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 September 30, ~~2016~~2017

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

For the transition period from _____ to _____

Commission File Number 1-10869

UQM TECHNOLOGIES, INC.

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


Colorado		84-0579156
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

4120 Specialty Place, Longmont, Colorado 80504

(Address of principal executive offices) (Zip code)

(303) 682-4900

(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 website, 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.~~filer, a smaller reporting company, or an emerging growth company. See ~~definition~~definitions of ~~“accelerated filer and large~~“large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. ~~(Check one):~~



[ ] Large accelerated filer		[ ] Accelerated filer
[ ] Non-accelerated filer	(Do not check if a smaller reporting company)	[X] Smaller reporting company
	[ ] Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange ~~Act.)~~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 November 9,1, ~~2016~~2017 was ~~48,534,719.~~54,054,477.

~~Table of Contents~~

TABLE OF CONTENTS


		Page No.
PART I Financial Information		1

Item 1. Financial Statements

Consolidated Condensed Balance Sheets as of September 30, ~~2016~~2017 and ~~March~~December 31, 2016		1

Consolidated Condensed Statements of Operations for the quarters and ~~six~~nine months ended September 30, ~~2016~~2017 and ~~201~~20165		3

Consolidated Condensed Statements of Cash Flows for the ~~six~~nine months ended September 30, ~~2016~~2017 and ~~201~~20165		4

Notes to Consolidated Condensed Financial Statements		5

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		1416

Item 3. Quantitative and Qualitative Disclosures About Market Risk		1922

Item 4. Controls and Procedures		1922

PART II Other Information		2022

Item 1. Legal Proceedings		2022

Item 1A. Risk Factors		2022

Item 2. Unregistered Sales of Equity Securities		23

Item 3. Defaults Upon Senior Securities		23

Item 4. Mine Safety Disclosures		23

Item 5. Other Information		2123

Item 6. Exhibits.		2124

Table of Contents

Part I – FINANCIAL INFORMATION

ITEM 1:1. FINANCIAL STATEMENTS

UQM TECHNOLOGIES, INC. AND SUBSIDIARIES

Consolidated Condensed Balance Sheets (unaudited)


	September 30,		March 31,		September 30,		December 31,
	2016		2016		2017		2016
Assets
Current assets:
Cash and cash equivalents	$	3,861,947	$	7,030,230	$	8,035,754	$	2,100,089
Restricted cash						165,575		-
Accounts receivable		484,100		481,404		634,108		1,163,316
Costs and estimated earnings in excess of billings on uncompleted contracts		46,246		60,296		-		29,917
Inventories		2,421,982		2,271,271
Inventories, net						2,688,933		1,749,735
Prepaid expenses and other current assets		286,059		272,597		292,795		259,682
Total current assets		7,100,334		10,115,798		11,817,165		5,302,739

Property and equipment, at cost:
Land		1,683,330		1,683,330		896,388		1,683,330
Building		4,516,301		4,516,301		4,516,301		4,516,301
Machinery and equipment		7,107,224		7,089,332		7,098,898		7,052,740
		13,306,855		13,288,963		12,511,587		13,252,371
Less accumulated depreciation		(7,541,532)		(7,241,769)		(7,853,574)		(7,590,641)
Net property and equipment		5,765,323		6,047,194		4,658,013		5,661,730

Patent costs, net of accumulated amortization of $927,249 and $916,960, respectively		251,984		249,414

Trademark costs, net of accumulated amortization of $79,762 and $77,514, respectively		96,079		98,327

Noncurrent inventories		6,727,706		6,840,170

Patent costs, net of accumulated amortization of $948,438 and $932,564, respectively						210,865		213,326
Trademark costs, net of accumulated amortization of $84,257 and $80,885, respectively						91,583		94,955
Restricted cash						376,407		-
Total assets	$	19,941,426	$	23,350,903	$	17,154,033	$	11,272,750

See accompanying notes to consolidated condensed financial statements.

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UQM TECHNOLOGIES, INC. AND SUBSIDIARIES

Consolidated Condensed Balance Sheets (unaudited), Continued


	September 30,		March 31,		September 30,		December 31,
	2016		2016		2017		2016
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	782,495	$	364,841	$	1,388,825	$	809,950
Other current liabilities		1,135,460		985,435		1,585,997		1,318,941
Billings in excess of costs and estimated earnings on engineering services contracts						25,378		-
Total current liabilities		1,917,955		1,350,276		3,000,200		2,128,891

Long-term debt, net of deferred financing costs of $54,406 and $0, respectively						3,110,123		-
Other long-term liabilities		372,222		288,889		126,667		141,667
Total long-term liabilities						3,236,790		141,667

Total liabilities		2,290,177		1,639,165		6,236,990		2,270,558

Commitments and contingencies (Note 13)
Commitments and contingencies (Note 16)

Stockholders’ equity:
Common stock, $0.01 par value, 75,000,000 shares authorized; 48,503,260 and 48,330,286 shares issued and outstanding, respectively		485,033		483,303
Common stock, $0.01 par value, 175,000,000 shares authorized; 54,035,328 and 48,519,313 shares issued and outstanding, respectively						540,353		485,193
Additional paid-in capital		128,363,917		128,103,861		133,767,272		128,409,933
Accumulated deficit		(111,197,701)		(106,875,426)		(123,390,582)		(119,892,934)
Total stockholders’ equity		17,651,249		21,711,738		10,917,043		9,002,192

Total liabilities and stockholders’ equity	$	19,941,426	$	23,350,903	$	17,154,033	$	11,272,750

See accompanying notes to consolidated condensed financial statements.

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UQM TECHNOLOGIES, INC. AND SUBSIDIARIES

Consolidated Condensed Statements of Operations (unaudited)


									Quarter Ended September 30,				Nine Months Ended September 30,
	Quarters Ended September 30,				Six Months Ended September 30,				2017		2016		2017		2016
	2016		2015		2016		2015
Revenue:
Product sales	$	728,921	$	1,618,666	$	1,902,182	$	2,249,332	$	2,752,554	$	728,921	$	5,169,479	$	3,120,979
Contract services		292,204		116,144		554,024		226,007		-		292,204		387,075		839,517
		1,021,125		1,734,810		2,456,206		2,475,339		2,752,554		1,021,125		5,556,554		3,960,496
Operating costs and expenses:
Costs of product sales		525,313		1,289,315		1,284,402		1,866,761		1,471,334		525,313		3,085,822		2,094,236
Costs of contract services		251,291		96,029		488,240		160,827		-		251,291		161,616		791,681
Research and development		882,090		912,395		1,601,008		2,000,875		403,273		882,090		1,591,520		2,285,354
Selling, general and administrative		1,738,439		1,855,214		3,423,084		3,100,588		1,983,450		1,738,439		4,757,571		4,655,978
Recovery of impaired assets										-		-		-		(585,800)
		3,397,133		4,152,953		6,796,734		7,129,051		3,858,057		3,397,133		9,596,529		9,241,449

Loss from operations		(2,376,008)		(2,418,143)		(4,340,528)		(4,653,712)		(1,105,503)		(2,376,008)		(4,039,975)		(5,280,953)

Other income:
Other income / (expense):
Interest income		2,445		125		5,853		3,497		112		2,445		2,211		9,735
Interest expense										(42,895)		-		(65,626)		-
Amortization of deferred financing costs										(9,327)		-		(20,208)		-
Gain on sale of long-lived assets										606,006		-		606,006		-
Other		5,318		8,971		12,400		16,917		8,206		5,318		19,944		18,025
		7,763		9,096		18,253		20,414		562,102		7,763		542,327		27,760

Net loss	$	(2,368,245)	$	(2,409,047)	$	(4,322,275)	$	(4,633,298)	$	(543,401)	$	(2,368,245)	$	(3,497,648)	$	(5,253,193)

Net loss per common share - basic and diluted	$	(0.05)	$	(0.06)	$	(0.09)	$	(0.12)	$	(0.01)	$	(0.05)	$	(0.07)	$	(0.11)

Weighted average number of shares of common stock outstanding - basic and diluted		48,479,908		40,235,636		48,413,491		40,142,682		48,941,702		48,479,908		48,677,423		48,351,907

See accompanying notes to consolidated condensed financial statements.

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UQM TECHNOLOGIES, INC. AND SUBSIDIARIES

Consolidated Condensed Statements of Cash Flows (unaudited)


					Nine Months Ended September 30,
	Six Months Ended September 30,				2017		2016
	2016		2015
Cash flows from operating activities:
Net loss	$	(4,322,275)	$	(4,633,298)	$	(3,497,648)	$	(5,253,193)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		312,297		497,697		302,385		533,983
Non-cash equity based compensation		249,785		488,957		269,891		299,349
Recovery of impaired assets						-		(585,800)
Gain on sale of long-lived assets						(606,006)		-
Impairment of inventories						-		9,906
Change in operating assets and liabilities:
Accounts receivable		(2,696)		(156,732)		529,208		178,941
Other receivable		-		855,000
Costs and estimated earnings on uncompleted contracts		14,050		20,000		29,917		(16,329)
Inventories		(38,247)		344,153		(939,197)		(157,430)
Prepaid expenses and other current assets		(13,462)		(49,109)		(43,198)		12,834
Accounts payable and other current liabilities		567,679		481,635		845,931		244,231
Billings in excess of costs and estimated earnings on uncompleted contracts		-		(39,652)
Billings in excess of costs and estimated earnings on engineering services contracts						25,378		(60,266)
Other long-term liabilities		83,333		(239,468)		(15,000)		125,000
Net cash used in operating activities		(3,149,536)		(2,430,817)		(3,098,339)		(4,668,774)

Cash flows from investing activities:
Acquisition of property and equipment		(17,892)		(57,305)		(46,158)		(102,545)
Cash paid for patent and trademark fees		(12,856)		(9,628)		(13,411)		(15,198)
Net cash used in investing activities		(30,748)		(66,933)
Cash proceeds from the sale of long-lived assets						1,392,948		-
Net cash provided by / (used in) investing activities						1,333,379		(117,743)

Cash flows from financing activities:
Cash received for shares exercised under employee stock purchase plan		22,679		23,125		36,327		35,474
Registered direct offering costs						-		(65,000)
Draw on line of credit						3,100,000		-
Payment of employee tax withholdings in exchange for return of common stock		(10,678)		(92,591)		(12,381)		(10,678)
Net cash provided by (used in) financing activities		12,001		(69,466)
Issuance of common stock upon definitive stock purchase agreement						5,099,898		-
Issuance of common stock upon exercise of employee and directors options						18,763		-
Net cash provided by / (used in) financing activities						8,242,607		(40,204)

Decrease in cash and cash equivalents		(3,168,283)		(2,567,216)
Cash and cash equivalents at beginning of period		7,030,230		6,585,703
Cash and cash equivalents at end of period	$	3,861,947	$	4,018,487
Increase / (decrease) in cash, cash equivalents, and restricted cash						6,477,647		(4,826,721)
Cash, cash equivalents, and restricted cash at beginning of period						2,100,089		8,688,668
Cash, cash equivalents, and restricted cash at end of period					$	8,577,736	$	3,861,947

See accompanying notes to consolidated condensed financial statements.

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UQM TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements, Continued

(unaudited)

(1) Basis of Presentation

The accompanying consolidated condensed 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. 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~~10-KT for the ~~fiscal year~~nine-month transition period ended ~~March~~December 31, 2016.

(2) ~~Change in Fiscal Year~~Segment Reporting

~~During the second quarter of fiscal year 2017,~~The Company has performed its quarterly assessment to determine if additional disclosures are required for segment reporting. Management has determined that the Company ~~decided~~has one operating segment because the chief operating decision maker (CODM) and management make business decisions based on product and contract services revenues taken as a whole. Therefore, no further disclosure is required at this time. Management will perform an assessment quarterly to ~~change its fiscal year from one ending on March 31~~st ~~to one ending on December 31~~st~~. This will be effective as of December 31, 2016.~~determine if additional disclosures around this standard are needed in the future.

(3) New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued a new standard to achieve a consistent application of revenue recognition within the U.S., resulting in a single revenue model to be applied by reporting companies under U.S. generally accepted accounting principles. Under the new model, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that reporting companies disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new standard is effective for us for the first fiscal year beginning after December 15, 2017. ~~Early~~Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The new standard is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial ~~application.~~application and providing additional disclosures. The Company currently anticipates adopting the standard using the retrospective method with the cumulative effect and additional disclosures at the period of adoption. Based on the Company’s assessment on the impact of this guidance on our consolidated condensed financial statements, ~~cannot be determined at this time.~~

~~In August 2014, the FASB issued guidance on determining when~~we expect revenue related to product and ~~how~~contract services to disclose going-concern uncertainties in the financial statements. The new standard provides guidance around management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. The new guidance applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. We expect the new standard to increase the disclosures we provide regarding our liquidity and cash obligations.remain substantially unchanged.

In July 2015, the FASB issued guidance on simplifying the measurement of inventory from the lower of cost or market to the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less ~~reasonable~~reasonably predictable costs of completion, disposal, and transportation. This guidance is effective for years beginning after December 15, 2016, including interim periods within those fiscal years. Prospective application is allowed as of the beginning of an interim or annual reporting period. An entity is only required to disclose the nature of and reason for the change in accounting principle in the first interim and annual period of adoption. The Company adopted this new standard in the quarter ended March 31, 2017. There was no material impact ~~of this guidance~~ on ~~our~~the consolidated financial statements ~~cannot be determined at this time.~~

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~~UQM TECHNOLOGIES, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Condensed Financial Statements, Continued~~

~~(unaudited)~~

upon adoption.

In March 2016, the FASB issued guidance on improvements to employee share-based payment accounting for stock compensation. The new standard addresses the topics of accounting for income taxes, classification of excess tax benefits on the Statement of Cash Flows, forfeitures, minimum statutory tax withholding requirements, and classification of employee taxes paid on the Statement of Cash Flows when an employer withholds shares for tax withholding purposes. This is effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods. Early adoption is permitted

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UQM TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements, Continued

(unaudited)

within any interim or annual period. Any adjustments should be reflective as of the beginning of the fiscal year that includes that interim period. ~~An entity that elects early adoption must adopt all the amendments~~The Company adopted this new standard in the ~~same period. The impact~~quarter ended March 31, 2017. No adjustments were necessary upon adoption of ~~this~~the standard.

In November, 2016, the FASB issued guidance on ~~our financial statements cannot~~the Statement of Cash Flows and the presentation of restricted cash in the statement. The new standard will require the Statement of Cash Flows to explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash. As a result, the amounts generally described as restricted cash should be ~~determined at~~included in the cash and cash equivalents when reconciling the beginning of the period and end of the period total amounts shown on the Statement of Cash Flows. This is effective for annual periods beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The amendments should be applied using the retrospective transition method in each period presented. The Company elected to early adopt this ~~time.~~standard in the quarter ended June 30, 2017. The ending cash balance in the Consolidated Condensed Statements of Cash Flows was updated to reflect the adoption of the standard. Additional disclosure has been included in Note 5 of the Consolidated Condensed Financial Statements as required by adopting the standard.

(4) ~~Contracts in Process~~Going Concern

AtThese consolidated condensed financial statements are presented assuming that the Company will continue as a going concern. The going concern concept contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As of September 30, ~~2016~~2017, the Company had sustained recurring losses from continuing operations, had working capital surplus of $8,816,965, and ~~March 31, 2016, the estimated period to complete contracts in process ranged from one to three months (to complete final reports for the Department~~accumulated deficit of ~~Energy) and one to six months, respectively. We expect to collect all accounts receivable arising from these contracts within sixty days of billing.~~$123,390,582.

On March 15, 2017, the Company entered into a non-revolving line of credit for $5.6 million. The ~~following summarizes contracts in process:~~interest rate is variable based upon the one month LIBOR rate plus 4.0% per annum on the outstanding balance. The non-revolving line of credit will expire on March 15, 2019 and the amounts repaid during the term of the loan may not be re-borrowed. At the expiry date, all outstanding principal and interest are due. As of September 30, 2017, $3,164,529 was drawn on the line of credit. For additional information, see Note 9 of the Consolidated Condensed Financial Statements.

September 30,

March 31,

2016

2016

Costs incurred on uncompleted contracts

$
3,062,078

$
2,607,764

Estimated earnings

752,981

717,771

3,815,059

3,325,535

Less billings to date

(3,768,813)

(3,265,239)

Contracts in process

$
46,246

$
60,296

Included in the accompanying Consolidated Condensed Balance Sheets as follows:

Costs and estimated earnings in excess of billings on uncompleted contracts

$
46,246

$
60,296

Contracts in process

$
46,246

$
60,296

On July 6, 2017, the Company sold 15 acres of vacant land adjacent to its manufacturing facility. The gross selling price of the land was $1.5 million (net proceeds were $1.4 million) which was representative of the fair market value.

On September 25, 2017, the Company closed the first stage investment pursuant to a definitive stock purchase agreement entered into with China National Heavy Duty Truck Group Co., Ltd. and its wholly-owned subsidiary, Sinotruk (BVI) Limited (the Buyer), which resulted in the sale of 5,347,300 shares of the Company’s common stock to the Buyer and the Company’s receipt of cash proceeds of $5.1 million on that date.

Based on management’s projections of operations, the non-revolving line of credit, and a cash balance of approximately $8.0 million on September 30, 2017, the Company believes that it currently has sufficient cash and bank financing resources to support day to day activities through operations as they become due and sustain operations for at least the next twelve months.

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UQM TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements, Continued

(unaudited)

(5) Cash, cash equivalents, and restricted cash

~~(5)~~The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported on the Consolidated Condensed Balance Sheets to the cash on the Consolidated Condensed Statements of Cash Flows for the period ending September 30, 2017. There was no restricted cash as of September 30, 2016 or December 31, 2016.


	September 30,
	2017
Cash and cash equivalents	$	8,035,754
Restricted cash		165,575
Restricted cash included in other long-term assets		376,407
Total cash, cash equivalents, and restricted cash shown in the Consolidated Condensed Statements of Cash Flows	$	8,577,736

Restricted cash classified as a current asset on the Consolidated Condensed Balance Sheets represents the amount required to be set aside pursuant to a contractual agreement with the Company’s lender for the payment of interest on borrowings from the line of credit that is expected to be paid within the next twelve months. In addition, restricted cash included in other long-term assets on the Consolidated Condensed Balance Sheets represents interest due on the line of credit more than twelve months from the date of the financial statements as contractually required by the lender. The restrictions will lapse when the related long-term debt is paid off.

(6) Contracts in Process

At September 30, 2017 and December 31, 2016, the estimated period to complete contracts in process ranged from zero and one to six months, respectively. We expect to collect all accounts receivable arising from these contracts within sixty days of billing.

The following summarizes contracts in process:


	September 30,		December 31,
	2017		2016
Costs incurred on engineering services contracts	$	502,701	$	502,701
Estimated earnings		331,969		331,969
		834,670		834,670
Less billings to date		(860,048)		(804,753)

Contracts in process	$	(25,378)	$	29,917

Included in the accompanying Consolidated Condensed Balance Sheets is as follows:

Costs and estimated earnings in excess of billings on uncompleted contracts	$	-	$	29,917
Billings in excess of costs and estimated earnings on engineering services contracts		(25,378)		-
Contracts in process	$	(25,378)	$	29,917

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UQM TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements, Continued

(unaudited)

(7) Inventories

Inventories at September 30, ~~2016~~2017 and ~~March~~December 31, 2016 consisted of:


	September 30,		March 31,		September 30,		December 31,
	2016		2016		2017		2016
Raw materials	$	7,287,412	$	7,279,633	$	7,564,248	$	7,277,612
Work-in-process		65,948		45,506		756,528		105,252
Finished products		1,796,328		1,786,302		1,389,386		1,531,544
Reserve for excess and obsolete inventory						(7,021,229)		(7,164,673)
	$	9,149,688	$	9,111,441	$	2,688,933	$	1,749,735

September 30,

March 31,

2016

2016
Inventories- current

$
2,421,982

$
2,271,271
Inventories- noncurrent

6,727,706

6,840,170

$
9,149,688

$
9,111,441

We maintain raw material inventories of electronic components, motor parts and other materials to meet our expected manufacturing needs for proprietary products and for products manufactured to the design specifications of our customers. Some of these components may become obsolete or impaired due to bulk purchases in excess of customer requirements. Accordingly, we periodically assess our raw material and finished product inventories for potential impairment of value based on then available information, expectations and estimates and establish impairment reserves as appropriate. ~~We concluded that there were no impairments for obsolete inventory~~

As of December 31, 2016, we re-evaluated the carrying value of our PowerPhase Pro® product. A key factor in our analysis during the ~~six month periods~~nine-month transition period ended ~~September 30,~~December 31, 2016 was that in October 2016, our customer, ITL Efficient Energy Co., Ltd, informed us of their intention to purchase in cash a significant portion of the PowerPhase Pro® inventory by the filing date of our Form 10-KT for the nine-month transition period ended December 31, 2016. That payment had not at that point in time been received, nor have we received any payment as of the date of this quarterly filing. Because of the long delays in this customer’s product launch and ~~2015,~~the lack of a significant cash payment towards this inventory, we determined that approximately $6.8 million of this inventory be reserved as excess inventory and we ~~had no reserve~~took a charge for this amount against this inventory as of December 31, 2016. We have purchase orders from existing customers to acquire the remaining balance of the PowerPhase Pro® inventory. We also reserved approximately $350,000 for other obsolete inventory as of ~~September 30, 2016 or March~~December 31, 2016.

~~As of~~During the nine months ended September 30, ~~2016,~~2017, we sold $143,443 of inventory ~~of $6,727,706 shown on~~that was previously reserved as discussed in the ~~Consolidated Condensed Balance Sheet~~preceding paragraph. There was no net cost basis in the inventory that was sold, and as a ~~noncurrent asset represents that portion~~result of the transactions, there was no adjustment to the inventory ~~in excess of amounts expected to be sold in the next twelve months. Management believes that there will be adequate demand for this noncurrent inventory.~~cost basis.

~~(6)~~

(8) Other Current Liabilities

Other current liabilities at September 30, ~~2016~~2017 and ~~March~~December 31, 2016 ~~consist~~consisted of:


	September 30,		March 31,		September 30,		December 31,
	2016		2016		2017		2016
Accrued payroll and employee benefits	$	117,534	$	141,544	$	126,503	$	62,220
Accrued personal property and real estate taxes		174,244		174,260		179,879		232,326
Accrued warranty costs		263,695		244,310		346,539		289,710
Unearned revenue		234,956		79,956		587,519		116,886
Accrued royalties		48,336		48,336		48,336		48,336
Accrued import duties		87,100		87,100		87,100		87,100
Accrued vendor settlements		189,175		189,175		189,175		189,175
Accrued executive compensation						-		272,222
Other		20,420		20,754		20,946		20,966
	$	1,135,460	$	985,435	$	1,585,997	$	1,318,941

~~Table of Contents~~

~~UQM TECHNOLOGIES, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Condensed Financial Statements, Continued~~

~~(unaudited)~~

~~(7) Stock-Based Compensation~~

~~Share-Based Compensation Expense~~

~~The table below shows total share-based compensation expense for the quarters and six months ended September 30, 2016 and 2015 and the classification of these expenses:~~

Quarters Ended September 30,

Six Months Ended September 30,

2016

2015

2016

2015

Costs of product sales

$
3,265

$
4,557

$
6,238

$
10,176

Costs of contract services


3,491


981


5,900


1,726

Research and development

12,332

8,434

19,148

22,715

Selling, general and administrative

176,932

335,697

218,499

454,340

$
196,020

$
349,669

$
249,785

$
488,957

~~Stock Option Plans Activity~~

~~Additional information with respect to stock option activity during the six months ended September 30, 2016 under our Stock Option Plans is as follows:~~

Weighted-

Weighted-

Average

Shares

Average

Remaining

Aggregate

Under

Exercise

Contractual

Intrinsic

Option

Price

Life

Value

Outstanding at April 1, 2016

2,561,769

$
1.40

6.2 years

$
-

Granted

632,098

$
0.68

Exercised

-

$
-

$
-

Forfeited

(114,197)

$
1.82

Outstanding at September 30, 2016

3,079,670

$
1.23

6.5 years

$
-

Exercisable at September 30, 2016

2,269,476

$
1.41

5.4 years

$
-

Vested and expected to vest at September 30, 2016

2,810,808

$
1.25

6.3 years

$
-

As of September 30, 2016, there was $394,981 of total unrecognized compensation cost related to stock options granted under our Stock Option Plans. The unrecognized compensation cost is expected to be recognized over a weighted-average period of twenty-nine months. The total fair value of stock options that vested during the six months ended September 30, 2016 and 2015 was $165,665 and 308,951, respectively.

Table of Contents

UQM TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements, Continued

(unaudited)

~~Stock Bonus Plan Activity~~

(9) Debt

~~Activity with respect to non-vested shares under~~On March 15, 2017, the ~~Stock Bonus Plan~~Company entered into a non-revolving line of credit for $5.6 million. The loan is collateralized by the Company’s headquarters facility. The interest rate is variable based upon the one month LIBOR rate plus 4.0% per annum on the outstanding balance which was 5.23% as of September 30, ~~2016~~2017. As a condition of the loan, $600,000 was immediately drawn on the line of credit to be used for monthly interest payments on borrowings over the life of the loan. This is reported as restricted cash on the Consolidated Condensed Balance Sheet as of September 30, 2017. For additional information, see Note 5 to the Consolidated Condensed Financial Statements. The covenants under the debt agreement require the Company to have liquid assets of a minimum of $1.5 million with the lender. In addition, financial statements are to be presented no later than 45 days after the end of each quarter and ~~2015~~90 days after the end of each fiscal year. These covenants took effect for the quarter ending June 30, 2017. As of September 30, 2017, the Company was in compliance with its covenants. The non-revolving line of credit will expire on March 15, 2019 and ~~changes~~the amounts repaid during the ~~six~~term of the loan may not be re-borrowed. At the expiry date, all outstanding principal and interest are due. As of September 30, 2017, $3,164,529 was drawn on the line of credit. The Company incurred deferred financing costs of $73,060 upon securing the line of credit.

(10) Stock-Based Compensation

Share-Based Compensation Expense

The table below shows total share-based compensation expense for the quarters and nine months ended September 30, 2017 and 2016, and ~~2015 are presented below:~~the classification of these expenses:

Six Months Ended September 30, 2016

Six Months Ended September 30, 2015

Weighted-Average

Weighted-Average

Shares Under

Grant Date

Shares Under

Grant Date


Contract

Fair Value

Contract

Fair Value

Unvested at April 1

88,214

$
1.36

432,039

$
1.26

Granted

160,389

$
0.68

23,600

$
0.66

Vested

(144,982)

$
0.98

(361,237)

$
1.22

Forfeited

(1,573)

$
1.25

-

$
-

Unvested at September 30

102,048

$
0.84

94,402

$
1.35


	Quarter Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016

Costs of product sales	$	9,300	$	3,265	$	16,627	$	8,519
Costs of contract services		-		3,491		2,097		7,826
Research and development		18,521		12,332		37,422		23,744
Selling, general and administrative		113,522		176,932		213,745		259,260
	$	141,343	$	196,020	$	269,891	$	299,349

As of September 30, 2016, there was $62,766 of total unrecognized compensation cost related to common stock granted under our Stock Bonus Plan. The unrecognized compensation cost at September 30, 2016 is expected to be recognized over a weighted-average period of twenty-nine months.

~~Stock Purchase Plan Activity~~

During the six months ended September 30, 2016 and 2015, we issued 44,272 and 34,508 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 six months ended September 30, 2016 and 2015 was $22,679 and $23,125, respectively.

Table of Contents

UQM TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements, Continued

(unaudited)

~~(8) Stockholders’ Equity~~Stock Option Plans Activity

~~Changes in the components of stockholders’ equity~~Additional information with respect to stock option activity during the ~~six month period~~nine months ended September 30, ~~2016 were~~2017 under our Stock Option Plans is as follows:

Number of

common

Additional

Total

shares

Common

paid-in

Accumulated

stockholders’

issued

     stock

    capital

     deficit

     equity

Balances at April 1, 2016


48,330,286

$
483,303

$
128,103,861

$
(106,875,426)

$
21,711,738

Issuance of common stock under employee stock purchase plan

18,097

181

9,410

-

9,591

Issuance of common stock under stock bonus plan

3,667

37

(37)

-

-

Common stock used for tax withholdings

(1,368)

(14)

(958)

-

(972)

Compensation expense from employee and director stock option and common stock grants

-

-

53,768

-

53,768

Net loss

-

-

-

(1,954,030)

(1,954,030)

Balances at June 30, 2016

48,350,682

$
483,507

$
128,166,044

$
(108,829,456)

$
19,820,095

Issuance of common stock under employee stock purchase plan

26,175

262

12,826

-

13,088

Issuance of common stock under stock bonus plan

142,488

1,425

(1,425)

-

-

Retirement of vested shares

(16,085)

(161)

(9,545)

-

(9,706)

Compensation expense from employee and director stock option and common stock grants

-

-

196,017

-

196,017

Net loss

-

-

-

(2,368,245)

(2,368,245)

Balances at September 30, 2016

48,503,260

$
485,033

$
128,363,917

$
(111,197,701)

$
17,651,249


				Weighted-
		Weighted-		Average
	Shares	Average		Remaining		Aggregate
	Under	Exercise		Contractual		Intrinsic
	Option	Price		Life		Value
Outstanding at December 31, 2016	3,004,798	$	1.20		6.4 years	$	-
Granted	500,047	$	0.87				-
Exercised	(22,105)	$	0.85			$	-
Forfeited	(99,255)	$	1.28			$	480
Outstanding at September 30, 2017	3,383,485	$	1.15		6.5 years	$	765,296

Exercisable at September 30, 2017	2,451,144	$	1.30		5.4 years	$	412,812

Vested and expected to vest at September 30, 2017	2,938,864	$	1.23		6.2 years	$	557,173

~~In February 2014, we completed~~

As of September 30, 2017, there was $451,381 of total unrecognized compensation cost related to stock options granted under our Stock Option Plans. The unrecognized compensation cost is expected to be recognized over a ~~follow-on offering consisting~~weighted-average period of ~~2,864,872~~twenty-six months. The total fair value of stock options that vested during each of the nine months ended September 30, 2017 and 2016 was $236,328 and $264,004, respectively.

Stock Bonus Plan Activity

Activity with respect to non-vested shares under the Stock Bonus Plan as of ~~our~~September 30, 2017 and 2016 and changes during the nine months ended September 30, 2017 and 2016 are presented below:


	Nine Months Ended September 30, 2017			Nine Months Ended September 30, 2016
		Weighted-Average			Weighted-Average
	Shares Under	Grant Date		Shares Under	Grant Date
	Contract	Fair Value		Contract	Fair Value
Unvested at beginning of period	102,048	$	0.84	90,561	$	1.36
Granted	23,735	$	0.87	160,389	$	0.68
Vested	(68,023)	$	0.98	(144,982)	$	0.98
Forfeited	-	$	-	(3,920)	$	1.25
Unvested at end of period	57,760	$	0.68	102,048	$	0.84

As of September 30, 2017, there was $33,512 of total unrecognized compensation cost related to common stock ~~and common stock purchase warrants to purchase 1,432,436 shares of~~granted under our ~~common stock.~~Stock Bonus Plan. The warrants have an exercise price of $2.1275 per whole share of common stock and are exercisable on or after August 6, 2014 and on or before August 5, 2018. In addition, the placement agent was issued warrants to purchase 57,297 shares of common stock, on substantially the same terms as the warrants issued to the purchasers. Warrants from this offering to acquire 1,489,733 shares of our common stock were outstanding at both September 30, 2016 and March 31, 2016.

In October 2015, we completed a follow-on offering consisting of 8,000,000 shares of our common stock, and common stock warrants to purchase 4,000,000 shares of our common stock. The warrants have an exercise price of $1.31 per whole share of common stock and are exercisable for a period beginning April 30, 2016 through October 30, 2020. Warrants from this offering to acquire 4,000,000 and zero shares were outstandingunrecognized compensation cost at September 30, ~~2016 and March 31, 2016, respectively.~~2017 is expected to be recognized over a weighted-average period of twenty-one months.

Table of Contents

UQM TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements, Continued

(unaudited)

~~(9)~~Employee Stock Purchase Plan Activity

During the three months ended September 30, 2017 and 2016, we issued 45,849 and 26,175 shares of common stock, respectively, under the Employee Stock Purchase Plan. Cash received by us upon the purchase of shares under the Employee Stock Purchase Plan for the three months ended September 30, 2017 and 2016 was $17,881 and $13,088, respectively. As of September 30, 2017, 25,777 options had been purchased under this plan but the employee(s) had not exercised their right to acquire the common stock under the terms of the Employee Stock Purchase Plan.

(11) Stockholders’ Equity

Changes in the components of stockholders’ equity during the nine months ended September 30, 2017 were as follows:


	Number of
	common				Additional				Total
	shares		Common		paid-in		Accumulated		stockholders’
	issued		stock		capital		deficit		equity
Balances at December 31, 2016		48,519,313	$	485,193	$	128,409,933	$	(119,892,934)	$	9,002,192

Issuance of common stock under employee stock purchase plan		3,823		38		1,912		-		1,950
Compensation expense from employee and director stock option and common stock grants		-		-		61,564		-		61,564
Net loss		-		-		-		(1,606,026)		(1,606,026)
Balances at March 31, 2017		48,523,136	$	485,231	$	128,473,409	$	(121,498,960)	$	7,459,680

Issuance of common stock under employee stock purchase plan		43,412		434		16,062		-		16,496
Compensation expense from employee and director stock option and common stock grants				-		66,984		-		66,984
Net loss		-		-		-		(1,348,221)		(1,348,221)
Balances at June 30, 2017		48,566,548	$	485,665	$	128,556,455	$	(122,847,181)	$	6,194,939

Issuance of common stock upon exercise of employee and director options		22,105		221		18,542		-		18,763
Issuance of common stock under employee stock purchase plan		45,849		458		17,423		-		17,881
Issuance of common stock under stock bonus plan		68,022		680		(680)		-		-
Issuance of common stock under definitive stock purchase agreement		5,347,300		53,473		5,046,425		-		5,099,898
Common stock used for tax withholdings		(14,496)		(144)		(12,236)		-		(12,380)
Compensation expense from employee and director stock option and common stock grants		-		-		141,343		-		141,343
Net loss		-		-		-		(543,401)		(543,401)
Balances at September 30, 2017		54,035,328	$	540,353	$	133,767,272	$	(123,390,582)	$	10,917,043

Table of Contents

UQM TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements, Continued

(unaudited)

The Company has warrants outstanding as follows:


	Common Stock	Warrants
	Follow-on Offering	Under Option	Earliest
Offering Date	(Shares)	(Shares)	Exercise Date	Expiration Date
February, 2014	2,864,872	1,489,733	August 6, 2014	August 5, 2018
October, 2015	8,000,000	4,000,000	April 30, 2016	October 30, 2020
	10,864,872	5,489,733


				Weighted-
		Weighted-		Average
	Warrants	Average		Remaining
	Under	Exercise		Contractual
	Option	Price		Life
Outstanding at December 31, 2016	5,489,733	$	1.53		3.3 years
Granted	-	$	-
Exercised	-	$	-
Forfeited	-	$	-
Outstanding at September 30, 2017	5,489,733	$	1.53		2.5 years

Exercisable at September 30, 2017	5,489,733	$	1.53		2.5 years

Table of Contents

UQM TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements, Continued

(unaudited)

(12) Significant Customers

We have historically derived significant revenue from a few key customers. The following table summarizes revenue and percent of total revenue from significant customers for the quarters and nine months ended September 30, ~~2016~~2017 and ~~2015:~~2016:


																	Quarter Ended September 30,								Nine Months Ended September 30,
	Quarter Ended September 30,								Six Months Ended September 30,								2017				2016				2017				2016
	2016				2015				2016				2015
Customer A	$	448,597	44	%	$	305,870	18	%	$	802,032	33	%	$	427,552	17	%	$	1,800,000	65	%	$	-	-	%	$	1,974,000	36	%	$	-	-	%
Customer B	$	239,005	23	%	$	103,144	6	%	$	489,524	20	%	$	138,007	6	%	$	308,341	11	%	$	448,597	31	%	$	1,714,876	31	%	$	1,212,252	41	%
Customer C	$	141,379	14	%	$	148,803	9	%	$	366,484	15	%	$	299,118	12	%	$	102,499	4	%	$	14,838	1	%	$	136,781	2	%	$	311,069	11	%
Customer D	$	14,838	1	%	$	197,654	11	%	$	124,269	5	%	$	197,654	8	%	$	61,785	2	%	$	-	-	%	$	286,515	5	%	$	45,897	2	%
Customer E	$	-	-	%	$	495,536	29	%	$	12,212	1	%	$	696,693	28	%	$	52,364	2	%	$	141,379	10	%	$	227,502	4	%	$	499,389	17	%
Customer F																	$	-	-	%	$	-	-	%	$	300,000	5	%	$	-	-	%
Customer G																	$	-	-	%	$	239,005	17	%	$	-	-	%	$	775,018	26	%

The following table summarizes accounts receivable from significant customers as of September 30, ~~2016~~2017 and ~~March~~December 31, 2016:


					September 30,		December 31,
	September 30,		March 31,		2017		2016
	2016		2016
Customer A	27	%	22	%	-	%	-	%
Customer B	-	%	32	%	41	%	45	%
Customer C	27	%	12	%	-	%	11	%
Customer D	26	%	20	%	10	%	29	%
Customer E	-	%	-	%	8	%	10	%
Customer F					-	%	-	%
Customer G					-	%	-	%

Table of Contents

UQM TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements, Continued

(unaudited)

~~(10)~~(13) Income Taxes

The Company currently has a full valuation allowance against its deferred tax assets, 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 September 30, ~~2016~~2017 and ~~2015,~~2016, we had no provisions for interest or penalties related to uncertain tax positions.

The Company is subject to taxation in the U.S. and various state jurisdictions. As of September 30, ~~2016,~~2017, the Company’s tax years for 2012 to ~~2015~~2016 are subject to examination by the tax authorities.

~~Table of Contents~~

~~UQM TECHNOLOGIES, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Condensed Financial Statements, Continued~~

~~(unaudited)~~

~~(11)~~(14) Loss Per Common Share

The following table sets forth the computation of basic and diluted net loss per share for the quarters and ~~six~~nine months ended September 30, ~~2016~~2017 and ~~2015:~~2016:


									Quarter Ended September 30,				Nine Months Ended September 30,
	Quarter Ended September 30,				Six Months Ended September 30,				2017		2016		2017		2016
	2016		2015		2016		2015
Numerator:
Net loss	$	(2,368,245)	$	(2,409,047)	$	(4,322,275)	$	(4,633,298)	$	(543,401)	$	(2,368,245)	$	(3,497,648)	$	(5,253,193)
Denominator for basic and diluted net loss per common share:
Weighted average number of shares of common stock outstanding - basic and diluted		48,479,908		40,235,636		48,413,491		40,142,682		48,941,702		48,479,908		48,677,423		48,351,907

Net loss per common share - basic and diluted	$	(0.05)	$	(0.06)	$	(0.09)	$	(0.12)	$	(0.01)	$	(0.05)	$	(0.07)	$	(0.11)

The following table sets forth the potential shares of common stock that are not included in the calculation of diluted net loss per share because to do so would be anti-dilutive as of the end of each period presented:


	September 30,				September 30,
	2016		2015		2017		2016

Non-vested stock bonus plan shares		102,048		94,402		57,760	102,048
Stock options outstanding		3,106,096		3,149,381		3,409,262	3,106,096
Warrants to purchase common stock		5,489,733		1,489,733		5,489,733	5,489,733

~~(12)~~(15) Fair Value of Financial Instruments

The carrying amounts of cash, ~~and~~ cash equivalents, restricted cash, accounts receivable and accounts payable approximate fair value because of the short maturity of these instruments.

The Company measures the fair value of outstanding debt for disclosure purposes on a recurring basis and its long-term debt of $3,110,123 is reported at amortized cost. The Company’s long-term debt is subject to variable rates of interest and accordingly its carrying value is considered to be representative of its fair market value.

1214

Table of Contents

UQM TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements, Continued

(unaudited)

~~(13)~~(16) Commitments and Contingencies

Employment Agreements

On July 21, 2015, the Company entered into ~~new~~ employment agreements with its four officers that ~~expire~~expired on June 30, 2017.

Effective July 1, 2017, the Company entered into new employment agreements with its four officers, which expire December 31, 2019. The aggregate future base salary payable to the executive officers over their remaining terms is $760,953. The July 2015 employment agreements provide for future retention payments under the conditions and for the amounts specified in the agreements. These retention payments are being recorded over the required service period, and as a result, we have recorded a liability of $225,555 as of September 30, 2016. $2,399,634.

Litigation

We are involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, and based on current available information, the ultimate disposition of these matters is not expected to have a material adverse effect on our financial position, results of operations or cash flow.

1315

Table of Contents

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

This Report contains statements that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. These statements appear in a number of places in this Report and include statements regarding our plans, beliefs or current ~~expectations; including those plans, beliefs and expectations of our officers and directors with respect to, among other things,completion of the $48 million investment in us by Hybrid Kinetic Group Limited and our operations following such investment.~~expectations. Important Risk Factors that could cause actual results to differ from those contained in the forward-looking statements are listed below in Part II, Item 1A. Risk Factors and in our ~~Annual~~Transition Report on Form ~~10-K~~10-KT for the ~~fiscal year~~nine-month transition period ended ~~March~~December 31, 2016. Additionally, there may be other risks that are otherwise described from time to time in the reports that we file with the U.S. Securities and Exchange Commission (“SEC”). We assume no obligation to update, and, except as may be required by law, do not intend to update, any forward-looking statements.

Introduction

UQM Technologies, Inc., (“UQM”, “Company”, “we”, “our”, or “us”) is a developer and manufacturer of power dense, high efficiency electric motors, generators, power electronic controllers and fuel cell compressors for the commercial truck, bus, automotive, marine, ~~military~~ and industrial markets. We generate revenue from three principal activities: 1) the sale of electric propulsion systems, which includes motors and controllers; and 2) the sale of auxiliary products including generators, fuel cell compressors, air conditioning compressor systems, and DC-to-DC converters; and 3) services, including research, development and application engineering contract services and remanufacturing services. Our product sales consist of annually recurring volume production, prototype low volume sales, and revenues derived from the sale of refurbished and serviced products. The sources of engineering contract revenue typically vary from year to year and individual projects may vary substantially in their periods of performance and aggregate dollar value.

We have invested considerable financial and human resources into the development of our technology and manufacturing operations. We have developed and production-validated a full range of products for use in full-electric, hybrid electric, plug-in-hybrid and fuel cell applications for the markets we serve. These products are all highly efficient permanent magnet designs and feature outstanding performance, package size and weight valued by our customers. Our production capabilities and capacity are sufficient to meet the demands of our current and future customers for the foreseeable future. We are certified as an ISO/TS 16949 quality supplier, which is the highest level of quality standards in the automotive industry, and we are ISO 14001 certified, meeting the highest environmental standards. We have a management team with significant experience in the automotive industry, and with the requirements for high quality production programs ~~and~~that our customers demand, they have very deep technical knowledge of the electric motor and controller business. This team has the ability and background to grow the business to significantly higher levels, and we believe we have adequate cash balances and bank financing resources to fund our operations for at least the next twelve months.

Our most important strategic initiative ~~going forward~~ is to develop customer relationships that lead to longer-term supply contracts. Volume production is the key to our ongoing operations. We are driving business development in the following ways:

~~In June 2016, we signed a definitive stock issuance and purchase agreement with a subsidiary of Hybrid Kinetic Group, Ltd. (“HKG”).~~ ~~The~~ ~~HKG investment a~~greement calls for HKG, through its wholly-owned subsidiary, to purchase newly issued UQM common shares for approximately $48 million in exchange for a majority ownership of UQM. This investment will provide us with the growth capital needed to execute on our global expansion strategy, particularly in China which is the largest market in the world for electric vehicles. The closing of this investment is contingent upon, among other conditions, the approval of our shareholders at the next annual shareholder’s meeting, scheduled to be held on November 22, 2016. We expect the investment agreement to close before the end of 2016.

We have created a well-defined, structured process to target potential customers of vehicle electric motor technology in the commercial truck/van and shuttles, passenger buses, automotive, marine, ~~military~~ and other targeted markets both domestically and internationally. In particular, we are focused on developing customer relationships in China which is the world’s largest market for vehicle electrification products.

We hired our first employees in China in 2016. As China represents the largest market in the world for electric vehicles, our presence in that market is critical to our long-term success.

During the quarter ended September 30, 2017, we executed a stock purchase agreement with a strategic partner in China that meets three important criteria; the partner has capital, infrastructure and access to the Chinese domestic market (see below).

We have developed a customer pipeline where identified potential customers are synergistic and strategic in nature for longer-term growth potential.

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We are building long term quantifiable and sustainable relationships within the identified target markets.

We provide service and support to our customers from pilot and test activities through commissioning processes and ~~then~~ ultimately to volume production operations.

We continually look for ways to improve our purchasing and manufacturing processes to develop competitive costs to ensure that our pricing to customers is market competitive.

We provide customized solutions to meet specification requirements that some customers require.

We participate in trade show events globally to demonstrate our products and engage with users of electric motor technology.

We actively involve all functional groups within the Company to support the requests of our customers.

We believe that the successful execution of these activities will lead us to secure volume production commitments from customers, so that our operations will become cash flow positive and ultimately profitable.

Recent Announcements

~~During~~On August 28, 2017, we announced that we entered into a definitive stock purchase agreement (“Agreement”) with China National Heavy Duty Truck Group Co., Ltd. through its wholly owned subsidiary, Sinotruk (BVI) Limited (collectively, “CNHTC”), the parent company of Sinotruk (Hong Kong) Limited (“Sinotruk”), a leading Chinese commercial vehicle manufacturer, and that UQM and CNHTC plan to create a joint venture (“JV”) to manufacture and sell electric propulsion systems for commercial vehicles and other vehicles in China. CNHTC has headquarters in Jinan, China. CNHTC’s investment and creation of the JV is planned to occur in two stages. First, CNHTC acquired newly issued common shares of UQM, resulting in a 9.9% ownership interest of common shares issued and outstanding. This first stage of the investment was closed on September 25, 2017, and we received cash proceeds of $5.1 million on that date. Second, CNHTC will acquire additional newly issued common shares resulting in CNHTC owning a total of 34% of UQM’s issued and outstanding common stock on a fully diluted basis. The purchase price is $0.95 per share, which represents a 15% premium over the 30-day closing price average for the period ending on the last trading date before signing. The total transaction will bring approximately $28.3 million in cash to UQM. The terms of the Agreement were unanimously approved by the boards of directors of both companies. Our shareholders will continue to hold their shares in UQM, and UQM stock will continue to be traded on the NYSE American.

The Agreement is subject to usual and customary closing conditions, and closing of the second ~~quarter,~~stage will require approval by our shareholders representing a majority of UQM’s voting shares. Closing is expected to occur as soon as possible following shareholders’ approval and receipt of approval from the Committee on Foreign Investment in the United States (“CFIUS”) and the required Chinese regulatory authorities. We expect the closing will occur in December 2017.

As part of the Agreement, we ~~signed an extension~~have agreed that following the closing, CNHTC will have the right to nominate up to three of eight total directors to our ~~long-term supply agreement~~board of directors with ~~our customer Proterra~~®one CNHTC representative expected to ~~support Proterra’s growth demands for electric transit buses. UQM~~be elected as the Chairman of the Board.

CNHTC is the ~~primary supplier~~parent company of Sinotruk (Hong Kong) Limited (“Sinotruk”), a leading heavy-duty commercial vehicle manufacturer in China and one of the largest commercial vehicle groups in the world. In addition to heavy and light-duty commercial trucks and buses, they also manufacture key parts and components such as engines, cabins, axles, steel frames, and gearboxes. In Sinotruk’s annual report for the year ended December 31, 2016, Sinotruk reported audited revenues from these vehicles, parts, and components of US$4.9 billion. They also reported shipping over 172,000 commercial vehicles and over 106,000 engines. Sinotruk has over 25,000 employees.

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After the closing of the Agreement, we intend to form a joint venture with CNHTC for the manufacture and sales of electric propulsion systems in China. We expect Sinotruk to ~~Proterra. The extension reflects~~be a significant purchaser of electric drive trains from the ~~increased demand in the US marketplace~~JV for ~~the Proterra buses~~Sinotruk’s commercial vehicles and ~~the expected increased production volume of the UQM PowerPhase HD® systems.~~

~~Also during the quarter, we announced that we had secured global commercial customers as early adopters of our new full drivetrain solution, the PowerPhase~~®~~DT. These early adopters include Hybrid Kinetic Group, Wuzhoulong Motors and ITL for a Yangtse full-size bus in China and ADOMANI in the U.S. These~~other customers will ~~work in close collaboration with UQM, and suppliers Pi Innovo and Eaton, to develop heavy-duty commercial and transit all-electric vehicles, enabling them to rapidly deploy vehicles to market.~~

Finally, during the second fiscal quarter, we introduced our next generation PowerPhase® motor inverter. With a volume less than 7 liters and mass less than 10 kilograms, the new motor inverter will output 600A and operate at voltages up to 550V. The new inverter is designedbe identified for ~~extremely high reliability and provides 135 kW peak and 100 kW continuously to power light and medium-duty commercial vehicles~~sales as ~~well as high performance passenger vehicles.~~

~~U.S. Government Contract~~

We had a $4.0 million program with the DOE to develop non-rare-earth magnet electric motors for use in electric and hybrid vehicles. The DOE provided $3.0 million of funding for this three-year program and the Company provided $1.0 million of cost-share contribution. The objective of the program was to identify and evaluate magnet materials and technology that can deliver performance comparable to our rare-earth magnet motors, broaden our product portfolio, potentially lower magnet costs and limit our exposure to price and supply concerns associated with rare-earth magnets. At September 30, 2016, we had received reimbursements from the DOE under this program of $3.0 million with receivables of zero. ~~We have been granted a U.S. patent for our electric and hybrid electric vehicle motor design using non-rare earth magnets. This grant expired on September 30, 2016.~~well.

Financial Condition

Cash and cash equivalents at September 30, ~~2016~~2017 were ~~$3,861,947~~$8,035,754 and working capital was ~~$5,182,379,~~$8,816,965, compared with ~~$7,030,230~~$2,100,089 and ~~$8,765,522,~~$3,173,848, respectively, at ~~March~~December 31, 2016. The ~~decrease~~change in cash and working capital is primarily attributable to operating losses ~~which include higher legal~~offset by proceeds from the sale of vacant land during the quarter ended September 30, 2017 and ~~other expenses incurred relating~~the sale of common shares pursuant to the ~~HKG investment agreement.~~ Agreement as discussed above.

~~Table~~Restricted cash at September 30, 2017 was $541,982 versus $0 at December 31, 2016. The restricted cash is for payment of ~~Contents~~

interest on the draws from the line of credit. The current portion is for estimated interest payment due within the next twelve months. The long-term portion is the remaining amount expected to be paid by the end of the term of the line of credit on March 15, 2019.

Accounts receivable ~~increased $2,696~~decreased $529,208 to ~~$484,100~~$634,108 at September 30, ~~2016~~2017 from ~~$481,404~~$1,163,316 at ~~March~~December 31, 2016. The ~~increase~~decrease is primarily due to the mix in customer credit ~~terms during the second quarter this fiscal year versus the fourth quarter last fiscal year.~~terms. Our sales are conducted through acceptance of customer purchase orders, or in some cases, through supply agreements. For international customers and customers without an adequate credit rating or history, our typical terms ~~are~~require irrevocable ~~letter~~letters of credit or cash payment in advance of delivery. For credit qualified customers, our typical terms are net 30 days. As of September 30, ~~2016~~2017 and ~~March~~December 31, 2016, we had no allowance for bad debts.

Costs and estimated earnings on uncompleted contracts ~~was $46,246~~were zero and $29,917 at September 30, 2017 and December 31, 2016, ~~versus $60,296 at March 31, 2016.~~respectively. The decrease was due to ~~timing of billings and~~the completion of ~~certain contracts in process~~a customer contract.

Total inventories increased $939,198 to $2,688,933 at September 30, ~~2016 versus March~~2017 from $1,749,735 at December 31, ~~2016.~~

~~Total inventories increased $38,247 to $9,149,688 at September 30,~~ 2016 reflecting purchases for ~~shipments~~anticipated sales of fuel cell compressor and PP220 PowerPhase HD® systems.

Prepaid expenses and other current assets increased to ~~$286,059~~$292,795 at September 30, ~~2016~~2017 from ~~$272,597~~$259,682 at ~~March~~December 31, 2016, primarily due to ~~prepayments on commercial insurance policies offset.~~ timing of amortization of maintenance contracts.

We invested ~~$2,030~~$8,751 and ~~$17,892~~$46,158 for the acquisition of property and equipment during the quarter and ~~six month period~~nine months ended September 30, ~~2016~~2017, respectively, compared to ~~$10,555~~$2,030 and ~~$57,305~~$102,545 during the comparable ~~quarter and six month period~~periods last ~~fiscal~~ year. We believe that we have sufficient property and equipment in place to meet our production requirements for the foreseeable future.

Patent costs ~~increased $2,570~~decreased $2,461 for the nine months ended September 30, 2017 due to new patent costs offset by amortization. Trademark costs decreased ~~$2,248~~$3,372 for the nine months ended September 30, 2017 due to amortization.

Accounts payable increased ~~$417,654~~$578,875 to ~~$782,495~~$1,388,825 at September 30, ~~2016~~2017 from ~~$364,841~~$809,950 at ~~March~~December 31, 2016, primarily due to the timing of vendor payments and increased ~~legal and other expenses incurred relating to the HKG investment agreement that was signed during the first quarter.~~purchases of inventory.

Other current liabilities increased to ~~$1,135,460~~$1,585,997 at September 30, ~~2016~~2017 from ~~$985,435~~$1,318,941 at ~~March~~December 31, 2016. The increase is primarily attributable to an increase in unearned revenue ~~and accrued warranty costs~~ offset by ~~lower levels~~a decrease in accrued executive compensation.

Billings in excess of ~~accrued payroll~~costs and ~~associated benefits.~~ estimated earnings on engineering services contracts were $25,378 and zero at September 30, 2017 and December 31, 2016, respectively. The increase was due to timing of billings on the conclusion of a customer contract.

Long-term debt net of deferred financing costs increased $3,110,123 during the nine months ended September 30, 2017 due to borrowings on a bank line of credit secured on March 15, 2017. For additional information, see Note 9 of the Consolidated Condensed Financial Statements.

Other long-term liabilities decreased $15,000 to $126,667 at September 30, 2017 from $141,667 at December 31, 2016 due to amortization of a license fee received from a customer under a ten-year cooperation agreement.

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Common stock and additional paid-in capital were ~~$485,033~~$540,353 and ~~$128,363,917,~~$133,767,272, respectively, at September 30, ~~2016~~2017 compared to ~~$483,303~~$485,193 and ~~$128,103,861~~$128,409,933 at ~~March~~December 31, 2016. The increases in common stock and additional paid-in capital were primarily attributable to the issuance of common stock under the Agreement with CNHTC, and the periodic expensing of non-cash share-based payments associated with option and stock grants under our equity compensation ~~plans and the issuance of shares under the Employee Stock Purchase Plan.~~plans.

Results of Operations

Quarter Ended September 30, ~~2016~~2017

Revenue

Product sales revenue for the current quarter ~~decreased~~increased to ~~$728,921~~$2,752,554 versus ~~$1,618,666~~$728,921 for the comparable quarter last ~~fiscal~~ year, reflecting ~~decreased~~increased shipments ~~primarily~~ of ~~fuel cell motor~~PowerPhase Pro® 135 systems, ~~and some reduction of~~ PowerPhase HD® propulsion systems and ~~PowerPhase Pro~~® ~~propulsion systems.~~fuel cell compressor systems offset partially by decreased shipments of auxiliary motors.

Revenue from contract services ~~increased to $292,204 at~~was zero for the quarter ended September 30, ~~2016~~2017 versus ~~$116,144~~$292,204 for the comparable quarter last year. The ~~increase~~decrease is ~~primarily~~ due to ~~higher billings for our~~a Department of Energy grant program which expired as of September 30, ~~2016.~~2016 and no revenue from new contracts.

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Gross Profit Margin

~~Gross~~Total gross profit ~~margins~~margin for the quarter ended September 30, ~~2016~~2017 increased to ~~24.0~~46.6 percent compared to ~~20.1~~24.0 percent for the quarter ended September 30, ~~2015.~~2016. Gross profit margin on product sales for the ~~second~~ quarter this year increased to ~~27.9~~46.6 percent compared to ~~20.3~~27.9 percent for the ~~second~~same quarter last year primarily due to ~~a change in overhead absorption.~~increased sales of fuel cell compressor systems which generated higher gross profit margins than electric propulsion systems. Gross profit margin on contract services ~~decreased to 14.0~~was zero percent for the ~~second~~ quarter this ~~fiscal~~ year compared to ~~17.3~~14.0 percent for the quarter ended September 30, ~~2015, resulting from a change~~2016, as there was no contract services revenue in the ~~mix of contracts in process during the quarter ended September 30, 2016 versus the comparable quarter last year.~~ quarter.

Costs and Expenses

Research and development expenditures for the quarter ended September 30, ~~2016~~2017 decreased to ~~$882,090~~$403,273 compared to ~~$912,395~~$882,090 for the quarter ended September 30, ~~2015.~~2016. The decrease is related to ~~a reduction of payroll~~fewer headcount and ~~related expenses.~~engineering resources allocated to supporting business development efforts.

Selling, general and administrative expenses for the quarter ended September 30, 2017 was $1,983,450 compared to $1,738,439 for the same quarter last year. The increase is primarily attributable to legal fees, business development costs, and expenses pertaining to our UQM Asia operations, in the current quarter compared to the same period last year.

Other income and (expenses)

Other income and expense for the quarter ended September 30, ~~2016~~2017 was ~~$1,738,439~~$562,102 compared to ~~$1,855,214~~$7,763 for the same quarter last year. The ~~decrease~~increase is primarily attributable to ~~reduction~~the gain on the sale of vacant land in ~~payroll and associated benefits, offset by higher legal and other expenses incurred relating to~~ the ~~HKG investment agreement that was signed during the first~~current quarter.

Net Loss

As a result, net loss for the quarter ended September 30, ~~2016~~2017 was ~~$2,368,245~~$543,401, or ~~$0.05~~$0.01 per common share, compared to a net loss of ~~$2,409,047,~~2,368,245, or ~~$0.06~~$0.05 per common share, for the comparable quarter last year.

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Nine Months Ended September 30, ~~2016~~2017

Revenue

Product sales revenue for the ~~six~~nine months ~~decreased~~increased to ~~$1,902,182~~$5,169,479 versus ~~$2,249,332~~$3,120,979 for the comparable period last ~~fiscal~~ year, reflecting ~~decreased~~increased shipments of PowerPhase ~~Pro~~HD® propulsion systems and fuel cell compressor systems offset by decreased shipments of auxiliary motor and PowerPhase Pro® 135 systems.

Revenue from contract services ~~increased~~decreased to ~~$554,024 at~~$387,075 for the nine months ended September 30, ~~2016~~2017 versus ~~$226,007~~$839,517 for the comparable period last year. The ~~increase~~decrease is primarily due to ~~higher billings for our~~a Department of Energy grant program which expired as of September 30, ~~2016.~~2016 and lower revenue from new contracts.

Gross Profit Margin

~~Gross~~Total gross profit ~~margins~~margin for the ~~quarter~~nine months ended September 30, ~~2016~~2017 increased to ~~27.8~~41.6 percent compared to ~~18.1~~27.1 percent for the ~~comparable six~~nine month period last ~~fiscal~~ year. Gross profit margin on product sales for the ~~six month period~~nine months ended September 30, ~~2016~~2017 increased to ~~32.5~~40.3 percent compared to ~~17.0~~32.9 percent for the ~~comparable six~~nine month period last ~~fiscal~~ year primarily due to a change in product ~~mix and overhead.~~mix. Gross profit margin on contract services ~~decreased~~increased to ~~11.9~~58.3 percent for the ~~six month period~~nine months ended September 30, 2017 compared to ~~28.8~~5.7 percent for the ~~comparable six month period~~nine months last ~~fiscal~~ year, resulting from a change in the mix of contracts in process during the ~~period~~nine months ended September 30, ~~2016~~2017 versus the comparable ~~period~~nine months last year.

Costs and Expenses

Research and development expenditures for the ~~six~~nine months ended September 30, ~~2016~~2017 decreased to ~~$1,601,008~~$1,591,520 compared to ~~$2,000,875~~$2,285,354 for the ~~same period last year.~~nine months ended September 30, 2016. The decrease is related to ~~a reduction of payroll~~fewer headcount and ~~related expenses.~~engineering resources allocated to supporting business development efforts.

Selling, general and administrative expense net of recovery of impaired assets for the ~~six~~nine months ended September 30, 2017 was $4,757,571 compared to $4,070,178 for the nine month period last year. The change is primarily attributable to expenses pertaining to our UQM Asia operations, and higher business development costs, partially offset by a decrease in consulting, legal, and deferred executive compensation expenses in the current year. In the nine months ended September 30, 2016, we recovered $585,800 in connection with a vendor settlement.

Other income and (expenses)

Other income and expense for the nine months ended September 30, 2017 was ~~$3,423,084~~$542,327 compared to ~~$3,100,588~~$27,760 for the same period last year. The increase is primarily attributable to ~~higher legal and other expenses~~

~~Table~~the gain on the sale of ~~Contents~~

~~incurred relating to~~vacant land in the ~~HKG investment agreement that was signed during the first quarter offset by lower payroll and associated benefits.~~current nine month period.

Net Loss

As a result, net loss for the ~~six months~~nine month period ended September 30, ~~2016~~2017 was ~~$4,322,275,~~$3,497,648, or ~~$0.09~~$0.07 per common share, compared to a net loss of ~~$4,633,298,~~$5,253,193, or ~~$0.12~~$0.11 per common share, for the comparable nine month period last year.

Liquidity and Capital Resources

Our cash balances and liquidity throughout the quarter ended September 30, ~~2016~~2017 were adequate to meet operating needs. At September 30, ~~2016,~~2017, we had working capital of ~~$5,182,379~~$8,816,965 compared to ~~$8,765,522~~$3,173,848 at ~~March~~December 31, 2016. The ~~decrease~~increase in working capital is primarily attributable to ~~operating losses.~~a higher cash balance from the sale of land and common stock, and increased inventory purchases offset by higher accounts payable due to the timing of the vendor payments.

For the ~~six month period~~nine months ended September 30, ~~2016,~~2017, net cash used in operating activities was ~~$3,149,536~~$3,098,339 compared to net cash used in operating activities of ~~$2,430,817~~$4,668,774 for the comparable period last ~~fiscal~~ year. The ~~primary reason for this increase~~change in ~~the use of~~ cash ~~this quarter~~used in operating activities is that in the comparable period last year, we received life insurance proceeds of $855,000. In addition, accounts receivable decreased in the quarter ended September 30, 2016 versus the prior year quarter. Thisdue to higher inventory purchases, which was offset by ~~lower operating losses~~a decrease in ~~the current quarter.~~accounts receivable and settlement of vendor liabilities.

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Net cash ~~used in~~provided by investing activities for the ~~six month period of this fiscal year~~nine months ended September 30, 2017 was ~~$30,748~~$1,333,379 compared to net cash used in investing activities of ~~$66,933~~$117,743 for the comparable ~~six month period~~nine months last ~~fiscal~~ year. The ~~decrease~~increase for the ~~six~~nine months ended September 30, ~~2016~~2017 was primarily due to ~~reduction in expenditures for~~ the ~~acquisition~~sale of ~~property and equipment.~~vacant land as previously discussed.

Net cash provided by financing activities for the ~~six month period of this fiscal year~~nine months ended September 30, 2017 was ~~$12,001~~$8,242,607 compared to net cash used in financing activities of ~~$69,466~~$40,204 for the comparable period last ~~fiscal~~ year. The ~~decrease in cash provided was~~change is primarily ~~attributable~~due to borrowings on a ~~decrease in cash paid for employee tax withholdings in exchange for return~~bank line of credit and the sale of common stock ~~under~~associated pursuant to the ~~employee stock purchase plan.~~ Agreement executed during the nine months ended September 30, 2017.

We expect to fund our operations over the next year from existing cash and cash equivalent balances, cash generated from operations, and bank financing resources. On March 15, 2017, the ~~reduction~~Company entered into a non-revolving line of ~~inventories,~~credit with a lender for $5.6 million. The interest rate is variable based upon the one month LIBOR rate plus 4.0% per annum on the outstanding balance. The non-revolving line of credit will expire on March 15, 2019 and the ~~anticipated proceeds upon~~amounts repaid during the ~~successful closing~~term of the ~~HKG investment agreement.~~loan may not be re-borrowed. At the expiry date, all outstanding principal and interest are due. For additional information, see Note 9 of the Consolidated Condensed Financial Statements. Although we expect to manage our operations and working capital requirements to minimize the future level of operating losses and working capital usage, our working capital requirements may increase in the future. If customer demand accelerates substantially, our working capital requirements may also increase substantially.

If our existing financial resources are not sufficient to execute our business plan, we may issue equity or debt securities in the future, although we cannot assure that we will be able to secure additional capital should it be required to implement our current business plan. In the event financing or equity capital to fund future growth is not available on terms acceptable to us, or at all, we will modify our strategy to align our operations with then available financial resources. Based on our current level of operations, current cash balance and bank credit availability, we believe we have sufficient ~~cash and cash equivalents with the completion of the offering~~liquidity to fund our operations for at least the next twelve months.

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Contractual Obligations

The following table presents information about our contractual obligations and commitments as of September 30, ~~2016:~~2017:

Payments due by Period




Less Than





More than

Total

1 Year

2 - 3 Years

4 - 5 Years

5 Years

Purchase obligations

$
108,083

$
108,083

$
-

$
-

$
-

Executive employment agreements (1)

225,555

225,555

-

-

-

Total

$
333,638

$
333,638

$
—

$
—

$
—


			Payments due by Period
			Less Than						More than
	Total		1 Year		1 - 3 Years		3 - 5 Years		5 Years
Purchase obligations (1)	$	796,286	$	796,286	$	—	$	—	$	—

(1)

Includes ~~retention bonus payable under executive employment agreements if our officers remain employees~~procurement of ~~UQM continuously through June 30, 2017, but not annual cash compensation under~~inventory to fulfill the ~~agreements. This is reflected in other long-term liabilities in the accompanying Condensed Consolidated Balance Sheets.~~backlog for products.

Off-Balance Sheet Arrangements

None.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, assumptions and estimates that affect the dollar values reported in the consolidated condensed financial statements and accompanying notes. Note 1 to the ~~consolidated financial statements~~Consolidated Condensed Financial Statements contained in our ~~Annual~~Transition Report on Form ~~10-K~~10-KT for the ~~fiscal year~~nine-month transition period ended ~~March~~December 31, 2016 describes the significant accounting policies and methods used in the preparation of the consolidated financial statements. There have been no material changes in any of our critical accounting policies during the ~~six~~nine months ended September 30, ~~2016.~~ 2017.

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ITEM 3. 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. We do not use financial instruments to any degree to manage these risks and do not hold or issue financial instruments for trading purposes. All of our product sales, and related receivables are payable in U.S. dollars.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed with the ~~Securities and Exchange Commission (“SEC”)~~SEC) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our ~~Interim~~ Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure.

As of September 30, ~~2016,~~2017, we performed an evaluation under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the U.S. Securities and Exchange Act of ~~1934)~~1934 (the “Exchange Act”)). Based on that evaluation, our management, including the CEO and CFO, concluded that our disclosure controls and procedures were effective as of September 30, ~~2016.~~2017.

There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended September 30, ~~2016~~2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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~~PART II-OTHER~~Part II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Litigation

ITEM 1A. RISK FACTORS

Risk Factors

Our business is subject to a number of risks and uncertainties, many of which are outside of our control. Except as indicated below, there have been no material changes in the risk factors contained in our ~~Annual~~Transition Report on Form ~~10-K~~10-KT for the ~~fiscal year~~transitional nine-month period ended ~~March~~December 31, 2016:

~~We may not receive shareholder approval and U.S. governmental approval that is required for the completion of Hybrid Kinetic Group’s investment in the Company.~~

A number of conditions must be satisfied in order for Hybrid Kinetic Group’s $48 million investment in the Company to be completed. The conditions include approval by the Company’s shareholders holding two-thirds of the Company’s outstanding shares of common stock to amend UQM’s articles of incorporation to increase the number of authorized shares in order to have sufficient shares to permit Hybrid Kinetic Group’s investment. While UQM’s board of directors believes that the proposed investment by Hybrid Kinetic Group is in the best interest of UQM and its shareholders, there can be no assurance that the Company will be able to achieve the required shareholder approval to permit the transaction to be completed. Because the vote requirement is based on the number of shares outstanding rather than the shares that are voted, if a shareholder does not vote the shareholders’ shares it is treated the same as a vote against the amendment of the articles. In addition, because Hybrid Kinetic Group is a Bermuda corporation listed on the Hong Kong stock exchange, the investment must satisfy the approval requirements of the Committee on Foreign Investment in the United States (“CFIUS”). While the Company believes CFIUS approval will be timely granted for the transaction to close, we may not receive such approval or such approval may contain a condition that would be unacceptable to the parties If Hybrid Kinetic Group’s investment in the Company is not completed, the Company may not have sufficient funds to continue operations until a new financing arrangement can be obtained or it may not be able to secure additional financing on as favorable of terms as that under the HKG investment agreement.

We have incurred significant losses and may continue to do so.

We have incurred significant net losses as shown in the following tables:

Quarter Ended

Fiscal Year Ended March 31,


September 30, 2016

2016

2015

2014

Net loss

$
2,368,245

$
6,938,351

$
5,988,530

$
2,773,244


	Nine months ended September 30,		Nine months ended December 31,		Year ended March 31,
	2017		2016		2016

Net loss	$	3,497,648	$	12,978,261	$	6,938,351

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As of September 30, ~~2016~~2017 and ~~March~~December 31, 2016, we had accumulated deficits of ~~$111,197,701~~$123,390,582 and ~~$106,875,426,~~$119,892,934, respectively.

In the future, we plan to make additional investments in product development, facilities and equipment and incur other costs related to the commercialization of our products. As a result, we expect to continue to incur net losses for the foreseeable future.

~~Table of Contents~~

Our operating losses, anticipated capital expenditures and working capital requirements in the longer term may exceed our current cash balances.

Our net loss for the quarter ended September 30, ~~2016~~2017 was ~~$2,368,245~~$543,401 versus a net loss for the comparable quarter last ~~fiscal~~ year of ~~$2,409,047.~~$2,368,245. Our net loss for the ~~fiscal year~~nine-month transition period ended ~~March~~December 31, 2016 was ~~$6,938,351 versus a net loss for the fiscal years ended March 31, 2015 and 2014 of $5,988,530 and $2,773,244 respectively.~~$13,017,508. At September 30, ~~2016,~~2017, our cash and cash equivalents totaled ~~$3,861,947.~~$8,035,754. We expect our losses to continue for the foreseeable future. Our existing cash resources ~~together with cash generated from reductions in~~and availability under our ~~inventories~~bank line of ~~PowerPhase Pro~~® ~~propulsion systems,~~credit are expected to be sufficient to complete our business plan for at least the next twelve months. Should those resources be insufficient, we may need to secure additional debt or equity funding, which may not be available on terms acceptable to us, if at all.

Our revenue is highly concentrated among a small number of customers.

AWe have historically derived a large percentage of our revenue ~~is typically derived~~ from a small number of customers, and we expect this trend to continue.

Our customer arrangements generally ~~are~~have been non-exclusive, have no long-term volume commitments and are often done on a purchase order basis. Further, although we entered into a 10-year exclusive supply agreement with ITL in October 2015, the amount of revenue we will generate pursuant to the ITL Agreement is uncertain. We cannot be certain that customers that have accounted for significant revenue in past periods will continue to purchase our products. Accordingly, our revenue and results of operations may vary substantially from period to period. We are also subject to credit risk associated with the concentration of our accounts receivable from our customers. If one or more of our significant customers were to cease doing business with us, significantly reduce or delay its purchases from us or fail to pay us on a timely basis, our business, financial condition and results of operations could be materially adversely affected.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

(a)

Exhibits


10.1		Stock Purchase Agreement, dated as of August 25, 2017, among UQM Technologies, Inc., China National Heavy Duty Truck Group Co., Ltd. and Sinotruk (BVI) Limited. Reference is made to Exhibit 10.1 to our Current Report on Form 8-K, filed on August 30, 2017 (No. 1-10869), which is incorporated herein by reference.

10.2		Registration Rights Agreement, dated September 25, 2017, between UQM Technologies, Inc. and Sinotruk (BVI) Limited. Reference is made to Exhibit 10.1 to our Current Report on Form 8-K, filed on September 28, 2017 (No. 1-10869), which is incorporated herein by reference.

10.3		First Amendment to Employment Agreement, dated as of September 25, 2017, between UQM Technologies, Inc. and Joseph R. Mitchell. Reference is made to Exhibit 10.1 to our Current Report on Form 8-K, filed on September 29, 2017 (No. 1-10869), which is incorporated herein by reference.

31.1		Certification of Chief Executive Officer

31.2		Certification of Chief Financial Officer

32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

~~31.1Certification of Chief Executive Officer~~

~~31.2Certification of Chief Financial Officer~~

~~32.1Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~

~~101.INSXBRL Instance Document~~

~~101.SCHXBRL Taxonomy Extension Schema Document~~

~~101.CALXBRL Taxonomy Extension Calculation Linkbase Document~~

~~101.LABXBRL Taxonomy Extension Label Linkbase Document~~

~~101.PREXBRL Taxonomy Extension Presentation Linkbase Document~~

~~101.DEFXBRL Taxonomy Extension Definition Linkbase Document~~

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		UQM Technologies, Inc.
		Registrant
Date: November ~~10, 2016~~2, 2017
	/s/	~~David~~DAVID I. ~~Rosenthal~~ROSENTHAL
		David I. Rosenthal
		Treasurer and Chief Financial Officer
		(Duly Authorized Officer, Principal Financial and Accounting Officer)

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	Six Months Ended September 30, 2016			Six Months Ended September 30, 2015
		Weighted-Average			Weighted-Average
	Shares Under	Grant Date		Shares Under	Grant Date
	Contract	Fair Value		Contract	Fair Value
Unvested at April 1	88,214	$	1.36	432,039	$	1.26
Granted	160,389	$	0.68	23,600	$	0.66
Vested	(144,982)	$	0.98	(361,237)	$	1.22
Forfeited	(1,573)	$	1.25	-	$	-
Unvested at September 30	102,048	$	0.84	94,402	$	1.35


	Quarter Ended		Fiscal Year Ended March 31,
	September 30, 2016		2016		2015		2014

Net loss	$	2,368,245	$	6,938,351	$	5,988,530	$	2,773,244