX-1 PART III Pursuant to instruction G(3) to Form 10-K, the information required in Items 10-13 is hereby incorporated by reference from the Company's definitive Proxy Statement for the Annual Meeting of Shareholder to be held on August 22, 2001, to be filed on or about July 6, 2001, pursuant to Regulation 14A. X-1 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. - ------- (a) 1. Financial Statements: -------------------- UQM Technologies, Inc. (included in Part II): Independent Auditors' Report. Consolidated Balance Sheets, March 31, 2001 and March 31, 2000. Consolidated Statements of Operations for the years ended March 31, 2001, 2000 and 1999. Consolidated Statements of Stockholders' Equity and Comprehensive Income (Loss) for the years ended March 31, 2001, 2000 and 1999. Consolidated Statements of Cash Flows for the years ended March 31, 2001, 2000 and 1999. Notes to Consolidated Financial Statements. 2. Financial Statement Schedules: ----------------------------- None. (b) Reports on Form 8-K: - ---------------------------- None (c) Exhibits 3.2 Restated Articles of Incorporation. Reference is made to Exhibit 3.2 of the Company's Quarter Report on Form 10-K for the year ended October 31, 1993 (No. 0-9146) which is incorporated herein by reference. 4.1 Specimen Stock Certificate. Reference is made to Exhibit 3.1 of the Company Registration Statement on Form 10, dated February 27, 1980 (No. 0-9146) which is incorporated herein by reference. 10.2 UQM Technologies, Inc. Incentive and Non-qualified Stock Option Plan (amended and restated effective January 1, 1988). Reference is made to Exhibit 10.4 of the Company's Quarterly Report on Form 10-Q for the quarter ended April 30, 1988 (No. 0-9146). 10.3 UQM Technologies, Inc. 1992 Stock Option Plan. Reference is made to Exhibit 4.1 to the Company's Registration Statement on Form S-8 (No. 33-47454), which is incorporated herein by reference. 10.4 UQM Technologies, Inc. Employee Stock Purchase Plan. Reference is made to Exhibit 4.3 to the Company's Registration Statement on Form S-8 (No. 33-34612), which is incorporated herein by reference. 10.5 401(k) Savings Plan of UQM Technologies, Inc. Reference is made to Exhibit 4.3 to the Company's Registration Statement on Form S-8 (No. 33-34613), which is incorporated herein by reference. 10.8 Lease between the Company and Unique Building Partners, Ltd. Liability Co. dated September 22, 1992. Reference is made to Exhibit 10.34 of the Company's Registration Statement on Form S-2 (No. 33-53376), which is incorporated herein by reference. XIV-1 10.9 UQM Technologies, Inc. Stock Option Plan for Non-Employee Directors. Reference is made to Exhibit 10.39 of the Company's Quarter Report on Form 10-K (No. 0-9146) for the year ended October 31, 1993 which is incorporated herein by reference. 10.10 Warrant Agreement with Arnhold and S. Bleichroeder, Inc. Reference is made to Exhibit 10.41 of the Company's Quarter Report on Form 10-K (No. 0-9146) for the year ended October 31, 1993 which is incorporated herein by reference. 10.11 Assignment Agreement with Alcan International Limited. Reference is made to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended April 30, 1994 (No. 0-9146) which is incorporated herein by reference. 10.12 Amendment to the 1992 Stock Option Plan of UQM Technologies, Inc. Reference is made to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended April 30, 1994 (No. 0-9146) which is incorporated herein by reference. 10.13 Amendment to the 401(k) Savings Plan of UQM Technologies, Inc. dated January 18, 1995. Reference is made to Exhibit 10.1 in the Company's Quarterly Report on Form 10-Q for the Quarter ended January 31, 1995 (No. 0-9146) which is incorporated herein by reference. 10.14 Amendment to the 1992 Stock Option Plan of UQM Technologies, Inc. dated December 7, 1994. Reference is made to Exhibit 10.2 in the Company's Quarterly Report on Form 10-Q for the Quarter ended January 31, 1995 (No. 0-9146) which is incorporated herein by reference. 10.15 Stock Purchase Agreement by and among UQM Technologies, Inc. and Invacare Corporation dated December 7, 1995. Reference is made to Exhibit 10.36 in the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1995, (No. 1-10869) which is incorporated herein for reference. 10.16 Amendment to the Stock Purchase Agreement by and among UQM Technologies, Inc. and Invacare Corporation. Reference is made to Exhibit 10.3 in the Company's Quarterly Report on Form 10-Q for the quarter ended April 30, 1996, (No. 0-9146) which is incorporated herein by reference. 21 Subsidiaries of the Company. Reference is made to Exhibit 21 of the Company's Annual Report Form 10-K for the year ended March 31, 2000 (No. 1-10869) which is incorporated herein by reference. 23.1 Consent of KPMG LLP. XIV-2 SIGNATURES Pursuant to the requirements of Section 13 of the Securities and 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 Golden, Colorado on the 14th day of June, 2001. UQM TECHNOLOGIES, INC., a Colorado Corporation By: "William G. Rankin" William G. Rankin Chairman of the Board of Directors Pursuant to the requirements of the Securities and Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of UQM Technologies, Inc., in the capacities indicted and on the date indicated.
Signature Title Date Chairman of the Board of "William G. Rankin" Directors and President --------------------- William G. Rankin (Principal Executive Officer) June 14, 2001 Treasurer and Secretary (Principal Financial and "Donald A. French" Accounting Officer) June 14, 2001 --------------------- Donald A. French "Ernest H. Drew" Director June 13, 2001 --------------------- Ernest H. Drew "Stephen J. Roy" Director June 13, 2001 --------------------- Stephen J. Roy "J. B. Richey" Director June 14, 2001 --------------------- J. B. Richey
EX-23 2 kpmg0110k.txt KPMG CONSENT Exhibit 23.1 Consent of Independent Auditors The Board of Directors and Shareholders UQM Technologies, Inc.: Our report dated May 18, 2001, states that we did not audit the financial statements of Taiwan UQM Electric Co., Ltd. (a 38.25% owned investee company). The financial statements of Taiwan UQM Electric Co, Ltd. were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Taiwan UQM Electric, Co., Ltd. for the year ended March 31, 1999 is based solely on the report of the other auditors. We consent to the incorporation by reference in the registration statements on Forms S-8 (Nos. 33-23113, 33-24071, 33-34612, 33-35055, 33-34613, 33-41325, 33-64852, 33-47454, 33-81430 and 33-92288) and in the registration statements on Forms S-3 (Nos. 33-6116, 33-63399, 333-01919, 333-13883, 333-44597, 333-23843, 33-50393, 333-52861, 333-67313 and 333-78525) of UQM Technologies, Inc. of our report dated May 18, 2001 relating to the consolidated balance sheets of UQM Technologies, Inc. and subsidiaries as of March 31, 2001 and 2000, and the related consolidated statements of operations, stockholders' equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended March 31, 2001, which report appears in the March 31, 2001 Annual Report on Form-K of UQM Technologies, Inc. /s/KPMG LLP KPMG LLP -----END PRIVACY-ENHANCED MESSAGE-----