Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

UQM Technologies (NYSEMKT:UQM)

Q3 2013 Earnings Call

January 31, 2013 4:30 pm ET

Executives

Barry Hutton

Eric R. Ridenour - Chief Executive Officer, President and Director

Donald A. French - Chief Financial Officer, Principal Accounting Officer, Treasurer, Secretary and Director

Analysts

Rob Young - Wm Smith & Co.

Randall Hough

Larry Southam

Irving Reifman

Robert Thurston Hoffman - Candlewood Capital Management, LLC

Operator

Good afternoon, ladies and gentlemen. Welcome to the UQM Fiscal Year 2013 Third Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded today, January 31, 2013. It is now my pleasure to introduce our host, Mr. Eric Ridenour, President and CEO of UQM Technologies. Please go ahead, Mr. Ridenour.

Barry Hutton

To review the forward-looking statements. This conference call may contain 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 include statements regarding our plans, beliefs or current expectations, including those plans, beliefs and current expectations of our officers and directors with respect to, among other things, future orders to be received, future shipments and payments under our supply agreement with CODA, future financial results and the continued growth of the electric powered vehicle industry. Important risk factors that could cause actual results to differ from those contained in the forward-looking statements are contained in our Form 10-Q filed today with the SEC and available through our website on www.uqm.com or at www.sec.gov.

Now I'd like to turn the call over to UQM Technologies President and CEO, Eric Ridenour.

Eric R. Ridenour

Thanks, Barry, and welcome to the fiscal year 2013 third quarter conference call. Total revenue for the quarter was down 29% year-over-year to $1.9 million. This is due principally to no shipments to CODA in the quarter versus the $1.5 million we shipped in the same quarter last year. On a positive note, sales to our existing customers increased 52% versus last year, selling progress on our strategy to grow with these customers. Net loss for the quarter was $4.6 million or $0.12 per share, including a charge of $3.8 million or $0.10 per share versus a net loss of $850,000 or $0.03 per share for the same quarter last year. Don will provide more details on the financials later.

Let me begin with CODA. We continue to be in regular communication with the CODA leadership team, and we remain hopeful that they will be successful in their fund raising activities and will restart production soon. However, the passing of another quarter without payments and the recent CODA announcement that they were furloughing employees has created substantial uncertainty for us. As a result, we made the decision to record a charge of $3.8 million during the quarter, which Don will detail later. In the event CODA is unable to secure funding, we may need to record additional charges in future periods, we believe that these would fall in the range of $1 million to $2 million.

The good news is that the new PowerPhase Pro system that we're shipping to CODA is rightsized for many passenger, medium-duty truck and marine applications. We've already sold some of the units out of the CODA inventory to other customers, and are working aggressively to develop additional customers for the product to work down the inventory. If needed, we believe we can also utilize certain components from this inventory in our other products as well. These additional sales will allow us to monetize the inventory and improve our cash position over time.

We're also taking further steps to proactively manage our cash position and lower our expenses in light of the lack of news from CODA. These actions include a staff reduction of approximately 20% announced today and other cost reduction initiatives to improve our operating efficiency. We've also reconfigured our high volume production line to allow it to build either the PowerPhase Pro used for CODA or the PowerPhase HD used for our commercial customers. This provides needed capacity for the growth of the HD without requiring an all-new line and will save us $2 million to $3 million in future CapEx.

This should ensure that we can continue to aggressively pursue new customers, grow with our current customers and develop new products and segments for the future. We expect these actions to substantially reduce our cost base and lower our cash burn rate by as much as 1/3.

On a more positive note, we have made steady progress building and shipping products for our other customers and growing our base business as our customers begin their rollouts. First, shipments to EVI hit their stride this quarter, adding nearly $0.75 million to our revenue. Their first units were used by UPS for internal testing and confirmation, and these units are being built into completed trucks by EVI and sent to UPS. Having successfully completed that phase, the trucks are now in field service, collecting valuable data. The early indications are very positive. UPS will use the results of this pilot program to determine the applicability of EVs in its broader fleet, and guide its future EV rollout plan.

Next, Proterra recently announced an additional capital infusion of $23 million. We shipped units to Proterra in third quarter and will increase shipments in subsequent quarters. Proterra is currently in discussions with or has signed contracts with municipalities in California, Florida, Massachusetts, Texas and South Carolina for the potential sales of an additional 70 electric buses. We also shipped units to Boulder EV for their all electric delivery van in the third quarter and will ship additional units ongoing.

We continue to see new applications for our products in the Marine market, with both all electric and hybrid powertrains. ReGen Nautic displayed 5 different products with UQM systems in them at the Paris boat show. And we just jointly announced the new all electric outboard motor with UQM inside at the Dusseldorf boat show. We'll continue to look for additional opportunities in this new and exciting market for us.

Turning to China. The team just got back from another very busy trip, which included next phase meetings with the company that we signed the MOU with, along with continuing discussions with several other companies that are also interested in working with us. These meetings have progressed and become extremely productive as they move into detailed discussions with the various options for entering the marketplace, specific product specs, timing and customer requirements.

We also met with several new companies in China to begin the process of assessing product sets, market potential and business opportunities. We believe that we now had narrowed the list of potential partners to those with the right combination of technical expertise, product introduction capability, market segment penetration and the political savvy to allow us to realize the sales potential for UQM products in China.

Next, the company NEVS, which is a successor to Saab, also announced a long-term partnership with the city of Quingdao. Quingdao plans to initially invest CNY 2 billion or a little over $300 million, obtaining a 22% ownership share of NEVS through a directed share issue. Quingdao also plans to invest in a plant in China with an ultimate capacity of 400,000 units per year. NEVS has stated that it's looking to restart production on the current IC-based Saabs yet this year, with electric vehicles beginning in 2014. Because of our extensive development activities with Saab prior, and a ready inventory of motors and controllers, we believe we provide one of the quickest paths for NEVS to get EVs into production.

And finally, as I'm sure you all saw, our long time CFO Don French is planning to retire at the end of July. During his 25 years at UQM, Don has been instrumental in getting UQM to the stage of production readiness and product excellence. He has been a stalwart in managing spending levels in our financial position, to enable the healthy balance sheet we have today. Don will continue as an active member of management until his retirement, and will be an integral part of the recruiting process to ensure a seamless transition.

I'll turn it over to Don, who will discuss the financials.

Donald A. French

Thanks, Eric, and good afternoon, everybody. Taking a look at the third quarter results, total revenue for the third quarter was $1.9 million and did not include any revenue from CODA, down from last year's level of $2.7 million. Excluding CODA shipments from last year's revenue, total revenue increased 52% year-over-year. This increase was driven by an acceleration in propulsion system deliveries to Electric Vehicles International to $735,000 as deliveries by EVI of all electric delivery vehicles to UPS grew. Net loss for the quarter was $4,555,000 or $0.12 per common share, including the charge of $3.8 million or $0.10 per common share. The net loss for the comparable quarter last year was $846,000 or $0.03 per common share.

As Eric touched on briefly, as CODA has not yet been able to secure financing after another quarter, and announced an employee layoff and a subsequent employee furlough, we made the decision to reserve all of the accounts receivable currently outstanding with CODA. This resulted in a charge of $3.8 million this quarter. In the event CODA is unable to secure funding to allow them to resume production, we may record additional charges in future periods associated with settling outstanding purchase obligations with some of our suppliers. We estimate the potential amount of these settlements, in the aggregate, to be in the range of $1 million to $2 million.

At December 31, 2012, we had inventory of CODA's designated propulsion systems of $8.4 million. Of this, we expect to both drawdown certain components of raw materials that are usable in other products and to sell these systems to other customers, which would increase our cash. We have also implemented a number of internal actions to improve our operating efficiency, reduce losses and conserve cash. And to ensure that we can continue to aggressively pursue new customers, grow our current customers and develop new products. These actions include a staff reduction of approximately 20%, primarily in manufacturing and administrative positions that were added as part of the ramp-up, and are planning an execution for CODA, and other cost-reduction initiatives that will significantly reduce our cost base in future periods.

Turning back to quarterly results. Gross profit margins on contract services were 48.4%. However, margins on product sales were 9.6%, weighed down by changes in product mix and the normal startup cost and initial production builds of our PowerPhase HD 220 systems. We expect these margins to expand going forward, as we move beyond initial unit builds.

Production engineering expense before DOE reimbursement decreased to $1 million this quarter versus $1.2 million in the same quarter last year, when we had higher-than-normal engineering activities as we began the production launch for CODA.

Reimbursements of product qualification and testing cost under the DOE grant during the third quarter were $1.4 million versus $0.9 million for the comparable quarter last fiscal year. The increase in reimbursements during the quarter is primarily due to improved billing rate realization for the current fiscal year versus estimates at the beginning of the fiscal year.

Selling, general and administrative expense for the third quarter increased to $1.4 million versus $1.2 million a year ago. The increase resulted from higher business development, marketing and travel expenses associated with our strategy to enter the China market and expand our customer base worldwide.

Capital expenditures for property and equipment before reimbursements from the DOE grant were $54,000 for the quarter versus $315,000 for the comparable quarter last year. Capital expenditures over the near-term are not expected to be significant, principally due to modifications we are making to our high-volume production line, to convert it to a multiple product line, negating the need for $2 million to $3 million in CapEx for a separate PowerPhase HD production line.

Taking a look at the balance sheet, the company continues to be in a strong financial position and remains well-capitalized. At the end of the quarter, we had cash of $5.9 million and working capital of $18.4 million. Inventories decreased sequentially by $2 million from their September 30 level and we expect inventory levels to continue to decline as we monetize the CODA inventory through sales to other customers and raw material drawdowns discussed earlier.

We believe our current cash balances will be sufficient to fund our operations for more than 2 years. The expected proceeds from the sale of our old facility in Frederick will add an additional year of runway. In addition to our foreign liquidity, our expenditures on future development activities and equipment will be aided significantly by our $45 million DOE grant, of which approximately $25 million remains available to fund activities through January of 2015.

Just a few words on my planned retirement. Over my career with the company, I've had the opportunity to work with a group of exceptionally talented and capable people on potentially game-changing technology. In addition to developing valued friendships with many of you, I'm very fortunate to be in a position to retire and together with my wife, Connie, plan on spending more time growing our family's farming operation, traveling and skiing. I'm honored to have had the opportunity to work for this company, and I greatly appreciate the support I've received from all of you over the years.

At this point, I'd like to turn the call back to the operator for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is from the line of Rob Young with William Smith.

Rob Young - Wm Smith & Co.

Just a couple of questions. I was wondering how sustainable the EVI revenue is. Is that something that you've seen an increase in their original order? Or is that something that, it just mainly hit this time, just -- are you seeing anything there?

Eric R. Ridenour

From the standpoint of the EVI order is, the original order, we're still building through that. And as we mentioned in previous calls, that is a pilot program for UPS. And those are going into a restrict set of their fleet in order to really learn the full capabilities from the standpoint of range performance and other metrics. Once they finish their assessment of that, they'll be looking at the total pool of all vehicles across the U.S. and so our expectation is that at the end of that, we will see additional follow-on orders. At this point, those are still in the future, so we don't know that. Though at this point, we have the current contract and then other items that will come, but the expectations is that we would see then, a follow-on for UPS. But again, we don't have specifics on that yet.

Rob Young - Wm Smith & Co.

Okay. And with the inventory that you're going to transition from CODA to other customers, is there any design time change that you need to factor in, in order to get it to these other customers, or is that pretty much a fairly succinct process?

Eric R. Ridenour

Yes, it has a range of possibilities for a number of people. It's a plug-and-play, and they can utilize it the way it is. There's a few where there might be some modest changes. We're aware of at least one where we've made some modest changes and again, that can be done fairly quickly. We would expect, in all reality for this to take a period of time to go through that, especially in significant numbers because as you know, most start out with a few and then jumping to higher number and then finally, to the more volume number. And so that, we would expect to burn off through a period of time.

Rob Young - Wm Smith & Co.

Okay, is there any difference in pricing between what CODA would be charged to what you'd be able to charge others?

Donald A. French

Well, we think again, pricing we already have has higher pricing for lower volumes. Obviously, we gave volume discounts. So again, we would expect to stay within our pricing models as we look forward over time.

Operator

Our next question is from the line of Randy Hough with ProEquities.

Randall Hough

Don, first, a comment to you. I think you may have made an error here in your early retirement, given your status with the company and long contribution and value to the company and the shareholders, you should have put your retirement to a vote. And have you done that, you wouldn't -- as far as I'm concerned, you would have been retiring on the 31st of July.

Donald A. French

All right. I'll keep that in mind.

Randall Hough

Well, rethink that, would you? Now on to a question about the inventory, Don. Did I hear you say that in your remarks that CODA's inventory -- or the inventory attributable to CODA had been reduced by $3 million?

Donald A. French

No. What I had stated in my comments is that the inventories from September 30 through December 31 had gone down by $2 million.

Randall Hough

They were attributed to CODA?

Donald A. French

Well, some of that would have been that inventory, yes.

Randall Hough

Okay. No, what I'm driving at here, if I can follow up, is assuming no drawdown by CODA themselves, for this 100 kW engine inventory, could you give us any feel for what might be skiing on the horizon that could give us an indication to how quickly that inventory might be drawn down by new customers and even in volume production or initial preproduction orders and that sort of thing?

Eric R. Ridenour

Yes, again, this is Eric. On the standpoint of the drawdown, we have people that we're aware of that we've already shipped units to that are testing those. With success we'll start seeing again follow-on orders and again, the kind of follow-up pattern, they'll send us a few for testing and then it's a good handful, and then some significant numbers over that. They have not rolled out that full timing plan, but again I would think that would come, again over a period of time, certainly not a few quarters but potentially even over a year or 2. And then, from the standpoint of the one that we have been talking about that we can mention is, obviously with Saab, is that, that exact system, with a different controller calibration was used with again, a few minor modifications in the Saab vehicle. So as that relationship comes together and we're able to -- as they put their team in place and get to more details, if that were to come to the fore, that would be a fairly quick usage of that exact inventory and then obviously like I said, there's a few others we're talking to, but at the same time, we are talking to new people. This period of time, it's not something, again, nobody ramps up instantaneously. We had done that over a number of years with CODA, before they had their funding issues. And so we would expect a similar kind of ramp-up for others, looking forward.

Operator

Our next question is from the line of Thurman Willis [ph], a private investor.

Unknown Attendee

Don, I remember walking in there about 15 years ago and seeing a little blackboard with stock trading 100 shares a day and trading at about $2.50. So Lord, tremendous strides have been made with your expertise, and I'm sorry that some of the potential promises we have received from other countries -- companies that we relied on haven't come to pass. So I'm really going to miss talking to you, miss seeing you, because you're definitely one of the most qualified CFOs I know. So filling your shoes are going to be hard for you to do, Eric.

Eric R. Ridenour

Yes, I appreciate that.

Donald A. French

Thanks for that complement.

Unknown Attendee

The comment I wanted to talk about was China, was an article, "China Motorizes Alternative Energy Sector." I had no idea that China is ahead of us in the United States in the electric hybrid field. And I read in this article where they did 400 buses rolled off between 2009 and last year, 1,407 hybrid energy gas buses. The month later, the Ministry of Finance was giving credits, anywhere from $643 to $696,000 on buses, and the fact that there are -- just tremendous amount of buses in China, which I think is a positive. I'm sorry that CODA has strung us along. I think they betrayed us, and -- but anyway, I want go on to talk about China and talk about boots on the ground in China. It appears, we come out with articles that we're the lead this, we're the lead that, we're the lead this, it appears we lead in everything, from the best electric motor, even talking about Tesla to somewhat, whether it be boats, motorcycles, wheelchairs, cars. We seem to lead everywhere, but we just seem to get screwed, excuse the oppression, every time somebody comes and wants to do something with us. I strongly suggest that CODA was going to get ahead of the game and that now they're a year behind the game. I hope we won't even deal with CODA, because I think CODA has sort of taken us to the woodshed. But China seems to just be tremendous, and then with our agreement with a couple of Chinese companies, I just don't understand why it is that other motors, I mean, we had the motor in the taxi that led the Chinese athletes to the Olympic Games. We had the motor that was also in a bus. But yet, we seem to get no business. So something is not matching up somewhere. I know we put a lot of eggs in CODA and had hoped CODA would come through for us, and now CODA is just not there. With some of the other companies we're dealing with, I just don't understand why we're the best, but we can't get in something. Now I understand we're in the Audi and other various companies, and we seem to be, from everything I hear, leading with EDI and the other factors in the bus business, but we can't seem to get a motor with China that could ramp-up very, very quickly.

Eric R. Ridenour

So let's talk about China, Thurman. We just got back from there. The team was there for the last 2 weeks. They're talking to a number of different people. The thing you've read, which is that China is very interested. There certainly are a lot of buses. There's a talk of the potential in the tens of thousands of buses being electrified out to the future. So again, the first few hundred is just that, a start. Again, remember how many different regions and how many different areas are in China, and how many different people are there. That's why the 220 we developed was seen so well in that, as we go over there. A lot of those early buses were done with Chinese motors and sources, one-offs, and they're finding that controller side and all that technology isn't so good. That's where we have the ability to get in, to just about each of those places pretty simply, by just sending a letter saying we'd like to talk. Everyone's very anxious to talk to us. Our brand name is very good over there, and we've been building relationships over there. Again, there's several -- the one we signed, the MOU with, there's another that we've had by an equal amount of time with, it looks very promising, and then there's new ones that we talked to. So again, it takes time. China's about relationships. You don't ever go in to China and just make a deal and you're done, and it happens in a couple of weeks. It is the Chinese way, and so we've been building those relationships. As I mentioned in my comments, we're now into the details, the specific of what we think target costs are going to be, and volumes are going to be, and specific specifications where we do specific performance curves for their specific vehicles and all those things, and they're taking those things into their meetings. Again, we've been there 1/2 a dozen times in the last year, and it takes time. But I think it's very promising and again, with the pollution, the government incentives, $15 billion over the next 5 years, it's going to generate a whole lot of potential for us and that's why we're spending so much time there.

Unknown Attendee

Well, that's great. And Eric, you have not been there that long, but I've heard the same thing for 10 years about every company we dealt with. And CODA's CEO was there for 20 years. And so he knew the Chinese game, Great Wall is a Chinese company. Our PR just doesn't seem to match our execution, that's the reason our stock is at $0.70. That's the people reason stay still disappointed in it. And Don, I know that relative to your retirement, you've got to be frustrated as hell with all of these ups and downs, and so Eric, I just say that you guys should put out more information. The last thing I heard was that the gentleman from CODA was never more excited about getting his $150 million, he'd only raised $43 million, and how in the world he could be so excited is just -- it's baffling to me when he lays off, and then he lays off his entire group, and he can't raise the $100 million. So that tells me --

Operator

We will take the next caller, Robert Brown with Real Securities.

Unknown Analyst

I was just curious whether or not any other supplier has taken an action against CODA. It's been a long time. They obviously misled you, and they owe you this money. And what kind of action are you prepared to take against them to get the money?

Eric R. Ridenour

Well yes, again, the couple of things is, we've taken a charge, it's an allowance against bad debt because of expectations. At this point, again, they still feel like they'll get the funding. We have worked with our General Counsel of all the kinds of options that are available over time, and we've certainly spent some time investigating it. And then basically, with their advice, we're waiting for the appropriate time, if needed, to go after that. This -- the fact that we've taken allowance has no impact on our determination to get the money that we're owed and to do other things. And if necessary, and we will. But again, it's when it's right.

Unknown Analyst

Well, the thing is, and I've told you this before, that CODA has raised over $350 million, and they have a deal already with a Chinese company, and they seem to be, not willing to raise the rest of the money. I think it stands to reason that you can forget about them. However, I think they really screwed you, and I think that you really have to go after them legally, and not just you, us, and I think it really is a dereliction, considering CODA's board and all the people, the big shots that are on it. I think this is a stretch as I think that the action that you, in good faith, shipped them stuff and they didn't pay you. And that's just stealing. And I think that they should be gone against, and I think the board should be gone against their board, which is a lot of very heavy hitters, should be put to task. And I think, at least to get some of my money back, because other suppliers are certainly going to get into the act, it really is annoying that you've been misled this whole time, and you know I've called you many times, and there's no [indiscernible] and I can tell you by looking at their [indiscernible] car or whatever it is, and it doesn't make any sense.

Eric R. Ridenour

[indiscernible] to the point of having to take the action we took today. We'll continue to work with them, hopefully to a success. And if not, then we'll find the appropriate responses, legal and other, as they come up.

Unknown Analyst

The other thing you mentioned, I just want to add, you something about the sale of the other plant, is that in the works or is that a potential?

Eric R. Ridenour

No, we've been active on that. It's been for sale for a period of time. We actually have had some very recent interest, advancing to a stage we're not quite ready to call it done, but we're hoping to get an offer shortly. But again, until we actually see it, but they've gone through several stages. So that has a very real possibility of seeing something in the short-term.

Operator

Our next question's from the line of Larry Southam with My Broker LLC.

Larry Southam

Just wanted to get a little bit more clarification on the -- CODA. I'm not -- how much of the inventory was actually -- is in their hands, not paid for? And how much inventory are you holding that was intended for them, but is now being repurposed?

Eric R. Ridenour

Yes, the amount of inventory we have is $8.4 million, and that here is either as work-in-process or finished goods. I don't have the exact number because of what's in finished cars or what's still in, but it's mostly what the accounts receivable is. So it's essentially that might devalue, is in the inventory there, but I don't have the exact number in front of me.

Larry Southam

Okay. And theirs -- but they're -- are they holding inventory? Or they were basically pulling inventory on a car-to-car basis?

Eric R. Ridenour

Well again, we shipped in anticipation of a build schedule that they had provided for us at the time they were moving and realizing that, and then it stopped because of ocean freight and other things we had, there's a lag factor within all that. But it had the inventory for quite some time. It's not new shipments.

Larry Southam

Okay. I was just curious on whether they have had paid for some product and if they were still holding, or...

Eric R. Ridenour

There were some payments, and then some that are not paid, that's why I said I don't have the exact breakdown in front of me of where they fall in each side.

Larry Southam

Okay, but $8.4 million of motors is -- sounds like a lot of motors.

Eric R. Ridenour

Yes, it is.

Larry Southam

Some place between 500 and a 1,000 I would guess? I did my math right?

Eric R. Ridenour

Well, it's a higher number than that. I don't know the exact number, again, we got the valuation, but I don't have the number, but it's a higher number than that, but obviously if we give out too much data, it tells everyone what our cost positions are.

Larry Southam

Okay. Other question. From time-to-time, you've identified other people you were working with, you've --

Operator

The next question is from the line of Patrick Catard, a private investor.

Unknown Attendee

I was wondering, with this $8.4 million in motors that we have that hasn't been shipped out yet, if we don't find any other customers for that, will that be another write-off that we'll have to incur also?

Eric R. Ridenour

Well, our anticipation is to find customers for it principally, and then there is, as we mentioned, a portion of that inventory that are common with other motors and systems we do. And so therefore, they'll be usable in others. And then we'll look at other kinds of factors beyond that, as we go forward in time. But at this point, our forward expectation is that we'll sell them, that it'll take a period of time to do that.

Unknown Attendee

Do we have an idea, how long that period of time might be?

Eric R. Ridenour

It's not really easy to guess at this point, because again, this is from the standpoint of we had not -- we've been talking to customers, because, obviously, whether CODA's running or not, we have enough capacity to build for all customers. But obviously, as the time has moved on, we've looked more intensely for people from the standpoint of inventory absorption, and so again, we're talking to the beginnings of people and will continue to do that, but until we get further along in those conversations, I can't give an accurate, I'd be just doing a full guess. In a period of time, it's a significant period of time. I'm not going to -- it's not a couple of quarters, and it'll be all better.

Unknown Attendee

I see. And as far as Proterra, has there been any more updates on them as to them putting any more orders in?

Eric R. Ridenour

Yes, they've done, again, we haven't done official, what the numbers is, I used the number that came off of their website of the potential of an additional 70. We know that there's a portion of those that are in hand, and a portion of those that are still yet to be in hand. They did get the additional $23 million in additional funding, and so they look pretty good. They're rolling. Things are moving. They're shipping buses and we expect to see that continue.

Operator

Our next question is from the line of Irving Reifman with Reifman and Altman.

Irving Reifman

I was wondering, some of the companies you've dealt with before, if you could just comment on any current situation for Audi, Eaton, the Hino buses? And with these boat companies, are there any prospects for sales, or are they just demonstrating?

Eric R. Ridenour

We'll go through them Eaton, we continue to sell that DC-to-DC converters for them. And that business continues. For the Hino, we have sold them buses. We're still in conversation with them about additionals going forward. So that one is still alive and going. Audi, we have a guy over there right now, who is working with them on data collection and some of the work on those cars that are in service. They haven't yet built all of them into full vehicles yet. So that will still go on for a period of time, but again, all things are still looking good on that front. Moving forward, I forget, what was the other one you asked?

Irving Reifman

On the boats?

Eric R. Ridenour

Yes, the boats, sorry. They're -- we're having a meeting shortly with ReGen Nautics on the specifics of that. There's a number of them have been shown, some of them, I think have resulted in direct sales. But at this point, we're trying to generate the interest to then go in, and we're really happy whether it's now, as with a number of different companies and they've been quite good and quite productive and reactive into that marketplace, showing them at these different boat shows and getting a lot of interest, so we're going to talk in the next stages of how to best go after that market segment.

Irving Reifman

So do you have any feedback from Audi if they'll go forward with more vehicles?

Eric R. Ridenour

Well, what we know is that they're still building out from the second phase that we talked about last quarter. They're still building those units into full vehicles. We know they're actively testing because their guy's over there right now collecting data off the vehicles, we know they have a huge team all working on it. So again, they've made no decisions, but certainly, the data we do have shows that they're very serious and very forward-looking on this.

Irving Reifman

And it's after the original 60, or they're more than that?

Eric R. Ridenour

Well, we never announced the first number, but it was -- there was an initial number that was a good sized number and then an additional number that's about double that, and that's the total, and it's in the double digits, but they don't allow us to say the specifics.

Operator

Our next question is a follow-up from the line of Randy Hough with ProEquities.

Randall Hough

Eric, let me take you back to CODA for a second. There's some speculation that CODA has pulled back and furloughed as you mentioned, a number of their employees and are still operational. Now we do know that they are in the process of developing this crossover SUV or small SUV with Great Wall. Yet any insights at all that you can comment on with respect to what you believe might be CODA's strategy to find a bridge to when -- since we're talking about a year before the target launch of the vehicle by Great Wall that it -- and with respect to CODA's intention to continue to work go forward with that Great Wall relationship?

Eric R. Ridenour

I learned a long time ago in my career to never speak for another company, and I won't start now. What we can say is obviously CODA's intentions are to continue to do what they've been doing, and the things they've announced, well certainly, I would say that Great Wall is amongst those things and they very much would like to be able to continue. Again, the issue is the current funding issue that they expect to hopefully get past. If they do, then I think all those things will be back on track. But all the particulars in behind are all that, I won't even begin to try and speculate on.

Randall Hough

What you could speculate on this then, if I asked a question this way with respect to Great Wall, should CODA not be successful in bridging the gap and have to fold, there's no reason is there that UQM, since our motors are believed to be, well, I don't know that you've announced it that we actually are in those cars, but if there's an opportunity for us to get that business directly, even apart from CODA, is there not?

Eric R. Ridenour

Yes, I could say I can comment on that and I'll comment in 2 phases. One is, that we are working and have worked a packaging motor into a Great Wall vehicle. We don't know if they're also talking to other people. But certainly, we would expect that Great Wall has made a decision to be in the electric vehicle market someway, and we would expect that, that would continue. And if there was a -- the current plan doesn't work as well as planned or exactly as planned, that they would look at options, and we would certainly try and be part of those discussions. And our intent would be, that if it's appropriate to be part of those discussions, but we'll let that settle out as we see over these next weeks and months on exactly what the next play is. But certainly, we go after every opportunity we see.

Randall Hough

Okay, great. And then last question. Comment, if you will, on -- it's been about 6 months or so since you launched the HD 220. How is that going for applications in the bus and midsize truck markets? Could you give us a general overview of the receptivity of that motor size?

Eric R. Ridenour

Yes, we -- from 2 standpoints. One is from a customer looking at the specifications and reacting, we've got nothing but positive signs. And then in addition, we have now a number of them heading into real production and in vehicles and running tests and accumulating mileage. And those have all also been positive and obviously, we'll continue to do that. So at this point, it looks like we definitely have got a motor in the sweet spot. Stay tuned, because we might have other things coming in the future along that way, that appeals to a broader audience along the way, because we don't sleep and stay where we are. We're always moving forward. So as we've talked to people in the market, we're hearing about other things that might also be desirable and we're working on variance for those people. We're not quite ready to announce, but stay tuned.

Operator

Our next question is from the line of Robert Bassey, a private investor.

Unknown Attendee

I've been with you since Day 1, and I think you're still going to be successful. And I was wondering about military orders, rare earth technology that you're involved in, and battery technology, a brief comment on those.

Eric R. Ridenour

All right, I can talk on the first 2, on the battery, I'm less of an expert, so I'll leave that to the battery guys. But on the military, obviously we've been involved in military for a long time. We are still talking about different potentials. We've had some very recent discussions where there might be some new interest from the military. It's too premature to even talk much more than that. So it's -- we were going for awhile on the JLTV that's is still a program in flux, and we'll still see how that finally shapes out as it gets through with the next couple of phases, the EMD phase. But we have some new initiatives on that thing. So again, we still stay in contact, we still look for those things. From the rare earth, as you know, we're working on a magnet, now you got me saying it, a motor design that doesn't need rare earth magnets to work. It's a whole concept. That's what the deal -- we program that's doing extremely well. We're through the first phase, and now we're heading into the second phase for that program. We gave a presentation within DoE. They were quite pleased with the progress and that continues, certainly rare earth costs are down now. But that doesn't mean that the future won't change, and so what this really gives us is the ability to go in either direction. It's always great to have competition because with competition you get the best possible performance and the best possible prices. And so we'll be flexible both ways, that program is a 3-year program. It'll take some time yet until we get to the physicality phase, but that's coming up. And then finally, production phase, saying what does it take to take it to full production. So that's kind of what's going on that way. Obviously, within the battery field, it's a dynamic field, but I'm not an expert to start speculating or trying to summarize that.

Operator

Our next question is a follow-up from the line of Thurman Willis, private investor.

Unknown Attendee

Eric, I truly appreciate what the company's doing, and I only have one comment and if you'll pass it to the board. Again, we released all this positive PR but it never matches up with production orders. If we can't do it, let's sell the company to someone who can. If we really have the motor that we say we have, somebody ought to take to us and if we, as a company, can't get it done, the board needs to sell the company. Because this has been going on for 15, 20 years -- excuse me, 25. It's been going on 25 years.

Eric R. Ridenour

I appreciate the frustration. We'll pass it along. But my intent is to deliver.

Unknown Attendee

And I have confidence, Eric, that you can.

Operator

The next question is from the line of Robert Hoffman, a private investor.

Robert Thurston Hoffman - Candlewood Capital Management, LLC

Hi, I know you guys are in a hurry now, so I'll be brief. I'm assuming that on -- majority of the reason that you got the government grant was because of the CODA account that was supposed to work well, but now we know that it's not. What is the possibility that the government will cut off the rest of the money that they had authorized you to receive on this grant, and/or that they would make you pay back some of the money that you've already received?

Eric R. Ridenour

We don't see any effect from what's going on right now. The money was used with the purpose of productionizing and bring into production electric vehicle technology. We've done that. And we've done that now multiple times, both with the PowerPhase Pro for -- that was used in CODA and originally for Saab, and then also in the PowerPhase HD 220 lineup, which we are now into volume production on and starting that ramp-up. So we've been very successful within the programs being monitored by DOE under this grant. And we feel pretty good, and we don't think there's any issues with it.

Operator

Our next question is a follow-up from the line of Larry Southam of -- with My Broker LLC.

Larry Southam

Just one minor point. Back at the Olympics, you had a London taxi equipped with your motor, going up there with more than one. Is there anything continuing on that line?

Eric R. Ridenour

I don't think we've had a follow-up. That was done in the London taxi from a third-party. We certainly have talked with that third-party about those kinds of applications and part of the reason we were used is our extensive background with that third-party. So again, those things, you seed a lot of different places, and then you wait and see, which seeds germinate and which one sprouts the best. So there still could be something from that. There was also the Audi A1 e-tron, was also at the Olympics, that took the German team to the Olympics. And so we were there in actually 2 different vehicles.

Operator

[Operator Instructions] Our next question is a follow-up from the line of Patrick Ether, a private investor.

Unknown Attendee

Yes, my question has been answered. I was wondering about an update on the rare earth nonmagnetic motors, but you already covered that with another question from another person there.

Operator

Our next question is from the line of Al Sanchez with TVI.

Unknown Analyst

Yes, gentleman, I was just wondering about competition. And could you talk about that a bit? And has that been a factor in any of these non-acquired potential seeds from germinating?

Eric R. Ridenour

Well, I think that, obviously, the competition always is a factor in everything you do. I still think we haven't seen much in the head-to-head. What we've seen is people have either chosen, in some cases people they're already familiar with. As we mentioned earlier, some of the early Chinese bus guys, we're going Chinese guys because, frankly, they didn't know anyone else yet, and they were going through that. We certainly have a range of competitors out there with different level products, certainly, Remy, in the commercial, we see often. Certainly where there's a bigger company, they have some advantages being a bigger company. We think we have a better product and especially the fact that we have a full system approach where you can get both the motor and the controller at very high efficiencies and they work well together. Whereas Remy, you need to select from an alternative source and then they need to try and custom tune and work the 2 of those together, and we certainly heard feedback on whether that's a successful program or not. But there's a lot of guys out there and our intent is why we were working so hard, and why we keep bringing out new products is because you need to be ahead of the game. And you need to make sure that you have a vibrant product line and that you satisfy the customer. We bring flexibility. We bring the ability to be, to adjust and tune to the individual company's specific application, where some of our competitors have, this is our version, if you want it, this is what it looks like. If you don't want it, okay. And they're part of a bigger company, so it's not so important to them to win these sales. So we think as a small company, we have that, both the nimbleness and the desire as being this is what we do. And we've been fairly successful. So yes, there's certainly times that we will lose something because somebody will pick a different competition. But I think the biggest thing is this market is just still really formulating. I think it's certainly gone through its fits and spurts through time, and will continue to do that over the period of time. But as you see a crescendo the EDTA just released that the 2012 had 3x as many sales as the prior year. We saw a similar -- one of the callers was talking about the new data, that China showing some significant growth there. And so we're seeing it starting to take hold, obviously, slower than most people wanted, and most people envisioned. But the reality is there, the global CO2 standards, the CAFE standards. The California Resources Board requiring 15.4% of new cars that have to be electric. Wholesale electrification is really and coming, it's just a matter of exactly how it's going to formulate over time. And our job is to go pick up all the places where we have a good fit. And we intend to do that.

Operator

At this time, there are no further questions in queue. Mr. Ridenour, would you care to make any closing remarks?

Eric R. Ridenour

Yes, again, I think it's fortunate we had to take the charge off, but I think when you look behind that, and see that we're doing the things that we've been saying as part of our strategy, which is essentially to take care of our current customers and grow with them. As we're seeing, they're all starting to get to that phase, to continue to attract new customers and add to that. And then to continue to be on the leading edge of product. We'll do those 3 things. We'll make sure we ensure quality on all that. We have a very healthy balance sheet. We'll take any actions today to increase our runway to make sure that we have the time, and we don't get into any unnecessary concerns with -- going forward, and make sure we do that.

So with that, we look forward to the future and talk with you in the next quarter.

Operator

Thank you, ladies and gentlemen. That does conclude our conference for today. If you would like to listen to a replay of today's conference please dial (303) 590-3030 or (800) 406-7325 and enter the access code 4591693. We would like to thank you for your participation and you may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: UQM Technologies Management Discusses Q3 2013 Results - Earnings Call Transcript
This Transcript
All Transcripts