UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended December 31, 2011

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

For the transition period from _____ to _____

Commission File Number 1-10869

(Exact name of registrant, as specified in its charter)

(Address of principal executive offices) (Zip code)

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   X    No         .

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes    X    No          Not Applicable        .

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)

Yes        No   X    .

The number of shares outstanding (including shares held by affiliates) of the registrant's common stock, par value $0.01 per share at January 30, 2012 was 36,531,530.

TABLE OF CONTENTS

UQM TECHNOLOGIES, INC. AND SUBSIDIARIES

Consolidated Balance Sheets (unaudited)

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See accompanying notes to consolidated financial statements.

UQM TECHNOLOGIES, INC. AND SUBSIDIARIES

Consolidated Balance Sheets (unaudited), Continued

See accompanying notes to consolidated financial statements.

UQM TECHNOLOGIES, INC. AND SUBSIDIARIES

Consolidated Statements of Operations (unaudited)

UQM TECHNOLOGIES, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (unaudited)

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Notes to Consolidated Financial Statements

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1. The accompanying consolidated financial statements are unaudited; however, in the opinion of management, all adjustments, which were solely of a normal recurring nature, necessary to a fair presentation of the results for the interim periods, have been made. Certain Prior year amounts have been reclassified to conform to the current period presentation. The results for the interim periods are not necessarily indicative of the results to be expected for the fiscal year. The Notes contained herein should be read in conjunction with the Notes to our Consolidated Financial Statements filed on Form 10-K for the year ended March 31, 2011.

2. Allowance for Doubtful Accounts

The Company periodically evaluates the credit worthiness of its customers and establishes credit limits for each customer. The Company also establishes estimates and records an allowance for doubtful accounts based upon a number of factors including the payment history of its customers, general business conditions, specific business developments that may impact a customer's creditworthiness, and other relevant factors that may impact the ability of customers to honor their payment obligation to the Company. At December 31, 2011 and March 31, 2011 we had established an allowance for doubtful accounts of $127,697 and zero, respectively.

3. Stock-Based Compensation

Stock Option Plans

As of December 31, 2011, we had 258,291 shares of common stock available for future grant to employees, consultants and key suppliers under our 2002 Equity Incentive Plan ("Plan"). Under the Plan, the exercise price of each option is set at the fair value of the common stock on the date of grant and the maximum term of the option is 10 years from the date of grant. Options granted to employees generally vest ratably over a three-year period. The maximum number of shares that may be granted as options to an employee under the Plan in any calendar year is 500,000. Forfeitures under the Plan are available for re-issuance at any time prior to expiration of the Plan in 2013. Options granted under the Plan to employees require the option holder to abide by certain Company policies, which restrict their ability to sell the underlying common stock. Prior to the adoption of the Plan, we issued stock options under our 1992 Incentive and Non-Qualified Option Plan, which expired by its terms in 2002. Forfeitures under the 1992 Incentive and Non-Qualified Option Plan may not be re-issued.

Non-Employee Director Stock Option Plan

In February 1994 our Board of Directors ratified a Stock Option Plan for Non-Employee Directors ("Directors Plan") pursuant to which Directors may elect to receive stock options in lieu of cash compensation for their services as directors. As of December 31, 2011, we had no shares of common stock available for future grant under the Directors Plan. Option terms range from 3 to 10 years from the date of grant. Option exercise prices are equal to the fair value of the common shares on the date of grant. Options granted under the plan generally vest immediately. Forfeitures under the Directors Plan are available for re-issuance at a future date.

Stock Purchase Plan

We have established a Stock Purchase Plan under which eligible employees may contribute up to 10 percent of their compensation to purchase shares of our common stock at 85 percent of the fair market value at specified

dates. At December 31, 2011 we had 485,282 shares of common stock available for issuance under the Stock Purchase Plan. During the quarters and nine month periods ended December 31, 2011 and 2010, we issued zero and 11,497, and zero and 277 shares of common stock, respectively, under the Stock Purchase Plan. Cash received by us upon the purchase of shares under the Stock Purchase Plan for the quarters and nine month periods ended December 31, 2011 and 2010 was zero and $22,994, and zero and $1,006, respectively, and is included in cash provided by financing activities.

Stock Bonus Plan

We have a Stock Bonus Plan ("Stock Plan") administered by the Board of Directors. At December 31, 2011 there were 550,320 shares of common stock available for future grant under the Stock Plan. Under the Stock Plan, shares of common stock may be granted to employees and key consultants as additional compensation for services rendered. Vesting requirements for grants under the Stock Plan, if any, are determined by the Board of Directors at the time of grant. There were zero and 213,398 shares granted under the Stock Plan during both the quarter and nine month period ended December 31, 2011 and 7,903 and 243,076 shares granted under the Stock Plan during both the quarter and nine month period ended December 31, 2010.

We use the straight-line attribution method to recognize share-based compensation costs over the requisite service period of the award. Options granted by us generally expire ten years from the grant date. Options granted to existing and newly hired employees generally vest over a three-year period from the date of the grant. The exercise price of options is equal to the market price of our common stock (defined as the closing price reported by the NYSE Amex) on the date of grant.

We use the Black-Scholes-Merton option pricing model for estimating the fair value of stock option awards. The table below shows total share-based compensation expense for the quarters and nine month periods ended December 31, 2011 and 2010 and the classification of these expenses:

As of December 31, 2011, there was $748,644 of total unrecognized compensation costs related to stock options granted under the 2002 Equity Incentive Plan. The unrecognized compensation cost is expected to be recognized over a weighted-average period of 26 months. The total fair value of stock options that vested during the quarter and nine month period ended December 31, 2011 was $153,658 and $363,239. The total fair value of stock options that vested during both the quarter and nine month period ended December 31, 2010 was $153,658 and $512,720. There were options to acquire 25,000 and 414,588 shares granted under the Equity Incentive Plan during the quarter and nine month period ended December 31, 2011 and there were options to acquire zero and 510,132 shares granted under the Equity Incentive Plan during both the quarter and nine month period ended December 31, 2010.

A summary of the non-vested shares under the Stock Bonus Plan as of December 31, 2011 and 2010 and changes during the quarters and nine month periods ended December 31, 2011 and 2010 are presented below:

 

Additional information with respect to stock option activity during the quarter and nine month periods ended December 31, 2010 under our 2002 Equity Incentive Plan is as follows:

Additional information with respect to stock option activity during the quarter and nine month periods ended December 31, 2011 under our Director's Plan is as follows:

Additional information with respect to stock option activity during the quarter and nine month periods ended December 31, 2010 under our Director's Plan is as follows:

4. Cash received by us upon the exercise of stock options for both the quarter and nine month period ended December 31, 2011 was zero. Cash received by us upon the exercise of stock options for the quarter and nine month period ended December 31, 2010 was zero and $3,570, respectively. The source of shares of common stock issuable upon the exercise of stock options is from authorized and previously unissued common shares.

We have an investment policy approved by the Board of Directors that governs the quality, acceptability and dollar concentration of our investments. Investments are comprised of marketable securities and consist primarily of commercial paper, asset-backed and mortgage-backed notes and bank certificates of deposits with original maturities beyond three months. All marketable securities and corporate bonds are held in our name at three major financial institutions who hold custody of the investments. All of our investments are held-to-maturity investments as we have the positive intent and ability to hold until maturity. These securities are recorded at amortized cost.

The amortized cost and unrealized gain or loss of our investments at December 31, 2011 and March 31, 2011 were:

5. On both December 31, 2011 and March 31, 2011, the estimated period to complete contracts in process ranged from one to thirteen months. We expect to collect all related accounts receivable within sixty days of billing. The following summarizes contracts in process:

6. Inventories at December 31, 2011 and March 31, 2011 consist of:

Our raw material inventory is subject to obsolescence and potential impairment due to bulk purchases in excess of customers' requirements. We periodically assess our inventories for recovery of carrying value based on available information, expectations and estimates, and adjust inventory carrying values to the lower of cost or market for estimated declines in the realizable value. During the quarters and nine month periods ended December 31, 2011 and 2010, there was no impairment of inventory.

7. Facility Held for Sale

In July 2010, the Company relocated a substantial portion of its staff and equipment from its facility in Frederick, Colorado to a new facility in Longmont, Colorado. The Company continued limited operations at its Frederick, Colorado facility through June 2011, at which time the Company ceased operations at the Frederick facility and listed it for sale with a commercial real estate broker.

The facility has been reclassified as a current asset and the Company has discontinued depreciating the asset pending its sale, which is expected to occur within one year. The facility is recorded at the lower of fair value or cost.

8. Government Grants

We have a $45,145,534 grant with the U.S. Department of Energy ("DOE") under the Stimulus Act (the "Grant"). The Grant provides funds to facilitate the manufacture and deployment of electric drive vehicles, batteries and electric drive vehicle components in the United States. Pursuant to the terms of the Grant, the DOE will reimburse us for 50 percent of qualifying costs for the purchase of facilities, tooling and manufacturing equipment, and for engineering related to product qualification and testing of our electric propulsion systems and other products. The period of the Grant is through January 12, 2013.

We recognize government grants when it is probable that the Company will comply with the conditions attached to the grant arrangement and the grant will be received.

Funding for qualifying project costs incurred is initially limited to $32.0 million until we provide the DOE with an updated total estimated cost of the project along with evidence of firm commitments for our 50 percent share of the total estimated cost of the project no later than April 12, 2012. If all such funds have not been secured, we must submit, by such date, a funding plan to obtain the remainder of such funds, which is acceptable to the DOE. In the event we do not satisfy the foregoing contingency, the Grant may be terminated. In addition, the Grant may be terminated at any time at the convenience of the government.

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

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

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

At December 31, 2011 we have received reimbursements from the DOE under the Grant totaling $14.9 million and have grant funds receivable of $1.1 million.

The application of grant funds to eligible capital asset purchases under the Grant as of December 31, 2011 and March 31, 2011 are as follows:

9. Other current liabilities at December 31, 2011 and March 31, 2011 consist of:

10. Stockholders' Equity

11. Significant Customers 

We have historically derived significant revenue from a few key customers. Revenue from CODA Automotive totaled $1,454,176 and $2,272,731, and $259,756 and $687,556 for the quarters and nine month periods ended December 31, 2011 and 2010, respectively, which was 53 percent and 36 percent, and 12 percent and 12 percent, of our consolidated total revenue, respectively.

Trade accounts receivable from CODA Automotive were 54 percent and 16 percent of total accounts receivable as of December 31, 2011 and March 31, 2011, respectively. Inventories consisting of raw materials, work-in-progress and finished goods for this customer totaled $5,619,195 and $832,320 as of December 31, 2011 and March 31, 2011, respectively.

Revenue derived from contracts with agencies of the U.S. Government and from subcontracts with U.S. Government prime contractors totaled $197,220 and $406,069 and $177,025 and $1,021,359 for the quarters and nine month periods ended December 31, 2011 and 2010, respectively, which was 7 percent and 6 percent, and 8 percent and 15 percent of our consolidated total revenue for the quarters and nine month periods ended December 31, 2011 and 2010, respectively. Accounts receivable from government-funded contracts represented 33 percent and 49 percent of total accounts receivable as of December 31, 2011 and March 31, 2011, respectively. Of these amounts, revenue derived from subcontracts with AM General LLC totaled zero and $55,724, and $46,478 and $762,088 for the quarters and nine months ended December 31, 2011 and 2010, respectively, which represented nil and 1 percent, and 2 percent and 11 percent, of our consolidated total revenue for the quarters and nine month periods ended December 31, 2011 and 2010, respectively. There were no accounts receivable balances or inventories for this customer at December 31, 2011 and March 31, 2011, respectively.

 

12. Income Taxes

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

We recognize interest and penalties related to uncertain tax positions in "Other Income (expense)," net. As of December 31, 2011 and 2010, we had no provisions for interest or penalties related to uncertain tax positions.

The tax years 2006 through 2010 remain open to examination by both the Internal Revenue Service of the United States and by the various state taxing authorities where we file.

 

13. Loss Per Common Share

Basic earnings per share is computed by dividing income or loss available to common stockholders by the weighted average number of common shares outstanding during the periods presented. Diluted earnings per share is computed by dividing income or loss available to common stockholders by all outstanding and potentially dilutive shares during the periods presented, unless the effect is antidilutive. At December 31, 2011 and 2010, respectively, common shares issued under the Stock Bonus Plan but not yet earned totaling 167,680 and 62,199 shares were being held by the Company. For the quarters and nine month periods ended December 31, 2011 and 2010 zero and zero shares, and 1,018 and 8,194 shares, respectively, were potentially includable in the calculation of diluted loss per share under the treasury stock method but were not included, because to do so would be antidilutive. At December 31, 2011 and 2010, options to purchase 3,476,269 and 3,209,772 shares of common stock, respectively, were outstanding. For the quarters and nine month periods ended December 31, 2011 and 2010, respectively, options for 3,446,608 and 3,264,845 and 2,293,190 and 1,238,463 shares, respectively, were not included in the computation of diluted loss per share because the option exercise price was greater than the average market price of the common stock. In-the-money options determined under the treasury stock method to acquire 7,111 and 6,914 shares, and 44,891 and 363,929 shares of common stock for the quarters and nine month periods ended December 31, 2011 and 2010, respectively, were potentially includable in the calculation of diluted loss per share but were not, because to do so would be antidilutive.

 

14. 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, accounts receivable, and accounts payable:

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

Investments:

The carrying value of these instruments is the amortized cost of the investments which approximates fair value. See Note 4.

 

15. Fair Value Measurements

Liabilities measured at fair value on a recurring basis as of December 31, 2011 are summarized below: