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Company Profile for Investors

We are a developer and manufacturer of energy efficient, power dense, electric motors, generators and power electronic controllers.  Our primary focus is incorporating our advanced technology into products aimed at existing commercial markets and emerging markets for electrically propelled vehicles that are expected to experience rapid growth.  We operate our business in two segments: 1) technology - which encompasses the further advancement and application of our proprietary motors, generators, power electronics and software; and 2) power products – which encompasses the manufacture of motors, generators, power electronic controllers and related products.  Our $0.01 par value common stock trades on the American, Chicago and Pacific stock exchanges under the symbol “UQM.”

The Company’s revenue from continuing operations is derived from two principal sources: 1) funded contract research and development services performed for strategic partners, customers and the U.S. government directed toward either the advancement of our proprietary technology portfolio or the application of our proprietary technology to customers’ products; and 2) the manufacture and sale of products engineered by us.

We have two principal operating companies: 1) UQM Technologies, Inc., located in Frederick, Colorado, which includes the Corporate Headquarters and Engineering and Product Development Center; and 2) wholly-owned subsidiary UQM Power Products, Inc.(“UQM Power”), also located in Frederick, Colorado, which is an ISO quality certified manufacturer of our products.

Markets
Our primary focus is the commercialization of our technology in both existing and emerging markets for electrically powered vehicle propulsion systems and auxiliary systems for vehicles.

Existing Markets
Today there are numerous well-established markets for products that incorporate electric motors, generators and power electronic controllers that are targets for replacement by our advantaged systems.  Examples of existing electric vehicle markets that we believe present opportunities for the commercialization of our proprietary technology include electric wheelchairs, golf carts, forklift trucks and other warehouse vehicles, aircraft tugs and other support equipment, commercial floor cleaning equipment and other similar markets where the product application generally requires high torque and variable speed operation.  In addition, there are a multitude of electric auxiliary motors used on conventional vehicles that provide a further opportunity for replacement by our systems.

We have developed and commercialized several products for existing markets that are currently being manufactured by our wholly-owned subsidiary, UQM Power.  These products include a direct-drive propulsion motor used in Invacare Corporation’s StormÒ electric wheelchair for which we are supplying field service and warranty units, fan blower motors used in aircraft air conditioning systems manufactured by Keith Products, Inc. and a vehicle auxiliary motor for a product manufactured by Lippert Components, Inc.

We expect to continue to aggressively pursue the commercialization of both technologically advanced and low cost products that we develop to customer specifications in these large, established markets.

Emerging Markets
Potentially large markets are developing in conjunction with the electrification of a wide-range of vehicle platforms.  Electrification of vehicles is being pursued for a variety of application specific reasons including: 1) improved fuel economy, 2) lower vehicle emissions, 3) greater reliability and lower maintenance, 4) the need for higher levels of available onboard electric power to run electrical devices, and 5) improved performance and vehicle control.  Of these reasons, improved fuel economy has emerged as a significant factor in the development and potential rate of growth of the emerging markets as crude oil prices continue to rise, recently exceeding $75 per barrel, and consumers and businesses alike contend with gasoline and diesel prices of over $3.00 per gallon.  This trend toward higher fuel prices is expected to continue for the foreseeable future driven by tight supply levels, geopolitical turmoil in key oil producing countries and increasing world demand driven principally by escalating consumption of fossil fuels by developing countries such as China and India.  In addition to these factors, recent government regulations mandating reductions in pollutants from diesel engines are expected to further accelerate the trend toward electrification as increasingly stringent regulations continue with the next reduction set for 2010.

Crude oil consumption in the United States as reported by the Transportation Energy Data Book; Edition 22 and the EIA Annual Energy Outlook 2003 averages approximately 20 million barrels per day.  Of this amount, approximately two-thirds is used for transportation.

The electrification of conventional vehicles, ranging from passenger vehicles and over-the-road trucks to off-road vehicles such as agricultural tractors, construction equipment and military vehicles, can potentially offer improvements in fuel economy and emissions.  Nearly all conventional vehicles are powered by a gasoline or diesel fueled internal combustion engine that converts the energy stored in the fuel to rotating power out of the engine.  The power out of the engine’s rotating shaft is used to propel the vehicle and operate all of the vehicles auxiliaries either directly with belts, pulleys and gears or indirectly through electricity generated from a belted alternator.

Internal combustion engines are relatively inefficient, converting only 30 to 40 percent of the input energy in the fuel to the output shaft to do useful work.  The remaining 60 to 70 percent of the input energy is wasted by the engine as heat loss.  Electric motors on the other hand, are much more efficient in converting input electric energy to the rotating shaft to do useful work.  UQM® electric propulsion systems have some of the highest efficiencies (input energy to output work) in the industry ranging from 80 to 95 percent.

The electrification of vehicles can range from simply replacing inefficient belt and gear driven under-the-hood auxiliaries (water pump, power steering, HVAC, cooling fans etc.) with efficient electric powered ones, to eliminating the internal combustion engine entirely and replacing it with full electric propulsion such as in a battery or fuel cell powered vehicle.  Generally, as the vehicle powerplant content becomes increasingly more electric, the fuel efficiency improves and the cost and complexity increases.  With rising fuel prices, vehicle makers are finding it much more feasible to justify this added complexity and cost.

• Electrification of engine driven auxiliaries - In most existing conventional gasoline and diesel-powered vehicles, under-the-hood components, such as water, oil and fuel pumps, power steering systems, cooling fans and air conditioning compressors are powered by engine belts, pulleys and gears.  These devices perform their functions very inefficiently and represent a significant load on the engine.  Because they are directly connected to the engine, there is no way to independently vary their speed or modulate their power.  The electrification of these components provides numerous advantages including: 1) variable speed and power operation which improves efficiency and fuel economy, 2) the ability to locate them strategically anywhere in the vehicle because an electric component does not require proximity to an engine driven belt or gear, 3) improved controllability and reliability and 4) flexible architectures and improved access for service and maintenance.  Existing conventional alternators do not provide enough power to electrify the engine driven auxiliaries and must be replaced with a higher power generator.  The typical UQM® generator is smaller, nearly twice as efficient and provides five times the power of a conventional alternator.  In addition, these higher power generators can provide export power to power other on-board or off-board equipment.  This electrification strategy is easily adopted because required changes to vehicle design and operation are the least disruptive and can improve vehicle fuel economy by 7 to 15 percent.
• Parallel hybrids - Parallel hybrid vehicles incorporate an electric motor to join the internal combustion engine in propelling the vehicle.  In a low power configuration, often referred to as a “mild hybrid”, a starter/motor/generator that is typically integrated into the flywheel of an engine, is used to combine three separate functions in one electric machine.  The machine starts the engine, eliminating the need for a conventional starter, performs power generation, eliminating a conventional belt driven alternator, and can be run in motoring mode, supplying supplemental power to the driveline to improve acceleration and vehicle performance.  Higher power parallel hybrids incorporate additional system features such as regenerative braking and automatic engine shutdown and all-electric propulsion during certain operating conditions.  In a typical parallel hybrid vehicle, acceleration from a standing-stop is generally performed by the motor in all-electric mode up to a given speed at which time the engine starts and the engine and electric motor work in parallel to accelerate the vehicle.  Once the vehicle achieves highway speed, the motor ceases operation and the vehicle is propelled using the engine only.  During braking operations, the motor is switched to power generation mode and used to recapture and store energy into a battery pack that is normally lost as brake heat in conventional vehicles.  The stored energy is then consumed by the electric motor in the next acceleration cycle.  If the batteries need additional charging, the engine drives the machine in generator mode sending electricity to charge the battery pack.  These vehicles have sufficient battery charging capacity to be self-sustaining thereby eliminating the need to plug the vehicle into the electric power grid.  Depending on the vehicle’s level of electric motive power and its duty cycle, parallel hybrids can achieve fuel economy improvements of 10 to 45 percent.

• Series hybrids - Series hybrid vehicles contain a greater degree of electrification than parallel hybrids.  In a typical series hybrid vehicle, all of the motive power for the vehicle is supplied by electric motors, thereby eliminating conventional driveline components such as the transmission and drive shaft.  Generally, series hybrids contain a larger amount of batteries to store electrical energy and the engine’s principal function is to turn a separate generator to produce the electrical energy necessary to maintain the state of charge of the onboard battery pack.  As in a parallel hybrid, during braking operations, the motor is switched to power generation mode and used to recapture and store energy into the battery pack that is normally lost as brake heat in conventional vehicles.  The stored energy is then consumed by the electric motor in the next acceleration cycle.  Also, as in the parallel hybrid, a series hybrid vehicle has sufficient battery charging capacity to be self-sustaining thereby eliminating the need to plug the vehicle into the electric power grid.  Because the engine serves as an under-the-hood power plant, series hybrids typically have large amounts of available onboard power to perform additional functions while the vehicle is operating or when it reaches its final destination.  Depending on vehicle configuration and duty cycle, series hybrids can achieve fuel economy improvements of 35 to 50 percent.
• Plug-in hybrids - A plug-in hybrid vehicle can be configured as either a parallel or a series hybrid, although the most common is the parallel configuration.  What distinguishes this category of hybrid is that it is designed to operate in all-electric only mode for a range of 20 to 40 miles and be charge depleting therefore requiring it to be periodically plugged into and recharged from the electric grid.  Because a portion of the energy consumed by a plug-in hybrid vehicle is acquired at a relatively low cost from the electrical grid in addition to the efficiencies obtained from its hybrid configuration, this category of vehicle can achieve fuel economy improvements of 60 to 75 percent.
• All-electric battery and fuel cell vehicles - All-electric battery and fuel cell vehicles are powered entirely from electric energy stored onboard in batteries or generated onboard by a fuel cell.  In this category of vehicle all motive power is produced by electric motors and there is no engine and associated transmission, driveline and exhaust components.  Similarly, many vehicle functions currently performed by auxiliaries attached to the engine through belts or gears, such as power steering and air conditioning, must be performed using electric motors. As with hybrid electric vehicles, all-electric battery powered vehicles can switch the propulsion motor during braking operations to power generation mode and recapture and store energy into the battery pack that is normally lost as brake heat in conventional vehicles.  The stored energy is then consumed by the electric motor in the next acceleration cycle.  The energy needs of all-electric battery powered vehicles are obtained by recharging their batteries using the electric power grid.  Fuel cells are energy production devices that generate electricity through a chemical reaction of hydrogen and oxygen.  The by-product of this reaction is water therefore allowing for the total elimination of vehicle exhaust emissions in this category of vehicle.  Because there is no battery energy storage in a fuel cell powered vehicle, there is no opportunity for regenerative braking energy recapture.  Fuel economy improvements for all-electric battery and fuel cell vehicles are generally 75 percent or greater.

 

Our Opportunity


We have historically focused our resources on the development of products for the electrification of vehicles including electric motors, generators and electronic controls to power under-the-hood auxiliaries such as water, oil and fuel pumps, power steering, cooling fans and air conditioning compressors.  In addition, we have developed highly efficient electric propulsion systems for each category of vehicle described above with power levels of 0.5 kWKw to 120 kWKw, which are suitable for vehicles ranging from wheelchairs to passenger automobiles to large trucks, tractors, construction equipment and military vehicles.  We have also developed DC-to-DC and DC-to-AC electronic products that step down high voltage electrical systems to 12 volts or convert DC power to consumer friendly 110 volt alternating current power. In addition we are pursuing the commercialization of our technology and products designed by us in numerous large existing markets where we intend to replace an existing supplier through the introduction of technologically advanced products or lower cost systems or a combination of both.

We believe that our technology and products are well-suited for application in a wide range of vehicles as the trend toward electrification continues to gain momentum.  In this regard, we have focused our attention on several niche markets where we believe we can most effectively compete and which we expect to have higher than average rates of growth and expansion.  A brief description of each of these markets follows


Over-the-road trucks - The U.S. Department of Energy estimated that in 2004, trucks consumed 8 million barrels of crude oil per day and they project that by 2025, trucks will consume approximately two-thirds of all crude oil used in transportation, or 12 million barrels of crude oil per day.







There are approximately 6 million trucks, buses and other heavy-duty on-road vehicles sold in the United States each year.  The market for these vehicles is characterized by a large number of suppliers, a wide-range of vehicle designs and configurations, diverse power and performance levels and relatively low production volumes for each model.  As a result, the typical truck manufacturer is unlikely to have the technical expertise or financial resources to internally develop products that can compete in emerging markets for increasingly electrified vehicles.  Accordingly, we expect truck manufacturers to purchase products from suppliers who have developed technologically advanced electric motors, generators and power electronic energy management controls that can be applied to their vehicles.  During the current fiscal year we launched production of an automotive certified DC-to-DC product for Eaton Corporation which is used onboard heavy duty hybrid trucks and delivered a motor/generator system for long-haul Class 8 hybrid truck application.  We are working with a number of customers in the development and application of our products to both trucks and buses and expect to continue to aggressively pursue the commercialization of our products as this market emerges over the next several years.  Our customers in the over-the-road truck market include Eaton Corporation and International Truck and Engine Company for heavy-duty hybrid propulsion systems and related electronic products; and Engineered Machined Products, Inc. for a variety of pump and cooling fan under-the-hood auxiliaries.

Off-road vehicles - There are a wide range of off-road vehicles sold in the United States each year.  These vehicles range from the small - wheelchairs, golf carts, fork trucks, riding lawn mowers, snowmobiles, all-terrain vehicles, etc., to large construction, agricultural and mining equipment.  The markets for small vehicles are typically characterized by relatively high volumes, low power levels, and commodity pricing.  We have been supplying wheelchair motors to Invacare Corporation for the last six years and expect to continue to supply field service parts for wheelchairs for the foreseeable future.  In addition, we expect to continue to compete selectively in markets where the customer requires advanced technology or superior performance and where acceptable gross profit margins are obtainable.  The market for large equipment- tractors, construction, mining and other specialty equipment- possesses many of the same characteristics as the over-the-road truck market described above.  It is estimated that approximately 500,000 of these vehicles are sold in the United States each year.  Accordingly, we expect these vehicle manufacturers to purchase products with similar specifications as those required in over-the-road trucks from suppliers who have developed technologically advanced electric motors and power electronic energy management controls that can be applied to their vehicles.  Although these vehicles are produced in relatively lower volumes, they nevertheless represent a substantial opportunity due to higher power levels, substantial technical complexity and therefore substantially higher product content and dollar value per vehicle.

Other On-road vehicles - There are approximately 55 million passenger vehicles sold worldwide each year.  Several automotive manufacturers have recently introduced hybrid electric models including Toyota, Honda and Ford.  Many international automobile companies are also developing fuel cell powered vehicles that are essentially all-electric vehicles.  In addition to these automakers, a number of small entrepreneurial companies are developing vehicles for the market that are either plug-in hybrids or all-electric vehicles.  During the current fiscal year we received a $9.25 million purchase order from one of these entrepreneurial automakers, Phoenix Motorcars, Inc., for electric propulsion systems and DC-to-DC converters for Phoenix’s all-electric Sport Utility Truck.  This initial order is for the delivery of 500 systems.  Deliveries under this order commenced during the fourth fiscal quarter and are expected to continue throughout fiscal 2008.  Phoenix has further indicated that they hope to purchase up to an additional 6,000 systems following completion of the initial order to support the expected growth in their vehicle deliveries.  We expect to continue to pursue opportunities with international automakers and smaller entrepreneurial automakers to supply our electric propulsion systems and auxiliary motors and electronic products.  Other customers include Lippert Components to whom we are supplying a vehicle auxiliary motor for use in one of its products.

Military vehicles - The U.S. military purchases a wide range of ground vehicles each year including combat vehicles such as tanks, self-propelled artillery and armored personnel carriers, as well as a variety of light, medium and heavy-duty trucks for convoy and supply operations and for the transport of fuel used on the battlefield.  The military is particularly interested in the electrification of vehicles because the attributes these vehicles possess offer exceptional potential for the military to achieve its long-term objectives of developing a highly mobile, lethal fighting force.  Fuel economy improvements in military vehicles transfer into substantial savings in support infrastructure and transportation costs associated with transporting fuel to the battlefield, which is typically thousands of miles from the United States.  For example, if fuel economy improvements of 25 percent are achieved in the average truck, a corresponding amount of fuel does not have to be transported and therefore a corresponding number of airplanes or tankers are not required in the transportation process.  Also, the availability of onboard electrical power on vehicles opens up new opportunities for the development of sophisticated surveillance, detection and battlefield monitoring equipment and for laser, microwave and electrical pulse weapon systems.  It is estimated that the military purchases approximately 8,000 trucks per year and greater numbers during periods of armed conflict.  As is the case with large off-road equipment, these vehicles are produced in relatively lower volumes, operate at higher power levels, have substantial technical complexity and therefore substantially higher product content and dollar value per vehicle.

Distributed power generation - As the price of crude oil and natural gas has continued to rise over the last several years, there has been an increased focus on the development and adoption of clean, renewable energy products including wind turbine power generators, solar panels and stationary fuel cell power generators.  In addition, many experts believe that power users will increasingly consider on-site power generation using diesel or natural gas fueled internal combustion engine generators as an alternative to power supplied over the electrical grid.  We have developed and expect to continue to develop generators for this market.  In addition, we have also developed DC to AC electronic power inverters for use in distributed power generation applications to convert the DC output of these devices to usable AC power for the homeowner or business

.Other markets - We have also developed and expect to continue to develop electric products for the aircraft and aerospace market and the boat and marine market.  In the aerospace market, we have developed auxiliary power units for the generation of onboard power and other electric auxiliary systems such as components for aircraft air conditioning systems.  We have also developed hybrid propulsion systems for various boat applications.  We believe that the fuel efficiency benefits of vehicle electrification can also be realized in the boat and marine markets.  Although our focus is primarily on land applications, we will continue to leverage our technology and products in these potentially large niche markets.

Manufacturing strategy - Nearly all existing market applications utilize low cost components, making it difficult for the customer to justify the adoption of more costly and technologically superior components.  In order to successfully compete in these cost driven markets, we have adopted a part sourcing and manufacturing strategy designed to provide high quality and low pricing for our customers.  In 1998, our manufacturing operations achieved ISO 9002 quality certification, and we have recently adopted the Advanced Product Quality Planning (“APQP”) automotive quality procedures.

Our strategy for the near term is to source components with quality suppliers and to perform final assembly, testing, pack-out and shipping from our Frederick, Colorado facility.  We have established relationships with many low cost suppliers, including a number of international companies.  We also operate a highly automated, flexible, mixed model assembly system which is computer controlled and monitored for quality assurance and consistent performance.  Depending on product complexity and mix, we believe we have manufacturing capacity of up to 250,000 units per shift per year.  We also own 2.5 acres of land adjacent to our current facility where we can construct an additional 25,000 sq. ft. of manufacturing floor space.

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