UNITED STATES SECURITIES AND EXCHANGE COMMISSION 
WASHINGTON, D.C. 20549 **_____________________ **FORM 10-K**_____________________
[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES      EXCHANGE ACT OF 1934  
For the fiscal year ended March 31, 2009
OR 
[  ]
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 
(I.R.S. Employer   
of incorporation or organization) 
Identification No.)   
7501 Miller Drive, Frederick, Colorado 
80530   
(Address of principal executive offices) 
(Zip Code)  
Registrant's telephone number, including area code:      (303) 278-2002 
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE      ACT:    
Name of each exchange on which registered   
Title of each class 
NYSE Amex   
Common Stock 
Pacific Stock Exchange     
Chicago Stock Exchange     
Frankfurt Stock Exchange     
Berlin Stock Exchange  
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE      ACT:
None. 
Indicate by check mark if the registrant is a      well-known seasoned issuer, as defined in Rule 405 of the Securities Act.          Yes  [  ]  No  [X]   
Indicate by check mark if the registrant is not      required to file reports pursuant to Section 13 or 15(d) of the Act.                   Yes  [  ]  No  [X]   
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 during the preceding 12 months (or for such      shorter period that the registrant was required to submit and post such      files).                                                                                         Yes  [  ]  No  [  ]   
Indicate by check mark if disclosure of delinquent      filers pursuant to Item 405 of Regulation S-K is not contained herein, and      will not be contained, to the best of registrant's knowledge, in      definitive proxy or information statements incorporated by reference in      Part III of this Form 10-K or any amendment to this Form      10-K.  [ ] 
Indicate by check mark whether the registrant is a      large accelerated filer, an accelerated filer, a non-accelerated filer, or      a smaller reporting company. See the definitions of "large      accelerated filer," "accelerated filer" and "smaller      reporting company" in Rule 12b-2 of the Exchange Act. 
 [  ]  Large accelerated filer
[X]  Accelerated filer
[  ]  Non-accelerated filer
[  ]  Smaller reporting company 
Indicate by check mark whether the registrant is a      shell company (as defined in Rule 12b-2 of the Exchange Act).                Yes  [  ]  No  [X] 
The aggregate market value of the registrant's common stock ("Common Stock") held by      non-affiliates as of September 30, 2008, based on the      closing price of the Common Stock as reported by the NYSE Amex on such      date was approximately $72,456,380. As of May 18, 2009, there were      26,982,802 shares of the registrant's Common Stock      outstanding. 
DOCUMENTS INCORPORATED BY REFERENCE 
Document 
Parts Into Which Incorporated 
Portions of the Proxy Statement for the Annual Meeting      of Shareholders to be held August 11, 2009. 
Part III
 
**Table of Contents **  PART I.   
Item 1.
Business
    
Item 1A.
Risk Factors
   
Item 1B.
Unresolved Staff Comments    
Item 2.
Properties    
Item 3.
Legal Proceedings    
Item 4.
Submission of Matters to a Vote of Security Holders   **  PART II.   
Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters      and Issuer Purchases of   
Equity Securities     
Item 6.
Selected Financial Data     
Item 7.
Management's Discussion and Analysis of Financial Condition and      Results of Operations     
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk     
Item 8.
Financial Statements and Supplementary Data       
Report of Independent Registered Public Accounting Firm        
Consolidated Balance Sheets as of March 31, 2009 and March 31, 2008        
Consolidated Statements of Operations for the Fiscal Years ended March      31, 2009, 2008 and 2007        
Consolidated Statements of Stockholders' Equity for the Fiscal Years    
ended March 31, 2009, 2008 and 2007        
Consolidated Statements of Cash Flows for the Fiscal Years ended March      31, 2009, 2008 and 2007        
Notes to Consolidated Financial Statements      
Item 9.
Change In and Disagreements with Accountants on Accounting and      Financial Disclosure      
Item 9A.
Controls and Procedures   
Item 9B.
Other Information  **  PART III.   
Item 10.
Directors and Executive Officers of the Registrant     
Item 11.
Executive Compensation     
Item 12.
Security Ownership of Certain Beneficial Owners and Management and      Related Stockholder   
Matters    
Item 13.
Certain Relationships and Related Transactions    
Item 14.
Principal Accountant Fees and Services  **  PART IV.    
Item 15.
Exhibits and Financial Statement Schedules     * 

 *
 
** 

PART I
TOC**ITEM 1.**BUSINESS
TOC*****This Report contains statements that constitute"forward-looking statements" within the meaning of Section 27A of theSecurities Act and Section 21E of the Securities Exchange Act. These statementsappear in a number of places in this Report and include statements regarding ourplans, beliefs or current expectations; including those plans, beliefs andexpectations of our officers and directors with respect to, among other things,the development of markets for our products, the adequacy of our cash balancesand liquidity to meet future operating needs, and our ability to issue equity ordebt securities. Important Risk Factors that could cause actual results todiffer from those contained in the forward-looking statements are listed belowin Part I, Item 1A. Risk Factors.***General**
UQM Technologies, Inc., ("UQM") is a developer andmanufacturer of energy efficient, power dense, electric motors, generators andpower electronic controllers. We were incorporated in thestate of Colorado in 1967. Our primary focus is incorporating our advancedtechnology into products aimed at emerging markets for electrically propelledvehicles that are expected to experience rapid growth as well as selectedexisting commercial markets. We operate our business in two segments: 1)technology - which encompasses the further advancement and application of ourproprietary motors, generators, power electronics and software; and 2) powerproducts - which encompasses the manufacture of motors, generators, powerelectronic controllers and related products. Our $0.01 par value common stocktrades on the NYSE Amex, Chicago, Pacific, Berlin and Frankfurt stock exchangesunder the symbol "UQM."

 The Company's revenue is derived from two principalsources: 1) funded contract research and development services performed forstrategic partners, customers and the U.S. government directed toward either theadvancement of our proprietary technology portfolio or the application of ourproprietary technology to customers' products; and 2) the manufacture and saleof products engineered by us.

 We have two principal operating companies: 1) UQMTechnologies, Inc. which includes the Corporate Headquarters and Engineering andProduct Development Center; and 2) wholly-owned subsidiary UQM Power Products,Inc. ("UQM Power") which is an ISO quality certified manufacturer ofour products. Both operating companies are located in Frederick, Colorado.
**Technology**
Our technology base includes a number of proprietarytechnologies and patents relating to brushless permanent magnet motors,generators and power electronic controllers, together with software code tointelligently manage the operation of our systems. See also "Patents"below.

The typical architecture of a UQM® motor consists of a stator winding employing a high pole count configuration,which allows for high copper utilization (minimizing energy loss and cost) and ahollow rotor upon which powerful rare earth permanent magnets are mounted on theouter circumference. The stator is affixed to a housing containing a mountingring and bearings, which allows the rotor to be suspended within the stator.Commutation of the machine is accomplished electronically by sensing theposition of the rotor in relation to the stator and intelligently pulsingelectrical energy into the stator such that the electric field generated by thestator interacts with the magnetic field of the rotor, producing rotationalmotion ("motor operation"). Conversely, the application of rotationalmotion to the rotor by an external force results in the generation of electricalpower ("generator operation"). UQM® machines can be operated in either a forward or reverse direction of rotationand either in motor or generator mode and can dynamically change from one modeof operation to another in millisecond response time. The hollow design of therotor permits the packaging of other components such as gears andelectromechanical brakes in the interior of the machine. These design featurescontribute to lower usage of copper and iron and other materials generally (dueto smaller package dimensions), reducing manufacturing cost over those forconventional machines of similar power. In addition, the utilization ofneodymium-iron-boron ("NdFeB") magnet material in a wide-range ofconsumer devices such as cell phones, disk drives and medical devices, hasdramatically improved the availability, performance and price of this material,allowing us to price our advanced motors and controls competitively with lesserperforming conventional motors, which we believe will accelerate the rate ofcommercialization of our technology.

Attributes of our permanent magnet motor technology includebrushless electronic commutation, a relatively large air-gap dimension (usefulfor hybrid electric applications where the motor is integrated with an engine ortransmission), the use of powerful rare earth NdFeB magnet material, good heatrejection, low iron and copper content and low mechanical losses. As a result,UQM® motors have high operating efficiencies, high power density(high power output to weight ratio) and generally have smaller externaldimensions and weight for a given power output, improving packaging.

Attributes of our microprocessor-based digital powerelectronic controllers include high power operation (up to 500 amps at 400volts), four-quadrant control (forward/reverse and motoring/generation), reducedswitching losses, adaptive switch timing control and controller area network("CAN") capability. As a result, UQM® controllers havehigh operating efficiencies, high power density (high power output to weightratio) and generally have smaller external dimensions and weight for a givenpower output, improving packaging.

The UQM® embedded DSP software isthe intelligence that coordinates the interaction between the motor and motorcontroller, as well as interfacing with a vehicle controller. Software controlalgorithms are a key piece of the Company's intellectual property portfolio.One aspect of the software is a patented method of control referred to as PhaseTiming Advancement that enables UQM® motors todeliver both high output torque at low operating speeds and high power atincreasing operating speeds. We have extended the capability of Phase AdvanceControl by using Adaptive Control techniques. These proprietary softwarealgorithms alter the switching strategy as a function of DC voltage, operatingspeed and output power, optimizing system performance under dynamic conditions.The result is maximized output and efficiency which decreases fuel consumptionin hybrid electric vehicles and increases the range of battery electricvehicles. Adaptive Control also optimizes the output per unit of voltage andcurrent, maximizing the utilization of the onboard stored energy and otherelectrical devices by extracting power from substantially the entire electricalcycle of the motor. The application of these proprietary control strategies hasallowed us to recently increase the peak and continuous power output and improvethe efficiency of our systems. In addition, our motor controllers now have userconfigurable functionality and increased data transmission speeds and responsetimes, improving vehicle capability. Included in this functionality is theability to switch between torque, speed, and voltage control dynamically, whichis especially useful for parallel hybrids and generator applications of ourtechnology. For vehicle developers, our new Graphical User Interface providesthe means to tailor any UQM® system to create thedesired driving experience.

Conventional permanent magnet motor designs are limited tooperating at either high torque at low speeds, sacrificing power at high speed,or vice versa. In most vehicle propulsion applications, high torque is requiredto launch the vehicle from a standing-stop, with a subsequent transition to highpower as the vehicle is accelerated to highway speeds. In the majority ofconventional internal combustion engine powered vehicles, the transition fromhigh torque to high power is accomplished through the multiple gear changesperformed by a mechanical transmission. UQM® motors,incorporating phase advance technology, are suited as propulsion drives inelectric, hybrid electric, plug-in hybrid electric and fuel cell electricvehicles due to their ability to power a vehicle from a standing-stop to highwayspeeds without mechanical gear changes, thereby eliminating the size, weight,complexity and cost of mechanical transmissions.

We have also developed a technology that allows our permanentmagnet motors to achieve a 10 to 1 top speed to base speed ratio. Thistechnology also provides both high torque and high-speed capability in the samemachine, but at levels greater than that of other motor technologies. Manyelectric motor applications require high torque capability for starting and lowspeed operation, but must also achieve high speed. For military vehicles, hightorque at low speed translates into obstacle and grade climbing capability,while high speed enables pursuit, dash and evasive maneuvers as well as on-roadconvoy transport. Many commercial applications have similar requirements.Conventional vehicles achieve the high torque required for launch and low endacceleration and the constant power required for high road speed by using atransmission and multiple gear changes. Prior to this performance breakthrough,UQM® systems incorporating phase advance were able to achieve a topspeed to base speed ratio of 4 to 1. Electrically propelled vehicles designedaround a 4 to 1 limitation sometimes require unwanted gearing and/or have lessthan desired performance. This has particularly been the case in the moredemanding off-highway equipment and military vehicle applications. Providingvehicle developers with electric propulsion systems capable of a top speed tobase speed ratio of 10 to 1 overcomes a significant limitation and opens uppotential new application opportunities for UQM® systems.

We have also developed proprietary DC-to-DC converters thatconvert energy from hybrid electric vehicles with 250 volt to 450 volt batterypacks to 12 volts to power lower voltage devices onboard these vehicles and highvoltage DC-to-AC inverter technology with output efficiencies of up to 93percent for use onboard electric, hybrid-electric and fuel cell-electricvehicles. Our inverters convert DC power stored in vehicle battery packs withnominal operating voltages of 340 volts to high quality 110 volt or 220 volt ACpower. We are also developing grid-connect capable inverters and associatedsmart metering technology for potential future application as the utilityindustry pursues "smart-grid" development.

We have two patent applications pending related to technologydevelopments that have the potential to further improve the performance of ourmotors. We are also performing internally funded research and development tocontinually improve the functionality of the microprocessor software we use tointelligently control our motor/controller system. Some of these enhancementsinclude torque, speed and voltage control improvements that enable moresophisticated hybrid electric operating strategies, refined generator voltageregulation to facilitate improved battery pack management and furtherimprovements in system efficiency and power output through advances in motorcontrol algorithms. In addition to these activities, the U.S. Air Force hascontracted us to manage a research and development project in cooperation withMississippi State University, directed toward the development of hightemperature power switching devices using silicon carbide that may lead toimproved power handling capability for our motor controllers.

The majority of our research and development activities arethe result of projects contracted with and funded by customers, for which wetypically retain intellectual property rights in the resulting technologydeveloped. Customer funded development activities are recorded in our financialstatements as contract services revenue and the associated development costs areshown as cost of contract services. Internally-funded research and developmentexpenditures are charged to research and development expense when incurred.

In recent years, we have focused our research and developmentactivities on the development of commercial products and production engineeringactivities to lower the cost of manufacture, as well as enhance the performanceand capability of our systems, as opposed to basic research in the field. Webelieve our future growth is dependent, in part, on the continued advancement ofour technology portfolio and our ability to commercialize our technology inadditional product applications and markets. Accordingly, we expect to continueto pursue additional customer funded programs and to selectively invest ininternally funded development projects to accomplish these objectives.
**Vehicle Electrification**
Our primary focus is incorporating our advanced technologyinto products aimed at emerging markets for electrically propelled vehicles thatare expected to experience rapid growth as well as selected existing commercialmarkets.
***Existing Markets***
Today there are numerous well-established markets forproducts that incorporate electric motors, generators and power electroniccontrollers that are targets for replacement by our advantaged systems. Examplesof existing electric vehicle markets that we believe may present opportunitiesfor the commercialization of our proprietary technology include electricwheelchairs, golf carts, forklift trucks and other warehouse vehicles, aircrafttugs and other support equipment, commercial floor cleaning equipment and othersimilar markets where the product application generally requires high torque andvariable speed operation. In addition, there are a multitude of electricauxiliary motors used on conventional vehicles that provide a furtheropportunity for replacement by our systems.

We have developed and commercialized several products forexisting markets that are currently being manufactured by our wholly-ownedsubsidiary, UQM Power. These products include a fan blower motor and acompressor drive motor that are used in aircraft air conditioning systemsmanufactured by Keith Products, Inc., a vehicle auxiliary actuator motor for aproduct manufactured by Lippert Components, Inc. and an electric brake actuationmotor that is used in selected golf carts manufactured by Club Car, Inc.

We expect to continue to commercialize both technologicallyadvanced and low cost products that we develop to customer specifications inselected large, established markets.
***Emerging Markets***
Potentially large markets are developing as a result of theelectrification of a wide-range of vehicle platforms. The electrification ofvehicles is being pursued for a variety of application specific reasonsincluding: 1) improved fuel economy, 2) lower vehicle emissions, 3) greaterreliability and lower maintenance, 4) the need for higher levels of availableonboard electric power to run electrical devices, and 5) improved performanceand vehicle control. Of these reasons, improved fuel economy has emerged as asignificant factor in the development and potential rate of growth of theemerging vehicle electrification markets as crude oil prices are expected toresume their rise, and consumers and businesses alike have to contend withhigher gasoline and diesel prices. This trend toward higher fuel prices isexpected to continue for the foreseeable future, driven by tight supply levels,geopolitical turmoil in key oil producing countries and expected futureincreases in world demand, driven principally by escalating consumption offossil fuels by developing countries such as China and India. In addition tothese factors, government regulations mandating reductions in pollutants fromdiesel engines are expected to further accelerate the trend towardelectrification as increasingly stringent regulations continue, with the nextreduction set for 2010. Further, Corporate Average Fuel Economy (CAFE')standards recently received their first overhaul in more than 30 years. TheEnergy Independence and Security Act of 2007 requires, in part, that automakersboost fleetwide gas mileage to 35 mpg by the year 2020. This requirement appliesto all passenger automobiles, including "light trucks." Other recentgovernment legislation, including the Advanced Technology Vehicles ManufacturingIncentive Program and the American Recovery and Reinvestment Act of 2009(Stimulus Bill), encourage the development and introduction of environmentallyfriendly vehicles. A partial listing of some of the more notable provisions ofthis legislation includes:
-  Tax credits for the purchase of environmentally      friendly vehiclesLow cost loans to manufacturers and component suppliers      to purchase infrastructure and develop manufacturing capacity for clean      vehicles and components used in these vehiclesFunding for government agencies to acquire      environmentally friendly vehiclesGrants for the development of clean vehicles and clean      vehicle component technologyGrants for the development of a "smart"      electric grid
Crude oil consumption in the United States as reported by theTransportation Energy Data Book; Edition 27 and the EIA Annual Energy Outlook2009 averages approximately 21 million barrels per day. Of this amount,approximately two-thirds are used for transportation.

 

** **
Every day the U.S. consumes 21 million barrels of oil.

Non-transportation
Over 2/3 of the oil we consume is      used for transportation.
 

The electrification of conventional vehicles, ranging frompassenger vehicles and over-the-road trucks to off-road vehicles such asagricultural tractors, construction equipment and military vehicles, canpotentially offer improvements in fuel economy and emissions. Nearly allconventional vehicles are powered by a gasoline or diesel fueled internalcombustion engine that converts the energy stored in the fuel to rotating powerout of the engine. The power out of the engine's rotating shaft is used topropel the vehicle and operate all of the vehicles auxiliaries either directlywith belts, pulleys and gears or indirectly through electricity generated from abelted alternator.

Internal combustion engines are relatively inefficient,typically converting only 25 to 35 percent of the input energy in the fuel tothe output shaft to do useful work. The remaining 65 to 75 percent of the inputenergy 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 rotatingshaft to do useful work. UQM® electric propulsion systems have someof the highest efficiencies (input energy to output work) in the industryranging from 80 to 95 percent.

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

 

We believe that the trend toward increasing electrificationof vehicles will continue at an accelerated pace. Accordingly, we have developedand continue to develop, with considerable funding from our customers, electricpropulsion systems and other motor and electronic products that will enable ourcustomers to introduce alternative powered vehicles in the markets they serve,should they elect to do so. An expanded description of the different degrees ofvehicle electrification follows:
**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 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 electric 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 energy 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 electric    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 electric motor    is switched to power generation mode and used to recapture energy 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. 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 on board in batteries or generated on board by a fuel cell. In this    category of vehicle, all motive power is produced by electric motors and    there is no engine and associated fuel, 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    electric propulsion motor during braking operations; the electric motor is    switched to power generation mode and used to recapture energy 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 resulting from combining 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.
**Markets**
We have historically focused our resources on the developmentof highly efficient electric propulsion systems for each category of vehicledescribed above with power levels of 0.5 kW to 150 kW, which are suitable forvehicles ranging from wheelchairs to passenger automobiles to large trucks,buses, tractors, construction equipment and military vehicles. In addition, wehave developed electric motors, generators and electronic controls to powerunder-the-hood auxiliaries such as water, oil and fuel pumps, power steering,cooling fans and air conditioning compressors. We have also developed DC-to-DCconverters that step down high voltage electrical systems to 12 volts andDC-to-AC inverters that convert DC power to consumer friendly 110-voltalternating current power. We are pursuing the commercialization of ourtechnology and products designed by us in numerous large emerging and existingmarkets where we intend to introduce technologically advanced products or lowercost systems or a combination of both.

We believe that our technology and products are well-suitedfor application in a wide-range of vehicles as the trend toward electrificationcontinues to gain momentum. In this regard, we have focused our attention onseveral niche markets where we believe we can most effectively compete and whichwe expect will have higher than average rates of growth and expansion. A briefdescription of each of these markets follows:
**Passenger automobiles and light trucks - In past years,approximately 16 million passenger automobiles and light trucks were sold in theUnited States each year, although these production levels have declineddramatically over the last year to a current annual rate of approximately 9million units. Over the last several years a market has developed forautomobiles that are powered by hybrid electric powertrains. These vehicles havegood performance and provide above average fuel economy compared to conventionalautomobiles. Several automakers have introduced vehicle models incorporatinghybrid electric powertrains including Toyota, Lexus, Nissan, Honda, Ford, Saturnand General Motors. These automakers to date are using hybrid electricpowertrains that they have developed themselves or have acquired from otherautomakers or existing Tier 1 automotive suppliers. Many of these automobilecompanies are also developing fuel cell or battery-powered vehicles that theyhope to introduce at a future date. We have recently shipped electric and hybridelectric propulsion systems and /or generators to five international automobilecompanies for use in vehicle development programs.

In addition to established automakers, there are a variety ofsmall entrepreneurial companies that are developing and hope to commercializeelectric, hybrid electric and/or plug-in hybrid electric cars. Although many ofthese companies lack substantial financial resources and/or significantautomobile industry experience, they are pursuing a variety of strategies tointroduce these types of automobiles into either niche markets, such as forfleet users or high-end luxury sports car buyers, or the consumer vehicle marketgenerally. Should any of these companies be successful in commercializing theirproduct offerings, it could cause the growth rate of this market to acceleratesignificantly. These companies are generally using electric or hybrid electricpowertrains that they have developed themselves or have been developed by otherentrepreneurial companies. We have recently shipped electric and hybrid electricpropulsion systems and/or generators to eight of these companies and have beenand continue to be in discussions with nearly all of these companies regardingthe use of our equipment in their vehicle development programs.
**Trucks, Buses and Recreational Vehicles -****The U.S.Department of Energy estimated that in 2007, trucks consumed 6.3 million barrelsof crude oil per day and they project that by 2030, trucks will consumeapproximately 55 percent of all crude oil used in transportation, or 10 millionbarrels of crude oil per day.

In recent years, approximately 6 million trucks, buses andother medium and heavy-duty on-road vehicles were sold in the United States eachyear, although these quantities have declined substantially over the last year.The market for these vehicles is characterized by a large number of suppliers, awide-range of vehicle designs and configurations, diverse power and performancelevels and relatively low production volumes for each model. As a result, thetypical truck, bus and other medium and heavy-duty vehicle manufacturer isunlikely to have the technical expertise or financial resources to internallydevelop components that can compete in emerging markets for increasinglyelectrified vehicles. Accordingly, we expect these manufacturers to purchaseproducts from suppliers who have developed technologically advanced electricmotors; generators and power electronic energy management controls that can beapplied to their vehicles.

We are currently supplying an automotive qualified DC-to-DCconverter to Eaton Corporation which is used onboard medium and heavy-dutyhybrid trucks. We have also developed a DC-to-AC inverter that we expect to sellinto the truck market to meet the growing onboard and export power requirementsof hybrid trucks. Some medium and heavy-duty hybrid electric trucks manufacturedby customers of Eaton currently have our DC-to-DC converter on board. We expectthe medium and heavy-duty hybrid electric truck market to grow at anaccelerating rate as potential customers for these vehicles gain a greaterunderstanding of their operational, environmental and economic advantages. Inaddition to our supplier relationship with Eaton, we have been and expect tocontinue to be in discussion with truck OEMs regarding potential niche vehicleprograms. We have supplied a hybrid electric propulsion system to a commercialtruck manufacturer in the Middle East and have been selected as the propulsionsystem supplier for the ZeroTruckTM, an all-electric medium-duty truck beingdeveloped by Electrorides, Inc.

Also, several truck manufacturers are considering otherelectrically-based products that either enhance the utility of their vehicles,such as the ability to generate large amounts of exportable electric power, orthat may be necessary to meet regulatory mandates, such as diesel engineemission standards and restrictions on emissions arising from diesel engineidling. These products include electric propulsion systems, higher power enginegenerators, electric auxiliaries and DC-to-DC converters and DC-to-AC inverters.We intend to continue to aggressively pursue the commercialization of ourproducts for these and other applications in the market for electric and hybridtrucks as it emerges over the next several years.

We are also involved in a number of bus programs. Over thelast several years we have supplied generators and motor controllers to theDenver Regional Transportation District (RTD) for its fleet of thirty-sixMallRide hybrid electric shuttle buses, the first large-scale deployment ofhybrid electric buses for use in the United States. The 45-foot MallRide hybridelectric shuttles operate on the 16th Street Mall in downtown Denver,providing a free ride for passengers across the 1.3 mile long 16thStreet Mall.

 

We also are the propulsion system supplier for a hybridelectric bus being developed by Proterra LLC, Golden, Colorado. The 40-footcomposite body bus is being developed in both an all-electric battery andplug-in hybrid configuration.

 

We are also the supplier of propulsion motors to acollaborative advanced hybrid electric bus development program being performedby the Flint Michigan Mass Transportation Authority ("MTA"), KetteringUniversity, Michigan State University and Transportation Techniques LLC. MTAcurrently operates five hybrid electric cutaway buses on routes in Flint,Michigan and throughout Genesee County. The replacement of the existingpropulsion systems with a UQMTM propulsion system isexpected to provide additional fuel efficiency improvements of 15 percent to 20percent over that achieved by the current hybrid buses, or an overallimprovement of up to 40 percent over standard diesel-powered vehicles.

 

We currently supply a vehicle auxiliary actuator motor toLippert Components, Inc. for use in conventional recreational vehicles. We havemanufactured and shipped over 65,000 units since the launch of production infiscal 2007. There are a variety of specialty on-road manufacturers ofconventional vehicles who represent an opportunity for us to further expand thedeployment of our products, and we intend to continue to pursue thecommercialization of our products for these applications.
**Off-road vehicles -****There are a wide-range ofoff-road vehicles sold in the United States each year. These vehicles range fromsmall - wheelchairs, golf carts, fork trucks, riding lawn mowers, snowmobiles,all-terrain vehicles, etc., - to large construction, agricultural and miningequipment. The markets for small vehicles are typically characterized byrelatively high volumes, low power levels and commodity pricing. We expect tocontinue to compete selectively in off-road vehicle markets where the customerrequires advanced technology or superior performance and where acceptable grossprofit margins are obtainable.

The market for large equipment - tractors, construction,mining and other specialty equipment - possesses many of the samecharacteristics as the over-the-road truck market described above. In recentpast years, it is estimated that approximately 500,000 of these vehicles weresold in the United States each year. Accordingly, we expect these vehiclemanufacturers to purchase products with similar specifications as those requiredin the over-the-road truck and bus markets from suppliers who have developedtechnologically advanced electric motors and power electronic energy managementcontrols that can be applied to their vehicles. Although these vehicles areproduced in relatively lower volumes, they nevertheless represent a substantialopportunity due to higher power levels, substantial technical complexity andtherefore substantially higher product content and dollar value per vehicle. Wecurrently have systems under evaluation by several large off-road vehicledevelopers for both electric propulsion and under-the-hood auxiliaryapplications.

We have also developed electric power products for theaircraft and aerospace market and the boat and marine market. In the aerospacemarket, we have developed electric auxiliary motors and controllers used inaircraft air conditioning systems. We have also developed auxiliary power unitsfor the generation of onboard power and propulsion systems for various boatapplications. We believe that some of the fuel efficiency benefits of vehicleelectrification can also be realized in the boat and marine market. Although ourfocus is primarily on land applications, we will continue to leverage ourtechnology and products in these potentially large niche markets asopportunities present themselves.
**Military vehicles -****The U.S. military purchases awide-range of ground vehicles each year including combat vehicles such as tanks,self-propelled artillery and armored personnel carriers, as well as a variety oflight, medium and heavy-duty trucks for convoy and supply operations and for thetransport of fuel used on the battlefield. The military is particularlyinterested in the electrification of vehicles because the attributes that thesevehicles possess offer exceptional potential for the military to achieve itslong-term objectives of developing a highly mobile, lethal fighting force. Fueleconomy improvements in military vehicles transfer into substantial savings insupport infrastructure and transportation costs associated with transportingfuel to the battlefield, which is typically thousands of miles from the UnitedStates. For example, if fuel economy improvements of 25 percent are achieved inthe average truck, a corresponding amount of fuel does not have to betransported and therefore a corresponding number of airplanes or tankers are notrequired in the transportation process. Also, the availability of onboardelectrical power on military vehicles opens up new opportunities for thedevelopment of sophisticated surveillance, detection and battlefield monitoringequipment and for laser, microwave and electrical pulse weapon systems. It isestimated that the military purchases approximately 8,000 trucks per year andgreater numbers during periods of armed conflict. As is the case with largeoff-road equipment, these vehicles are produced in relatively lower volumes,operate at higher power levels, have substantial technical complexity andtherefore substantially higher product content and dollar value per vehicle. Wehave, over the last several years, been working with a number of militarycontractors and vehicle makers including DRS Technologies, AM General, BAESystems, Boeing, General Dynamics and others, on prototype hybrid electricvehicles, high export power generators, electric auxiliaries, DC-to-DCconverters and DC-to-AC inverters. Although this market has not yet begun toemerge, we believe that it may begin to soon, driven by the availability ofhybrid electric components in the commercial truck market that operate atsimilar power levels as those required by many military vehicles.
**Distributed power generation - There has recently been anincreased focus on the development and adoption of clean, renewable energyproducts including wind turbine power generators, solar panels and stationaryfuel cell power generators. In addition, many experts believe that power userswill increasingly consider on-site power generation using diesel or natural gasfueled internal combustion engine generators as an alternative to power suppliedover the electrical grid. The Stimulus Bill recently passed by the U.S.government has allocated substantial funding for power generation technologiesand development of a "smart grid". We have developed generators forpotential use in this market and have also developed DC-to-AC electronic powerinverters for use in distributed power generation applications to convert the DCoutput of these devices to usable AC power for the homeowner or business. We arecurrently developing, under the California Energy Commission's Public InterestEnergy Research Program and with the U.S. Department of Energy's NationalRenewable Energy Laboratory (NREL), an advanced grid-connect inverter under itsAdvanced Power Electronics Interface (APEI) Initiative. The objective of thedevelopment effort is to design a cost-effective, flexible,readily-manufactured, and ready to be commercialized prototype interface thatwill standardize the interconnection for a modular, scalable range of APEIsystems. We expect to compete for additional development funds available underthe Stimulus Bill to further advance our power generation and managementtechnology and potentially expand our product offerings in this market.

There is also a developing industry initiative termed"vehicle-to-grid", or "V-to-G", to potentially makeavailable for use on the electric utility grid, the large amount of energy inbattery electric, hybrid electric, plug-in hybrid electric and fuel cellelectric vehicles. Under this initiative, protocols, guidelines and electronicand software technologies are being developed to allow for the intelligenttransfer of electric power from these vehicles to the electric power grid. Thereare different versions of the vehicle-to-grid concept: 1) A hybrid or fuel cellvehicle, which generates power from storable fuel, uses its generator to producepower for a utility at peak electricity usage times. Here the vehicles serve asa distributed power generation system; and 2) A battery-powered or hybridvehicle which uses its excess rechargeable battery capacity to provide power tothe electric grid during peak load times. These vehicles can then be rechargedduring off-peak hours at cheaper rates while helping to absorb excess nighttimegeneration. Here the vehicles serve as a distributed battery storage system tobuffer power.

The V-to-G concept allows such vehicles to provide power tohelp load balance (valley fill and peak shave) localized grid segments duringpeak load periods when the selling price of electricity can be very high, and tobuffer electricity, including in power outages.

We are currently developing inverter technology that weexpect will be capable of functioning in this dynamic energy transferenvironment when, and if, it develops into a commercial opportunity.
**Manufacturing**
It is our primary objective to become a major manufacturer ofelectric motor, generator and other power electronic products that incorporateour proprietary technology and to supply these products to electric, hybridelectric and fuel cell electric vehicle manufacturers and/or their Tier 1suppliers. We have established and are continuing to expand our manufacturingcapability and presence through a planned technology progression driven by keycustomer demands to address future vehicle requirements. Our manufacturingoperations are ISO 9001:2000 quality certified.

In March of 2006, we began the volume production of vehicleauxiliary actuator motors for Lippert Components. This production is performedon a highly automated, flexible, mixed model assembly system which is computercontrolled and monitored for quality assurance and consistent performance. Thedevelopment and installation of this assembly system by our organization wasinstrumental in demonstrating our manufacturing know-how and capability toexisting, as well as potentially new, vehicle OEM and Tier 1 supplier customers.We also produce auxiliary actuator motors for Club Car, Inc. on this assemblysystem.

In September of 2006, we began the volume production ofDC-to-DC converters for Eaton Corporation as part of their hybrid electric powersystem for the heavy truck market. We designed and installed a manufacturingcell for these electronic boxes that includes the robotic application ofsealant, sixteen hours of burn-in cycling between hot and cold temperatureextremes, pressure testing for cooling leaks and complete functional testing.

Over the last several years we have established a productionengineering group with decades of manufacturing design and productionexperience, much of which is specific to the automotive industry. Today, thisteam consists of nearly twenty professionals. In the last two years we have madesignificant improvements in manufacturing systems, facilities and spaceutilization and we have adopted the Advanced Product Quality Planning ("APQP")automotive quality procedures.

In fiscal year 2009 we installed a production cell toassemble our larger frame size, higher power motors in higher volumes. Thecapacity of this cell is estimated to be 5,000 systems annually per shift.

In order to ensure our cost competitiveness, we have adopteda manufacturing strategy for the near term of designing all product componentsand then sourcing these parts with quality suppliers. Final assembly, testing,pack-out and shipping of the product is performed at our Frederick, Coloradofacility. We have established relationships with many high-quality, low-costsuppliers, including a number of international companies. Future plans are tocontinue the development and introduction of more advanced and automatedmanufacturing systems which we believe will ensure our competitiveness in newand emerging markets.

With the successful introduction of electric auxiliary motorsand power electronic boxes currently in production vehicles, we are now turningour attention to the volume production of high power generators and electricpropulsions systems. We believe that the Company is well positioned to leverageits technology and pursue significant production programs with major OEMs and/ortheir Tier 1 suppliers.
**Our Opportunity**
We have developed a range of products including electricpropulsion systems, generators, motor controllers and other power electronicproducts that we believe are ideally suited to the emerging markets forelectric, hybrid electric and fuel cell electric vehicles.

Hybrid electric passenger vehicle sales have grownsubstantially since their introduction in the North American market in 2000,with over one million units being sold since their introduction. As a result,the fuel economy and emission benefits of hybrid electric technology are broadlyunderstood by consumers worldwide. This, in concert with higher oil prices, taxcredits for hybrid electric vehicle purchasers, stricter government emissionregulations and growing environmental consciousness, has generated market demandfor this class of vehicle. Until recently, passenger vehicle makers have electedto develop their own hybrid electric systems and components, either individuallyor in cooperation with Tier 1 automotive suppliers; however, we have recentlysupplied our propulsion systems to six international automotive manufacturers aspart of their electric and hybrid electric vehicle development activities.Should any of these automakers elect to utilize our products in future modellaunches, it would have a material impact on our future rate of growth.

In addition to the passenger automobile market, vehiclemakers of all types have been evaluating the potential of applying hybridelectric technology to their vehicle platforms. Of these manufacturers,agricultural, construction, medium and heavy-duty truck and bus builders havebeen the most active, driven by the performance and fuel economy advantagesavailable from this technology, the availability of large amounts of onboard andexportable power and stricter diesel emission mandates.

Last year, International Truck and Engine Corporation, aNavistar Company, announced that it was the first company to enter lineproduction of hybrid electric commercial trucks, introducing the International®DuraStarTM Hybrid, a diesel electric medium-dutytruck. Similarly, Peterbilt Motors Company, a division of PACCAR Inc., beganfull production of its Model 330 and Model 335 medium-duty hybrid trucks at itsmanufacturing facility in Ste. Therese, Quebec, Canada in the summer of 2008 andFreightliner Trucks, a division of Daimler Trucks North America LLC hasintroduced its Business Class® M2e Hybrid Truck. Allof these truck manufacturers use the Eaton Corporation hybrid electric system.The automotive certified DC-to-DC converter manufactured by us for EatonCorporation is on board many of these hybrid trucks. In addition, Caterpillar,Inc. recently introduced the D7E crawler tractor incorporating an electric drivesystem for track-type tractors with an electric system that provides power toelectric auxiliaries so that no engine belts are required. We believe that theseindustry developments signal the beginning of a potentially large-scaledeployment of electric propulsion and related electronic products into marketsother than mass-market passenger automobiles. Should these products receivebroad customer acceptance, as we expect they will, potentially substantialopportunities will likely develop over time for our company and other similarlysituated companies that have developed technologically advanced products inanticipation of the emergence of these markets.

The operating characteristics of electric motors for vehiclepropulsion are different from those of more conventional industrial motors.Propulsion motors ideally deliver high levels of torque efficiently at slowrotational speeds and possess the ability to transition from high torque to highspeed over a relatively constant power curve allowing, in many cases, theelimination of conventional transmissions. Our proprietary propulsion systemshave been specifically developed for these applications and deliver exceptionaltorque and high rotational speeds in a compact, energy efficient machine. Webelieve that our portfolio of propulsion systems, power electronic controllersand related electronic products has well positioned our company to competeeffectively in these emerging markets. Electric and hybrid electric vehiclemakers to-date have generally adopted a 340-volt electrical system to deliverthe energy from the battery pack to the electric components and vice versa.Conventional gasoline vehicles generally have a 12-volt electrical system thatoperates dashboard instruments, lights, horns, etc. The higher electrical systemvoltages of electric and hybrid vehicles are creating opportunities forcompanies such as ours to enter the automotive market with a wide-range ofunder-the-hood auxiliaries including generators and motors to drive water, oiland power steering pumps, air conditioning compressors, and cooling fans, thatoperate at the new higher voltage.

These industry developments, as well as the potentialproduction requirements of our existing customers, may require us to invest asubstantially greater amount of financial and human resources in fiscal 2010 andbeyond in the commercial launch of products. We believe these investments arenecessary to support our strategy of aggressively rolling out automotivecertified products to satisfy our customers' requirements as these new marketopportunities emerge and expand.

As the markets for these advanced vehicles continue to emergeand expand into additional vehicle platforms over the next several years, weexpect to experience potentially rapid growth in our revenue coincident with theintroduction of electric products by our customers. In parallel to theseactivities in emerging markets, we expect to continue to pursue additionalproduction opportunities for our proprietary technology in existing marketswhere the performance of our products can provide our customers with acompetitive advantage in the markets they serve.
**Business Segments**
At March 31, 2009, we had two reportable segments. Thesereportable segments are strategic business units that offer different productsand services and are managed separately because of their different businessstrategies.
***Technology Segment

Our technology segment encompasses the operations of ourEngineering and Product Development Center which shares a 28,000 square footfacility located in Frederick, Colorado with our motor manufacturing operationswhich are reported in the power products segment. The Engineering and ProductDevelopment Center is equipped with research and development laboratories,prototype build and test facilities for electric motors, generators, powerelectronic controllers, software, and vehicle integration activities. Inaddition, we lease 6,000 square feet in a nearby facility where we performvehicle integration activities. The technology segment conducts customer fundedand internally-funded research and engineering activities directed toward: 1)the development of new motors, generators, and power electronic controllers tomeet the requirements of customers' specific product applications; 2)integration of our motors, generators and power electronic controllers intocustomers' products; and 3) support of our power products segment and the lowvolume manufacture of motors, generators and power electronic controllers.
***Power Products Segment***
Our power products segment encompasses the operations of ourwholly-owned subsidiary, UQM Power and shares a 28,000 square foot facilitylocated in Frederick, Colorado with the technology segment. UQM Power is themanufacturer of our proprietary products in higher volumes. UQM Power is an ISO 9001:2000quality certified manufacturer of motors and electronic products designedby the company.
**Competition**
All of the markets in which we operate are highlycompetitive. The markets served by the technology segment are additionallycharacterized by rapid changes due to technological advances that can renderexisting technologies and products obsolete.

The technology segment has developed advanced electricpropulsion systems and components which we hope to market to vehicle OEMs andtheir Tier 1 suppliers throughout the world for use in electric, hybridelectric, plug-in hybrid electric and fuel cell electric vehicles. In recentyears, the market for hybrid electric automobiles has begun to emerge, led bythe introduction and market success of hybrid electric vehicles manufactured byToyota, Lexus, Honda, Ford and General Motors. Recently, International Truck andEngine Corporation and, Freightliner Trucks and Peterbilt Motors Companyannounced plans to begin production of hybrid electric medium-duty trucks andCaterpillar, Inc. introduced a belt-less engine/electric tracked bulldozer. As aresult, additional vehicle makers in both on-road and off-road markets areexpected to develop and introduce a variety of hybrid electric vehicles as themarket acceptance of these vehicles continues to grow. We cannot assure that wewill be able to compete successfully in this market or any other market that nowexists or may develop in the future. There are numerous companies developingproducts that do or soon will compete with our systems. Some of these companiespossess significantly greater financial, personnel and other resources than wedo, including established supply arrangements and volume manufacturingoperations. In addition, the U.S. Government's Stimulus Bill is expected toaward substantial financial grants and loans to companies engaged in thedevelopment and manufacture of energy efficient, low emission vehicles and thecomponents that enable their operation. Companies that receive awards under theStimulus Bill may have substantially greater financial resources available tothem which could improve their ability to compete with us. We believe ourprincipal competitors include Honda, Toyota, General Motors, Daimler, Hitachi,Toshiba, Siemens, Delphi, Danaher, Enova and United Technologies Corp.

The power products segment competes primarily in theautomotive, heavy equipment, military, aerospace and medical productsindustries. Each of these industries is extremely competitive. We facesubstantial competition on a continuing basis from numerous companies, many ofwhom possess longer operating histories, significantly greater financialresources and marketing, distribution and manufacturing capability. We believeour principal competitors include Advanced Motors and Drives, Allied Motion,Emerson Electric, General Electric, Moog, Rockwell International, Baldor,Hitachi, Hyundai, Toshiba, Siemens, Delphi, Danaher,United Technologies, L-3 Communications and Enova.**Patents**
We hold several groups or families of patents.

U.S. Patent Nos. 5,311,092 and 5,319,844 disclose and claim alightweight high-power electromagnetic transducer and method of making the same.Corresponding applications have been filed and issued in several foreigncountries.

U.S. Patent No. 5,592,731 and U.S. Patent No. 5,382,859relate to a stator for high-power density electric motors and generators, and amethod of constructing the same. Corresponding applications have been filed andissued in several foreign countries.

U.S. Patent No. 5,677,605 discloses and claims a brushlessmotor and drive system using phase timing advancement. Correspondingapplications have been filed and issued in several foreign countries.

U.S. Patent No. 5,982,063 discloses and claims an electricmotor having an internal brake. Corresponding applications have been filed andissued in several foreign countries.

U.S. Patent No. 6,522,130 discloses and claims a method forcontrolling a brushless electric motor having a rotor, and relates to anaccurate method for sensing rotor position and detecting rotational speed over abroad range of speeds. U.S. Patent No. 6,693,422 is a related U.S. patententitled "Accurate Rotor Position Sensor and Method Using Magnet andSensors Mounted Adjacent to the Magnet and Motor". Correspondingapplications have been filed and issued in several foreign countries.

In 2007, we filed patent applications for a stator design anda permanent magnet rotor geometry for permanent magnet electric motors in theUnited States, Canada, and Europe. These applications are currently pending.

In January of 2009, we filed a U.S. patent application for adistributed generation power system having an integrated electric utility meterand inverter system, including the physical design, placement andinterconnection of the integrated electric utility and inverter system.

In 1994, we executed an agreement with Alcan AluminiumLimited ("Alcan") in which Alcan assigned to us all of its rights,title and interests in certain motor technology developed under a program fundedby Alcan.  This agreement further provides that we shall pay to Alcanroyalties of one-half of one percent on revenue derived from the manufacture andsale of products or processes embodying the related technology. Royalty paymentsunder this agreement for the fiscal years ended March 31, 2009, 2008 and 2007were $39,850, $32,988 and $23,848, respectively.

We also intend to rely on the unpatented proprietary know-howwe have developed and now utilize in our products. We cannot provide assurancethat others will not independently develop, acquire or obtain access to ourtechnology. Although we protect our unpatented proprietary rights by executingconfidentiality agreements with our management, employees and others with accessto our technology, these measures may not be adequate to protect us fromdisclosure or misappropriation of our proprietary information.

**Trademarks**
We have registered the letters "UQM" in the U.S.Patent and Trademark Office. Counterpart applications have been filed innumerous countries throughout the world, most of which have grantedregistrations or indicated them to be allowable. We own three U.S. TrademarkRegistrations for "UQM" (International Class 7 for power transducers,Class 12 for utility land vehicles, and Class 16 for publications). The foreigntrademark registrations and applications include major markets where we aredoing business or establishing business contacts.

We have also registered the trademark "POWERPHASE"which we use in conjunction with certain of our propulsion systems. Thetrademark is registered in the European Community and several other foreigncountries.
**Backlog**
Our technology segment had unperformed service contracts fromcustomers, which will provide future revenue upon completion totalingapproximately $0.7 million, and an order backlog for prototype motors andcontrollers of approximately $2.0 million at April 30, 2009, compared to $2.4million and $0.8 million, respectively at April 30, 2008. All such servicecontracts are subject to amendment, modification or cancellation. We expect tocomplete all unperformed service contracts over the next six months and shipmotor and controller backlog products over the next twelve months.

Our power products segment had an order backlog ofapproximately $3.0 million at April 30, 2009 compared to $3.7 million at April30, 2008. Many orders are issued to us as blanket purchase orders subject to theissuance of subsequent release orders which direct the number and timing ofactual deliveries. Substantially all of the backlog amounts at April 30, 2009and 2008 are subject to amendment, modification or cancellation. We expect toship all backlog products within the next twelve months.
**Customers and Suppliers**
We have historically derived significant revenue from a fewkey customers. Revenue from Invacare Corporation, which is a customer of ourpower products segment, was $292,414, $508,903, and $830,637 for the fiscalyears ended March 31, 2009, 2008 and 2007, respectively, representing 3.4percent, 6.8 percent and 12.5 percent of consolidated total revenue,respectively. This customer also represented 2.0 and 15.9 percent of totalaccounts receivable at March 31, 2009 and, 2008, respectively. Inventoriesconsisting of raw materials, work-in-process and finished goods for InvacareCorporation were nil and 7.0 percent of consolidated total inventories at March31, 2009 and 2008, respectively. Revenue from Lippert Components, Inc., which isalso a customer of our power products segment, was $635,144, $1,271,502 and$1,059,930 for the fiscal years ended March 31, 2009, 2008 and 2007,respectively, representing 7.3 percent, 16.9 percent and 15.9 percent ofconsolidated total revenue, respectively. This customer also represented nil and8.1 percent of total accounts receivable at March 31, 2009 and 2008,respectively. Inventories consisting of raw materials, work-in-process andfinished goods for Lippert Components, Inc. were 26.7 and 32.6 percent ofconsolidated total inventories at March 31, 2009 and 2008, respectively. Revenuefrom the Denver Regional Transportation District, which is a customer of ourPower Products segment, was $3,337, $864,540, and $417,750 for the fiscal yearsended March 31, 2009, 2008 and 2007, respectively; representing nil, 11.5percent and 6.3 percent of consolidated total revenue, respectively. Thiscustomer also represented nil and 19.9 percent of total accounts receivable atMarch 31, 2009 and 2008, respectively. We did not have any raw materials,work-in-process or finished goods inventory for the Denver RegionalTransportation District at March 31, 2009 and 2008. Revenue from Quantum FuelSystems Technologies Worldwide Inc., which is also a customer of our powerproducts segment, was $1,360,909, $256,393 and zero for the fiscal years endedMarch 31, 2009, 2008 and 2007, respectively, representing 15.6 percent, 3.4percent and nil percent of consolidated total revenue, respectively. Thiscustomer also represented 15.8 and 8.1 percent of total accounts receivable atMarch 31, 2009 and 2008, respectively. We did not have any raw materials,work-in-process or finished goods inventory for Quantum Fuel SystemsTechnologies Worldwide Inc. at March 31, 2009 and 2008.

Principal raw materials and components purchased by usinclude iron, steel, electronic components, magnets and copper wire. Most ofthese items are available from several suppliers. Certain components used by usare custom designs and if our current supplier no longer made them available tous, we could experience production delays.
**U.S. Government Contracts**
Revenue derived from contracts with agencies of the U.S.Government and from subcontracts with U.S. Government prime contractors was$1,989,872 or approximately 22.8 percent of our consolidated total revenue, forthe year ended March 31, 2009, $2,329,248, or approximately 31.0 percent of ourconsolidated total revenue, for the year ended March 31, 2008 and $2,313,856, orapproximately 34.8 percent of consolidated total revenue, for the year endedMarch 31, 2007. Accounts receivable from government-funded contracts represented5.6 percent and 11.5 percent of total accounts receivable as of March 31, 2009and 2008, respectively.

Some of our business with the U.S. Government was performedon a cost plus fixed fee basis. These contracts provide for reimbursement ofcosts, to the extent allocable and allowable under applicable regulations, andpayment of a fee. Certain other contracts with the U.S. Government provide forthe reimbursement of costs on a 50 percent cost-sharing basis based onnot-to-exceed billing rates negotiated between the U.S. Government and us. OtherU.S. Government business is performed under firm fixed price contracts. On"cost-share" and "firm fixed price" contracts, we can incuran actual loss in the performance thereof if incurred costs exceed the contractamount. All of our U.S. Government contracts are subject to modification orcancellation at the convenience of the Government.
**Employee and Labor Relations**
As of April 30, 2009, we had 60 total employees, of whom 59are full-time employees. We have entered into employmentcontracts with four of our executive officers. All of these contracts expire onAugust 22, 2012. None of our employees are covered by a collective bargainingagreement. We believe our relationship with employees has been generallysatisfactory.

In addition to our full-time staff, we from time to timeengage the services of outside consultants and contract employees to meet peakworkload or specialized program requirements. We do not anticipate anydifficulty in locating additional qualified engineers, technicians andproduction workers, if so required, to meet expanded research and development ormanufacturing operations.
**Available Information**
We file annual, quarterly and current reports, proxystatements and other information with the Securities and Exchange Commission("SEC"). Anyone seeking information about our business can receivecopies of our 2009 Annual Report on Form 10-K, Annual Report to Shareholders,Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, all amendments tothose reports and other documents, filed with the SEC at the public referencesection of the SEC at 100 F Street, NE, Room 1580, Washington, D.C. 20549. Thesedocuments also may be obtained, free of charge, by: contacting our InvestorRelations office by e-mail at investor@uqm.com; by phoneat (303) 278-2002; writing to UQM Technologies, Inc., Investor Relations, PO Box439, Frederick, CO 80530-0439; or accessing our website at www.uqm.com.We make our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, CurrentReports on Form 8-K and amendments to those reports filed or furnished pursuantto Section 13(a) or 15(d) of the Securities Exchange Act of 1934, available onour website as soon as reasonably practicable after we file or furnish thematerials electronically with the SEC. [To obtain any of this information, go towww.uqm.com, select "Investor Relations" and"SEC Filings."] Our website also includes our Audit Committee Charterand Code of Business Conduct and Ethics as well as the procedures for reportinga violation of business ethics.
**********ITEM 1A.**RISK FACTORS
TOC

Our business is subject to a number of risks anduncertainties, many of which are outside of our control.
**We have incurred significant losses and may continue to doso.**
We have incurred significant net losses as shown in thefollowing tables:
 
                                 Fiscal      Year Ended March      31,                           
      2009       
      2008       
     2007          
Net loss
$  4,402,019 
$   4,586,105 
$ 3,431,357 
We have had accumulated deficits as follows:

March 31, 2009
$ 69,425,239   
March 31, 2008
$ 65,023,220 
In the future, we plan to make additional investments inproduct development and commercialization, we expect willcause us to remain unprofitable for at least the next fewyears.
**Our operating losses and working capital requirements couldconsume our current cash balances.**
Our net loss for the fiscal year ended March 31, 2009 was$4,402,019 versus a net loss last fiscal year of $4,586,105. At March 31, 2009,our cash and short-term investments totaled $5,793,666. Weexpect our losses to continuefor at least the next few years, and our operations couldconsume some or all of our cash balances. We expect to make additionalinvestments in human resources, manufacturing facilities and equipment,production and application engineering, among other things, in order toeffectively compete in the emerging market for electric and hybrid electricvehicles. We cannot assure you, however, that our existing cash resources willbe sufficient to complete our business plan. Should our existing cash resourcesbe insufficient, we may need to secure additional funding. We cannot assure you;however, that funding will be available on terms acceptable to us, if at all.**Some of our contracts can be cancelled with little or nonotice and could restrict our ability to commercialize our technology.**
Some of our technology has been developed under governmentfunding by United States government agencies. In some cases, government agenciesin the United States can require us to obtain or produce components for oursystems from sources located in the United States rather than foreign countries.Our contracts with government agencies are also subject to the risk oftermination at the convenience of the contracting agency and in some cases grant"march-in" rights to the government. March-in rights are the right ofthe United States government or the applicable government agency, under limitedcircumstances, to exercise a non-exclusive, royalty-free, irrevocable worldwidelicense to any technology developed under contracts funded by the government tofacilitate commercialization of technology developed with government funding.March-in rights can be exercised if we fail to commercialize the developedtechnology. The implementation of restrictions on our sourcing of components orthe exercise of march-in rights by the government or an agency of the governmentcould restrict our ability to commercialize our technology.

Some of our orders for the future delivery of products areplaced under blanket purchase orders which may be cancelled by our customers atany time. The amount payable to the company, if any, upon cancellation by thecustomer varies by customer. Accordingly, we may not recognize as revenue all orany portion of the amount of outstanding order backlog we have reported.
**We face intense competition in our motor development and maybe unable to compete successfully.**
In developing electric motors for use in vehicles and otherapplications, we face competition from very large domestic and internationalcompanies, including the world's largest automobile manufacturers. Thesecompanies have far greater resources to apply to research and developmentefforts than we have, and they may independently develop motors that aretechnologically more advanced than ours. These competitors also have muchgreater experience in and resources for marketing their products. In addition,the U.S. Government is expected to award substantial financial grants and loansunder the recently enacted stimulus bill to companies engaged in the developmentand manufacture of energy efficient, low emission vehicles. To the extent thatour competitors receive awards under the stimulus bill in amounts orproportions greater than we do, our ability to compete could be adverselyimpacted.
**If we fail to develop and achieve market acceptance for ourproducts, our business may not grow.**
We believe our proprietary systems are suited for awide-range of vehicle electrification applications. We currently expect to makesubstantial investments in human resources, manufacturing facilities andequipment, production and application engineering, among other things, tocapitalize on the anticipated expansion in demand for products related to thismarket area. However, our experience in this market area is limited. Our salesin this area will depend in part on the market acceptance of and demand for ourproprietary propulsion systems and related future products. We cannot be certainthat we will be able to introduce or market our products, develop other newproducts or product enhancements in a timely or cost-effective manner or thatour products will achieve market acceptance.
**If we are unable to protect our patents and other proprietarytechnology, we will be unable to prevent third parties from using ourtechnology, which would impair our competitiveness and ability to commercializeour products. In addition, the cost of enforcing our proprietary rights may beexpensive and result in increased losses.**
Our ability to compete effectively against other companies inour industry will depend, in part, on our ability to protect our proprietarytechnology. Although we have attempted to safeguard and maintain our proprietaryrights, we do not know whether we have been or will be successful in doing so.We have historically pursued patent protection in a limited number of foreigncountries where we believe significant markets for our products exist or wherepotentially significant competitors have operations. It is possible that asubstantial market could develop in a country where we have not received patentprotection and under such circumstances our proprietary products would not beafforded legal protection in these markets. Further, our competitors mayindependently develop or patent technologies that are substantially equivalentor superior to ours. We cannot assure that additional patents will be issued tous or, if they are issued, as to the scope of their protection. Patents grantedmay not provide meaningful protection from competitors. Even if a competitor'sproducts were to infringe patents owned by us, it would be costly for us topursue our rights in an enforcement action, it would divert funds and resourceswhich otherwise could be used in our operations and we cannot assure that wewould be successful in enforcing our intellectual property rights. In addition,effective patent, trademark, service mark, copyright and trade secret protectionmay not be available in every country where we may operate or sell our productsin the future. If third parties assert technology infringement claims againstus, the defense of the claims could involve significant legal costs and requireour management to divert time and attention from our business operations. If weare unsuccessful in defending any claims of infringement, we may be forced toobtain licenses or to pay royalties to continue to use our technology. We maynot be able to obtain any necessary licenses on commercially reasonable terms orat all. If we fail to obtain necessary licenses or other rights, or if theselicenses are costly, our results of operations may suffer either from reductionsin revenues through our inability to serve customers or from increases in coststo license third-party technologies.

 
**Use of our motors in vehicles could subject us to productliability claims, and product liability insurance claims could cause an increasein our insurance rates or could exceed our insurance limits, which could impairour financial condition, results of operations and liquidity.**
Because most of our motors are designed for use in vehicles,and because vehicle accidents can cause injury to persons and property, we aresubject to a risk of claims for product liability. We carry product liabilityinsurance of $10 million covering most of our products. If we were to experiencea large insured loss, it might exceed our coverage limits, or our insurancecarriers could decline to further cover us or raise our insurance rates tounacceptable levels, any of which could impair our financial position andresults of operations.
**ITEM 1B.**UNRESOLVED STAFF COMMENTS
 TOC

None.
 

**ITEM 2.**
**PROPERTIES**
TOC
We own or lease our offices and manufacturing      facilities and believe these facilities to be well maintained, adequately      insured and suitable for their present and intended uses. Information      concerning our facilities as of March 31, 2009 is set forth in the table      below:
  
Ownership or 
                 Location                   
Square Feet
Expiration Date of Lease
                          Use                            
Frederick, Colorado
28,000
Own
Manufacturing, laboratories and offices
Frederick, Colorado
6,000
Month-to-Month
Vehicle integration** 
**ITEM 3.**LEGAL PROCEEDINGS
 TOC
**Litigation
In November      2007, we filed an arbitration claim with the American Arbitration      Association ("AAA") against Phoenix MC, Inc., as successor by      merger to Phoenix Motorcars, Inc. ("Phoenix") seeking damages      for Phoenix's breach of the Purchase and Supply Agreement between Phoenix      and UQM Technologies, Inc. dated January 12, 2007. The matter was heard by      an AAA arbitration panel (the "Panel") in December 2008. On      February 24, 2009, the AAA notified us of the Panel's findings that      Phoenix had materially breached the Agreement and awarded monetary damages      to us in the amount of $5,309,649. In addition, the Panel awarded us      post-award interest at the rate of 10 percent per annum on the unpaid      amount of the award subsequent to February 6, 2009. On April 27, 2009,      Phoenix filed a Chapter 11 Bankruptcy petition with the U.S. Bankruptcy      Court. As a result of the bankruptcy filing, efforts to collect on the      arbitration award are stayed. At this time, whether, to what extent, and      when, we will be able to recover any of the amounts that Phoenix owes is      uncertain.

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, although adverse      developments in these matters could have a material impact on a future      reporting period.** ****ITEM 4.**SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
TOC
There were no matters submitted to a vote of security    holders of the Company during the quarter ended March 31, 2009.

 
**PART II
TOC
**ITEM 5.**
**MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED      STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES**
TOC
Our common stock trades on the NYSE Amex, Chicago,      Pacific Stock, Frankfurt and Berlin Stock Exchanges. The high and low      trade prices, by fiscal quarter, as reported by the NYSE Amex Stock      Exchange for the last two fiscal years are as follows:
 
2009
 High
 Low
Fourth Quarter
$2.49
$1.25
Third Quarter
$2.85
$1.20
Second Quarter
$2.90
$1.50
First Quarter
$2.82
$1.23   
2008
 High
 Low
Fourth Quarter
$3.49
$1.19
Third Quarter
$4.05
$2.90
Second Quarter
$4.49
$3.04
First Quarter
$4.46
$3.66   
 

On May 18, 2009 the closing price of our common stock,      as reported on the NYSE Amex, was $1.89 per share and there were 734      holders of record of our common stock. 
We have not paid any cash dividends on our common stock      since inception and we intend for the foreseeable future to retain any      earnings to finance the growth of our business. Future dividend policy      will be determined by the Board of Directors based upon consideration of      our earnings, capital needs and other factors then relevant.
 
**PERFORMANCE GRAPH2
 

The following graph represents the yearly percentage change in the cumulativetotal return on the common stock of UQM Technologies, Inc., the group ofcompanies comprising the S&P Electrical Equipment Index, and those companiescomprising the S&P 500 Index for the five year period from 2003 through2008:

                                

2 The stock price performance graph depicted is not"soliciting material," is not deemed "filed" with the SEC,and is not to be incorporated by reference into any filing of the Company underthe Securities Act of 1933, as amended, or the Exchange Act, whether made beforeor after the date hereof and irrespective of any general incorporation containedin such filing.

 
**ITEM 6.**SELECTED CONSOLIDATED FINANCIAL DATA
TOC
The selected consolidated financial data presented below should be read      in conjunction with our consolidated financial statements and relatednotes included elsewhere in this document.

UQM Technologies, Inc. 
Selected Consolidated Financial Data  
                                                             Years      Ended March      31,                                                         
        2009     
        2008     
       2007     
     2006     
      2005     
Contract services revenue
$   2,717,246 
2,591,939 
2,907,536 
   2,502,098 
 2,281,427 
Product sales
$   6,011,065 
4,916,383 
3,745,658 
   1,820,468 
2,481,864 
Loss before other income
(expense)
$ (4,479,743)
 (4,995,242)
 (3,800,722)
 (3,039,659)
(1,837,480)
Net loss
$ (4,402,019)
(4,586,105)
(3,431,357)
 (2,784,970)
(1,868,896)      
Net loss per common share -      
basic and diluted
$     (0.17)     
(0.18)     
(0.14)     
(0.11)     
(0.09)     
       
       
        
    
    
Total assets
$ 12,422,832 
16,402,546 
14,012,607 
 14,796,088 
13,159,640       
Long-term obligations (1)
$   1,490,472 
1,520,798 
1,167,224 
      924,559 
 946,170       
Cash dividend declared per      
common share
$        -0-       
-0-       
-0-       
-0-       
-0-             
(1) Includes current portion of long-term obligations.
 
**ITEM 7.**MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
TOC*This Report contains statements that constitute"forward-looking statements" within the meaning of Section 27A of theSecurities Act and Section 21E of the Securities Exchange Act. These statementsappear in a number of places in this Report and include statements regarding ourplans, beliefs or current expectations; including those plans, beliefs andexpectations of our officers and directors with respect to, among other things,the development of markets for our products, the adequacy of our cash balancesand liquidity to meet future operating needs, and our ability to issue equity ordebt securities. Important Risk Factors that could cause actual results todiffer from those contained in the forward-looking statements are listed belowin Part I, Item 1A. Risk Factors.***Introduction**
We generate revenue from two principal activities: 1)research, development and application engineering services that are paid for byour customers; and 2) the sale of motors, generators and electronic controls.The sources of engineering revenue typically vary from year to year andindividual projects may vary substantially in their periods of performance andaggregate dollar value. Our product sales consist of both prototype low volumesales, which are generally sold to a broad range of customers, and annuallyrecurring higher volume production. During the fiscal year ended March 31, 2009our total revenue increased 16 percent to $8,728,311, driven primarily byincreased product sales which rose 22 percent to $6,011,065.

Production engineering expenses for the year ended March 31,2009 rose 10 percent to $1,869,848, reflecting engineering activities associatedwith the design and installation of a new production cell for our largerpropulsion motors and production design activities on our motor and controllerproducts.

Net loss for the current fiscal year decreased by $184,086 to$4,402,019 or $0.17 per common share versus $4,586,105 or $0.18 per common shareand $3,431,357, or $0.14 per common share for the fiscal years ended March 31,2008 and 2007, respectively. The decrease in losses versus last fiscal year isattributable to higher levels of revenue and higher gross profit margins onproduct sales revenue.

During the last year the automotive industry experienced asubstantial reduction in demand resulting from the global credit crisis andrecessions in the primary national economies worldwide. In reaction to thesedevelopments, many countries around the world passed legislation designed tostimulate industry within their countries, loosened monetary policy tocounteract the credit crisis and promote increased lending activities and, insome cases, nationalized certain companies or loaned them government funds. Inthe automotive industry, General Motors and Chrysler both received substantialgovernment funds, Chrysler has filed for bankruptcy protection and there is, atthis time, substantial doubt regarding General Motor's ability to avoidseeking bankruptcy protection. Despite these developments in one of the primaryindustries served by our company, we experienced strong demand for ourpropulsion system products. This demand was fueled, in part, by the efforts ofnumerous automobile companies worldwide to develop and introduce morefuel-efficient vehicles including all-electric, hybrid-electric and plug-inhybrid-electric automobiles. Although we are continuing to experience strongdemand for our electric propulsion systems and generators at this time, futuredevelopments in the automobile industry related to original equipmentmanufacturers or their large suppliers could adversely affect the future demandfor our products. Despite the turmoil automakers are experiencing currently,numerous automobile companies have publicly announced their strategies to fieldan increasing number of fuel-efficient vehicles in the future to better matchtheir product offerings to the type of vehicle consumers demand in anenvironment of rising oil and gasoline prices. Many of these new vehicleofferings are expected to be powered by either all-electric or hybrid-electricpowertrains. Should these strategies be implemented, we may experience asubstantial increase in product sales revenue arising from the commercialintroduction of this class of vehicles powered by our propulsion systems and/orgenerators.

In the event industry developments lead to additional demandfrom our customers, we may be required to invest a substantial amount offinancial and human resources on the commercial launch of our products.Specifically, we may need to 1) increase the size of ourproduction engineering group, 2) increase the level of our capital expendituresfor manufacturing equipment and tooling, and 3) expand our manufacturingfacility in Frederick, Colorado. We believe these investments may be necessaryto support our strategy of aggressively rolling out automotive certifiedproducts to satisfy our customers' requirements as these new marketopportunities emerge and expand.

We believe our existing cash and short-term investments,which amounted to approximately $5.8 million at fiscal year end, will beadequate to fund our anticipated growth for the fiscal year ended March 31, 2010and likely beyond, however, if our growth continues to accelerate we may requireadditional capital sooner.
**Financial Condition**
Cash and cash equivalents and short-term investments at March31, 2009 were $5,793,666 and working capital (the excess of current assets overcurrent liabilities) was $6,640,877 compared with $9,765,892 and $10,510,175,respectively, at March 31, 2008. The decrease in cash and short-term investmentsand working capital is primarily attributable to operating losses, higher levelsof inventories and investments in property and equipment offset by lower levelsof accounts receivable.

Accounts receivable decreased $387,040 to $917,099 at March31, 2009 from $1,304,139 at March 31, 2008. The decrease is primarilyattributable to lower levels of contract service billings as of March 31, 2009.Substantially all of our customers are large well-established companies of highcredit quality. Although we have not established an allowance for bad debts atMarch 31, 2009 and no allowance for bad debts was deemed necessary at March 31,2008, in light of current economic conditions we may need to establish anallowance for bad debts in the future.

Costs and estimated earnings on uncompleted contractsdecreased $6,572 to $643,098 at March 31, 2009 versus $649,670 at March 31,2008. The decrease is due to more favorable billing terms on certain contractsin process at March 31, 2009 versus March 31, 2008. Estimated earnings oncontracts in process decreased to $194,861 or 4.2 percent of contracts inprocess of $4,609,747 at March 31, 2009 compared to estimated earnings oncontracts in process of $377,822 or 11.1 percent of contracts in process of$3,396,292 at March 31, 2008. The decrease in estimated margins on contracts inprocess is attributable to higher cost incurrence than expected on theperformance of these contracts.

Inventories increased $345,682 to $1,307,171 at March 31,2009 versus $961,489 at March 31, 2008 principally due to increased levels ofraw materials, work-in-process and finished goods inventories which increased$73,372, $239,885 and $32,425, respectively; reflecting higher levels of lowvolume product builds in process at March 31, 2009.

Prepaid expenses and other current assets decreased to$117,768 at March 31, 2009 from $119,647 at March 31, 2008 primarily due tolower levels of prepaid rent at the end of the current fiscal year versus theprior fiscal year end.

We invested $570,986 for the acquisition of property andequipment during the fiscal year compared to $803,121 last fiscal year. Thedecrease in capital expenditures is primarily due to fewer building improvementsand purchases of manufacturing equipment during fiscal 2009.

Patent and trademark costs decreased $39,581 to $438,184 atMarch 31, 2009 versus $477,765 at March 31, 2008 due to systematic amortizationof patent issuance costs, which was partially offset by the costs associatedwith the filing of a new patent application.

Other assets decreased $165,106 to $76,443 at March 31, 2009from $241,549 at March 31, 2008 due to lower levels of prepayments on capitalequipment purchases at the end of the current fiscal year versus the priorfiscal year end.

Accounts payable decreased $89,398 to $651,129 at March 31,2009 from $740,527 at March 31, 2008, primarily due to improved paymentprocessing during the current fiscal year.

Other current liabilities increased $228,387 to $600,672 atMarch 31, 2009 from $372,285 at March 31, 2008. The increase is primarilyattributable to higher levels of accrued payroll and employee benefits andhigher levels of unearned revenue associated with customer prepayments.

Current portion of long-term debt increased $310,921 to$416,923 at March 31, 2009 from $106,002 at March 31, 2008 and long-term debt,less current portion, decreased $416,923 to zero at March 31, 2009. Both changesare due to a scheduled balloon payment in November of 2009 on the mortgage forour Frederick, Colorado facility. We expect to extend the term of this mortgagedebt prior to its maturity; however, we cannot assure you that an extension willbe completed.

Short-term deferred compensation under executive employmentagreements increased to $397,834 at March 31, 2009 versus $364,000 at March 31,2008 reflecting periodic accruals of future severance obligations underexecutive employment agreements.

Billings in excess of costs and estimated earnings onuncompleted contracts decreased $636,481 to $71,367 at March 31, 2009 from$707,848 at March 31, 2008 reflecting decreased levels of billings on certainengineering contracts in process at the end of the fiscal year ended March 31,2009 in advance of the performance of the associated work versus the priorfiscal year.

Long-term deferred compensation under executive employmentagreements increased $41,842 to $675,715 at March 31, 2009 from 633,873 at March31, 2008 reflecting periodic accruals of future severance obligations underexecutive employment agreements.

Common stock and additional paid-in capital increased to$267,277 and $78,767,154, respectively, at March 31, 2009 compared to $265,267and $77,819,041 at March 31, 2008. The increase in additional paid-in capitalwas primarily attributable to the recording of non-cash share based payments.
**Results of Operations**
Operations for the fiscal year ended March 31, 2009, resultedin a net loss of $4,402,019, or $0.17 per common share, compared to a net lossof $4,586,105, or $0.18 per common share, and $3,431,357, or $0.14 per commonshare, for the fiscal years ended March 31, 2008 and 2007, respectively. Thereduction in the current year net loss is primarily attributable to higherlevels of product sales revenue, expanded gross profit margins on product sales,and lower selling, general and administrative expenses. Non-cash expense arisingfrom share-based payments for the fiscal year ended March 31, 2009, 2008 and2007 was allocated as follows:
 
Year Ended
Year Ended
Year Ended 
March 31, 2009
March 31, 2008
March 31, 2007
Cost of contract services
$    110,329          
    113,507          
    154,828          
Cost of product sales
84,875          
60,933          
48,606          
Research and development
37,903          
25,652          
22,612          
Production engineering
128,553          
132,494          
113,013          
Selling, general and administrative
   711,383          
   842,349          
618,697              
$ 1,073,043          
 1,174,935          
 957,756          
Revenue from contract services increased $125,307, or 4.8percent, to $2,717,246 for the fiscal year ended March 31, 2009 versus$2,591,939 for the fiscal year ended March 31, 2008. The increase is primarilyattributable to higher levels of material purchases for billable programs thisfiscal year versus last fiscal year. Revenue from contract services decreased10.9 percent to $2,591,939 for the fiscal year ended March 31, 2008 compared to$2,907,536 for the fiscal year ended March 31, 2007. The decrease was primarilyattributable to the increased allocation of engineering resources to productionengineering activities during fiscal 2008 versus fiscal 2007.

Product sales this fiscal year increased 22.3 percent to$6,011,065 compared to $4,916,383 for the fiscal year ended March 31, 2008.Product sales for the fiscal year ended March 31, 2008 increased 31.3 percent to$4,916,383 compared to $3,745,658 for the year ended March 31, 2007. Powerproducts segment revenue for the year ended March 31, 2009 increased $155,268,or 5.0 percent, to $3,272,377 compared to $3,117,109 for fiscal year ended March31, 2008 due to increased shipments of DC-to-DC converters and the shipment ofelectric propulsion systems. Power products segment revenue for the year endedMarch 31, 2008 increased to $3,117,109 versus $2,626,939 for fiscal year endedMarch 31, 2007 due to increased shipments of vehicle auxiliary motors and theshipment of electric propulsion systems. Technology segment product revenue forthe fiscal year ended March 31, 2009 increased $939,414 or 52.2 percent to$2,738,688 compared to $1,799,274 for fiscal year ended March 31, 2008 due toincreased shipments of low volume propulsion systems. Technology segment productrevenue for the fiscal year ended March 31, 2008 increased $680,555, or 60.8percent, to $1,799,274 compared to $1,118,719 for fiscal year ended March 31,2007 due to increased shipments of low volume propulsion systems.

Gross profit margins for the current fiscal year increased to20.2 percent compared to 14.3 percent for the fiscal year ended March 31, 2008.Gross profit margins for the fiscal year ended March 31, 2008 increased to 14.3percent compared to 10.0 percent for the fiscal year ended March 31, 2007. Grossprofit margins on contract services decreased to 16.1 percent this fiscal yearcompared to 21.3 percent for the fiscal year ended March 31, 2008 due to higherincurred costs than planned on certain engineering contracts in process duringthe current fiscal year. Gross profit margins on contract services increased to21.3 percent for the fiscal year ended March 31, 2008 compared to 8.3 percentfor the fiscal year ended March 31, 2007 due to improved program executionduring fiscal year 2008. Gross profit margins on product sales this fiscal yearincreased to 22.1 percent compared to 10.7 percent for fiscal 2008. Theimprovement is primarily due to lower material costs and improved overheadabsorption arising from higher production levels during the fiscal year endedMarch 31, 2009. Gross profit margins on product sales for the fiscal year endedMarch 31, 2008 decreased to 10.7 percent compared to 11.3 percent for the fiscalyear ended March 31, 2007 due to reduced overhead absorption.

Research and development expenditures for the fiscal yearended March 31, 2009 increased to $593,209 compared to $461,791 and $321,160 forthe fiscal years ended March 31, 2008 and 2007, respectively. The increase inresearch and development expenditures for the fiscal year ended March 31, 2009compared to the prior fiscal year was primarily due to increased costs oninternally funded programs. The increase in research and developmentexpenditures for fiscal 2008 versus fiscal 2007 was primarily due to increasedcosts on internally funded software development programs.

Production engineering costs were $1,869,848 for the fiscalyear ended March 31, 2009 versus $1,706,978 and $1,286,761 for the prior twofiscal years. The increase for the current fiscal year versus fiscal year 2008is primarily attributable to engineering activities associated with the designand installation of a new production cell for our larger propulsion motors andproduction design activities on our motor and controller products. The increasefor the fiscal year ended March 31, 2008 versus fiscal 2007 is primarilyattributable to additional staffing during fiscal year 2008.

Selling, general and administrative expense this fiscal yearwas $3,782,840 compared to $3,905,495 and $2,855,213 for the fiscal years endedMarch 31, 2008 and 2007, respectively. The decrease for this fiscal year isprimarily attributable to lower levels of equity based compensation and lowerdeferred compensation expense recorded during the current fiscal year partiallyoffset by increased legal fees for litigation. The increase for fiscal 2008versus fiscal 2007 is primarily attributable to increased levels of compensationand bonuses, and the amendment of executive employment agreements, whichaccelerated the recording of deferred compensation expense associated with theseverance provisions of these agreements.

Impairment of long-lived assets for the fiscal years endedMarch 31, 2009, 2008, 2007 were zero, $11,155 and $889, respectively. Theimpairment of long-lived assets for the fiscal year ended March 31 2008 wasattributable to the impairment of obsolete equipment. The impairment oflong-lived assets for the fiscal year ended March 31, 2007 was attributable tothe write-down of costs associated with an abandoned patent application.

Interest income declined to $198,947 for the current fiscalyear compared to $463,248 and $445,578 for the fiscal years ended March 31, 2008and 2007, respectively. The decrease for fiscal 2009 versus fiscal 2008 isattributable to lower invested balances and lower yields during the currentfiscal year. The increase for fiscal 2008 versus fiscal 2007 is attributable tohigher invested cash balances.

Interest expense decreased to $33,387 for the year endedMarch 31, 2009 compared to $40,652 and $47,422 for the fiscal years ended March31, 2008 and 2007, respectively. The decrease is due to lower average mortgageborrowings outstanding throughout the fiscal year as compared to the priorfiscal year.
**Liquidity and Capital Resources**
Our cash balances and liquidity throughout the fiscal yearended March 31, 2009 were adequate to meet operating needs. At March 31, 2009,we had working capital (the excess of current assets over current liabilities)of $6,640,877 compared to $10,510,175 at March 31, 2008.

For the year ended March 31, 2009, net cash used in operatingactivities was $3,065,281 compared to net cash used in operating activities of$2,511,723 and $2,732,956 for the years ended March 31, 2008 and 2007,respectively. The increase in cash used in operating activities in fiscal 2009is primarily attributable to higher levels of inventories, increased levels ofbillings in excess of costs on uncompleted contracts partially offset by loweroperating losses, increased depreciation and amortization and impairmentexpense. The decrease in cash used for the year ended March 31, 2008 isprimarily attributable to higher levels of billings in excess of costs andestimated earnings on certain uncompleted contracts, partially offset by higheroperating losses.

Net cash provided by investing activities for the fiscal yearended March 31, 2009 was $2,620,118 compared to cash used in investingactivities of $1,446,752 for the previous fiscal year and $428,914 for fiscal2007, respectively. The change this fiscal year versus last fiscal year wasprimarily due to higher levels of maturities of short-term investments offset bylower expenditures for building improvements and manufacturing equipment. Netcash used in investing activities for fiscal 2008 increased to $1,446,752 versus$428,914 for fiscal 2007 primarily due to higher expenditures for buildingimprovements and manufacturing equipment and increased purchases of short-terminvestment securities.

Net cash used in financing activities was $228,922 for thefiscal year ended March 31, 2009 versus cash provided by financing activities of$5,182,382 and $1,037,241 for the fiscal years ended March 31, 2008 and 2007,respectively. The change this fiscal year versus fiscal year 2008 isattributable to the purchase of treasury stock this fiscal year, and to thecompletion of a private placement in the first quarter of fiscal 2008, whichresulted in $5.2 million in cash proceeds. The increase in fiscal 2008 versus2007 is attributable to the completion of a private placement in the firstquarter of fiscal 2008, which resulted in 5.2 million in cash proceeds.

We expect to fund our operations over the next year fromexisting cash and short-term investment balances and from available bankfinancing, if any. We may need to invest in substantially greater financialresources during fiscal 2010 on the commercialization of our products inemerging markets, including a significant increase in human resources,investments and increased the amounts for equipment, tooling and facilities.Although we expect to manage our operations and working capital requirements tominimize the future level of operating losses and working capital usageconsistent with execution of our business plan, our planned working capitalrequirements may consume a substantial portion of our cash reserves at March 31,2009. If customer demand accelerates substantially, our losses over theshort-term may increase together with our working capital requirements. If ourexisting financial resources are not sufficient to execute our business plan, wemay issue equity or debt securities in the future. Over the last year, access tothe capital markets has been severely restricted or nonexistent for mostcompanies due to the global credit crisis. In light of current market conditionsand the uncertainty regarding the ability of the capital markets to recover fromthe credit crisis, we cannot assure you that we will be able to secureadditional capital should it be required to implement our current business plan.In the event financing or equity capital to fund future growth is not availableon terms acceptable to us or at all, we will modify our strategy to align ouroperation with then available financial resources.
**Contractual Obligations**
The following table presents information about ourcontractual obligations and commitments as of March 31, 2009:
  **                              Payments      due by      Period                            ** 

              

       Total  ** 

 Less Than

    1 Year  
 
** 

2 - 3 Years
 

 
**4 - 5 Years**More than 

  5 Years   
Long-term debt obligations (2)
$    416,923  
416,923   
-       
-       
-         
Interest on long-term debt obligations
18,315  
18,315   
-       
-       
-         
Purchase obligations
677,607  
677,607   
-       
-       
-         
Executive employment agreements (1)
1,073,549  
   397,834   
654,000 
      -       
21,715   
Total
$ 2,186,394  
1,510,679   
654,000 
      -       
21,715     (1) Includes severance pay obligations under executive  employment agreements contingently payable upon six months notice by two  officers of the company, but not annual cash compensation under the  agreements.  (2) Represents a balloon payment on a facility mortgage which  we expect to refinance.  **Off-Balance Sheet Arrangements******
None.
**Critical Accounting Policies**
The preparation of financial statements and relateddisclosures in conformity with accounting principles generally accepted in theUnited States of America requires management to make judgments, assumptions andestimates that effect the dollar values reported in the consolidated financialstatements and accompanying notes. Note 1 to the consolidated financialstatements describes the significant accounting policies and methods used inpreparation of the consolidated financial statements. Estimates are used for,but not limited to, allowance for doubtful accounts receivables, costs tocomplete contracts, the recoverability of inventories and the fair value offinancial and long-lived assets. Actual results could differ materially fromthese estimates. The following critical accounting policies are impactedsignificantly by judgments, assumptions and estimates used in preparation of theconsolidated financial statements.
***Accounts Receivable***
Our trade accounts receivable are subject to credit risksassociated with the financial condition of our customers and their liquidity. Weevaluate all customers periodically to assess their financial condition andliquidity and set appropriate credit limits based on this analysis. As a result,the collectibility of accounts receivable may change due to changing generaleconomic conditions and factors associated with each customer's particularbusiness. Because substantially all of our customers are large well-establishedcompanies with excellent credit worthiness, we have not established a reserve atMarch 31, 2009 and 2008 for potentially uncollectible trade accounts receivable.In light of current economic conditions we may need to establish an allowancefor bad debts in the future. It is also reasonably possible, that future eventsor changes in circumstances could cause the realizable value of our tradeaccounts receivable to decline materially, resulting in material losses.
***Inventories***
We maintain raw material inventories of electroniccomponents, motor parts and other materials to meet our expected manufacturingneeds for proprietary products and for products manufactured to the designspecifications of our customers. Some of these components may become obsolete orimpaired due to bulk purchases in excess of customer requirements. Accordingly,we periodically assesses our raw material inventory for potential impairment ofvalue based on then available information, expectations and estimates andestablish impairment reserves for estimated declines in the realizable value ofour inventories. The actual realizable value of our inventories may differmaterially from these estimates based on future occurrences. It is reasonablypossible that future events or changes in circumstances could cause therealizable value of our inventories to decline materially, resulting inadditional material impairment losses.
***Percentage of Completion Revenue Recognition on Long-termContracts: Costs and Estimated Earnings in Excess of Billings on***UncompletedContracts***
We recognize revenue on development projects funded by ourcustomers using the percentage-of-completion method. Under this method, contractservices revenue is based on the percentage that costs incurred to date bear tomanagement's best estimate of the total costs to be incurred to complete theproject. Many of these contracts involve the application of our technology tocustomers' products and other applications with demanding specifications.Management's best estimates have sometimes been adversely impacted byunexpected technical challenges requiring additional analysis and redesign,failure of electronic components to operate in accordance with manufacturerspublished performance specifications, unexpected prototype failures requiringthe purchase of additional parts and a variety of other factors that may causeunforeseen delays and additional costs. It is reasonably possible that totalcosts to be incurred on any of the projects in process at March 31, 2009 couldbe materially different from management's estimates, and any modification ofmanagement's estimate of total project costs to be incurred could result inmaterial changes in the profitability of affected projects or result in materiallosses on any affected projects.
***Fair Value Measurements and Asset Impairment***
Some of our assets and liabilities may be subject to analysisas to whether the asset or liability should be marked to fair value and someassets may be evaluated for potential impairment in value. Fair value estimatesand judgments may be required by management for those assets that do not havequoted prices in active markets. These estimates and judgments may include fairvalue determinations based upon the extrapolation of quoted prices for similarassets and liabilities in active or inactive markets, for observable items otherthan the asset or liability itself, for observable items by correlation or otherstatistical analysis, or from our assumptions about the assumptions marketparticipants would use in valuing an asset or liability when no observablemarket data is available. Similarly, management evaluates both tangible andintangible assets for potential impairments in value. In conducting thisevaluation, management may rely on a number of factors to value anticipatedfuture cash flows including operating results, business plans and present valuetechniques. Rates used to value and discount cash flows may include assumptionsabout interest rates and the cost of capital at a point in time. There areinherent uncertainties related to these factors and management's judgment inapplying them to the analysis of asset impairment. Changes in any of theforegoing estimates and assumptions or a change in market conditions couldresult in a material change in the value of an asset or liability resulting in amaterial adverse change in our operating results.
**New Accounting Pronouncements**
In September 2006, the Financial Accounting Standards Board("FASB") issued Statement of Financial Accounting Standards No. 157, *Fair ValueMeasurements ("SFAS No. 157").* SFAS No. 157 defines fair value,establishes a framework for measuring fair value and requires additionaldisclosures about fair value measurements. In February 2008, the FASB issuedFASB Staff Position (FSP) 157-2, *Effective Date of FASB Statement No. 157*whichdelayed the effective date of SFAS No. 157 for all nonrecurring fair valuemeasurements of nonfinancial assets and liabilities*.*We adopted theprovisions of SFAS No. 157 related to financial instruments on April 1, 2008,and the provisions related to nonfinancial assets and liabilities on April 1,2009 (except for those that are recognized or disclosed at fair value in thefinancial statements on a recurring basis). The provisions of this standardadopted by us on April 1, 2008 did not have a material effect on our financialstatements and the adoption of the provisions effective April 1, 2009 will nothave a material effect on our financial statements.

In December 2007, the FASB issued Statement of FinancialAccounting Standards No. 141 (revised 2007), *Business Combinations**("FAS141(R)")*and Statement of Financial Accounting Standards No. 160, *NoncontrollingInterests in Consolidated Financial Statements**("FAS 160")*.These standards goals are to improve, simplify, and converge internationally theaccounting for business combinations and the reporting of noncontrollinginterests in consolidated financial statements. The provisions of FAS 141(R) andFAS 160 are effective for our fiscal year beginning April 1, 2009. We intend toadopt these standards for future acquisitions after the effective date.

In April 2008, the FASB issued FASB Staff Position (FSP)142-3, *Determination of the Useful Life of Intangible Assets ("FSP142-3").*FSP 142-3 amends the factors that should be considered indeveloping renewal or extension assumptions used to determine the useful life ofa recognized intangible asset under SFAS No. 142, *Goodwill and OtherIntangible Assets.*FSP 142-3 is effective for fiscal years beginning afterDecember 15, 2008. The adoption of this standard will not have a material effecton our financial statements.

In May 2008, the FASB issued Statement of FinancialAccounting Standards No. 162, *The Hierarchy of Generally Accepted AccountingPrinciples ("SFAS No. 162")*. SFAS No. 162 identifies the sourcesof accounting principles and the framework for selecting the principles used inthe preparation of financial statements. SFAS No. 162 is effective 60 daysfollowing the SEC's approval of the Public Company Accounting Oversight Boardamendments to AU Section 411, *The Meaning of Present Fairly in Conformitywith Generally Accepted Accounting Principles".*The adoption of thisstandard will not have a material effect on our financial statements.

In June 2008, the FASB ratified Emerging Issues Task Force (EITF)Issue No. 08-3, *Accounting for Lessees for Maintenance Deposits Under LeaseArrangements ("EITF 08-3")*. EITF 08-3 provides guidance foraccounting for nonrefundable maintenance deposits. It also provides revenuerecognition accounting guidance for the lessor. EITF 08-3 is effective forfiscal years beginning after December 15, 2008. The adoption of this EITF willnot have a material effect on our financial statements.

In October 2008, the FASB issued FASB StaffPosition (FSP) 157-3, *Determining the Fair Value of a Financial Asset Whenthe Market for That Asset Is Not Active ("FSP 157-3")*. FSP 157-3clarifies the application of SFAS No. 157 in a market that is not active, andaddresses application issues such as the use of internal assumptions whenrelevant observable data does not exist, the use of observable marketinformation when the market is not active, and the use of market quotes whenassessing the relevance of observable and unobservable data. FSP 157-3 iseffective for all periods presented in accordance with SFAS No. 157. Theadoption of FSP 157-3 did not have a material effect on our financialstatements.

In April 2009, the FASB issued FASB Staff Position (FSP)157-4, *Determining Fair Value When Volume and Level of Activity for the Assetor Liability Have Significantly Decreased and Identifying Transactions That AreNot Orderly**("FSP 157-4")*. FSP 157-4 provides guidance onhow to determine the fair value of assets and liabilities when the volume andlevel of activity for the asset/liability has significantly decreased. FSP 157-4also provides guidance on identifying circumstances that indicate a transactionis not orderly. In addition, FSP 157-4 requires disclosure in interim and annualperiods of the inputs and valuation techniques used to measure fair value and adiscussion of changes in valuation techniques. FSP 157-4 is effective for usbeginning in the first quarter of fiscal year 2010. The adoption of FSP 157-4will not have a material impact on our consolidated financial statements.

In April 2009, the FASB issued FASB Staff Position (FSP)115-2 and Statement of Financial Accounting Standards (FAS) No. 124-2, *Recognitionand Presentation of Other-Than-Temporary Impairment ("FSP 115-2/FAS No.124-2")*. FSP 115-2/FAS No. 124-2 amends the requirements for therecognition and measurement of other-than-temporary impairments for debtsecurities by modifying the pre-existing "intent and ability"indicator. Additionally, FSP 115-2/FAS No. 124-2 changes the presentation of another-than-temporary impairment in the income statement for those impairmentsinvolving credit losses. FSP 115-2/FAS No. 124-2 is effective for us beginningin the first quarter of fiscal year 2010. The adoption of this standard will nothave a material effect on our financial statements.

In April 2009, the FASB issued FASB Staff Position (FSP)107-1 and Accounting Principals Board (APB) Opinion 28-1, *Interim Disclosureabout Fair Value of Financial Instruments ("FSP 107-1/APB 28-1")*.FSP 107-1/APB 28-1 requires interim disclosures regarding the fair values offinancial instruments that are within the scope of FAS 107, *Disclosures aboutthe Fair Value of Financial Instruments*. Additionally, FSP 107-1/APB 28-1requires disclosure of the methods and significant assumptions used to estimatethe fair value of financial instruments on an interim basis as well as changesof the methods and significant assumptions from prior periods. FSP 107-1/APB28-1 does not change the accounting treatment for these financial instrumentsand is effective for us beginning in the first quarter of fiscal year 2010. Theadoption of this standard will not have a material effect on our financialstatements.
**ITEM 7A.**QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET    RISK
TOC
Market risk is the potential loss arising from adversechanges in market rates and prices, such as foreign currency exchange andinterest rates. We do not use financial instruments to any degree to managethese 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.We are not subject to interest rate risk on our debt obligations.
**ITEM 8.**FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 TOC
**REPORT OF INDEPENDENT      REGISTERED
PUBLIC ACCOUNTING FIRM
TOC
Board of Directors and Shareholders

of UQM Technologies, Inc.

 

We have audited the accompanying consolidated balance      sheets of UQM Technologies, Inc. (a Colorado      Corporation) and subsidiaries (the Company) as of March 31, 2009 and 2008,      and the related consolidated statements of operations, stockholders'      equity and cash flows for each of the three years in the period ended      March 31, 2009. We also have audited UQM Technologies, Inc. and      subsidiaries internal control over financial reporting as of March 31,      2009 based on criteria established in *Internal Control - Integrated      Framework* issued by the Committee of Sponsoring Organizations of the      Treadway Commission (COSO). UQM Technologies, Inc.'s management is      responsible for these financial statements, for maintaining effective      internal control over financial reporting, and for its assessment of the      effectiveness of internal control over financial reporting, included in      the accompanying Management's Annual Report on Internal Control over      financial reporting, included in Item 9A. Our responsibility is to express      an opinion on these financial statements and an opinion on UQM      Technologies, Inc.'s internal control over financial reporting based on      our audits.

We conducted our audits in accordance with the      standards of the Public Company Accounting Oversight Board (United      States). Those standards require that we plan and perform the audits to      obtain reasonable assurance about whether the financial statements are      free of material misstatement and whether effective internal control over      financial reporting was maintained in all material respects. Our audits of      the financial statements included examining, on a test basis, evidence      supporting the amounts and disclosures in the financial statements,      assessing the accounting principles used and significant estimates made by      management and evaluating the overall financial statement presentation.      Our audit of internal control over financial reporting included obtaining      an understanding of internal control over financial reporting, assessing      the risk that a material weakness exists, and testing and evaluating the      design and operating effectiveness of internal control based on the      assessed risk. Our audits also included performing such other procedures      as we considered necessary in the circumstances. We believe that our      audits provide a reasonable basis for our opinions.

A company's internal control over financial reporting      is a process designed to provide reasonable assurance regarding the      reliability of financial reporting and the preparation of financial      statements for external purposes in accordance with generally accepted      accounting principles. A company's internal control over financial      reporting includes those policies and procedures that (1) pertain to the      maintenance of records that, in reasonable detail, accurately and fairly      reflect the transactions and dispositions of the assets of the company;      (2) provide reasonable assurance that transactions are recorded as      necessary to permit preparation of financial statements in accordance with      generally accepted accounting principles, and that receipts and      expenditures of the company are being made only in accordance with      authorizations of management and directors of the company; and (3) provide      reasonable assurance regarding prevention or timely detection of      unauthorized acquisition, use, or disposition of the company's assets      that could have a material effect on the financial statements.

Because of its inherent limitations, internal control      over financial reporting may not prevent or detect misstatements. Also,      projections of any evaluation of effectiveness to future periods are      subject to the risk that controls may become inadequate because of changes      in conditions, or that the degree of compliance with the policies or      procedures may deteriorate.

In our opinion, the consolidated financial statements      referred to above present fairly, in all material respects, the financial      position of UQM Technologies, Inc. and subsidiaries as of March 31,      2009 and 2008, and the results of their operations and their cash flows      for each of the three years in the period ended March 31, 2009 in      conformity with accounting principles generally accepted in the United      States of America. Also, in our opinion, UQM Technologies, Inc. and      subsidiaries, maintained, in all material respects, effective internal      control over financial reporting as of March 31, 2009, based on criteria      established in *Internal Control - Integrated Framework* issued by      COSO.

 

Denver, Colorado

May 20, 2009* *
**UQM TECHNOLOGIES, INC. AND SUBSIDIARIES**

TOC
**Consolidated Balance Sheets**
TOC
 
March 31, 2009 
March 31, 2008 **Assets     
Current assets:   
Cash and cash equivalents
$   2,501,999 
 3,176,084  
Short-term investments
3,291,667 
6,589,808  
Accounts receivable
917,099 
1,304,139  
Costs and estimated earnings in excess of billings on    
uncompleted contracts
643,098 
649,670  
Inventories
1,307,171 
961,489  
Prepaid expenses and other current assets
     117,768 
     119,647       
Total current assets 
  8,778,802 
 12,800,837    
Property and equipment, at cost:   
Land
181,580 
181,580  
Building
2,464,213 
2,460,103  
Machinery and equipment
  4,040,406 
  3,558,524  
6,686,199 
6,200,207  
Less accumulated depreciation
(3,556,796)
(3,317,812)      
Net property and equipment
  3,129,403 
  2,882,395    
Patent and trademark costs, net of accumulated amortization   
of $733,594 and $677,957
438,184 
477,765    
Other assets
       76,443 
    241,549    
Total assets
$ 12,422,832 
16,402,546 *See accompanying notes to consolidated financial statements.*
 
** ** 
March 31, 2009 
March 31, 2008 **Liabilities and Stockholders' Equity     
Current liabilities:   
Accounts payable
$      651,129 
740,527  
Other current liabilities
600,672 
372,285  
Current portion of long-term debt
416,923 
106,002  
Short-term deferred compensation under executive employment    
agreements
397,834 
364,000  
Billings in excess of costs and estimated earnings on    
uncompleted contracts
       71,367 
     707,848       
Total current liabilities
  2,137,925 
  2,290,662       
Long-term debt, less current portion
-       
416,923 
Long-term deferred compensation under executive employment agreements
     675,715 
     633,873  
     675,715 
  1,050,796       
Total liabilities
  2,813,640 
  3,341,458    
Commitments and contingencies     
Stockholders' equity:   
Common stock, $0.01 par value, 50,000,000 shares  
authorized; 26,727,694 and 26,526,737 shares
issued and outstanding
267,277 
265,267 
Additional paid-in capital
78,767,154 
77,819,041  
Accumulated deficit
(69,425,239)
(65,023,220)   
Total stockholders' equity
  9,609,192 
  13,061,088       
Total liabilities and stockholders' equity
$ 12,422,832 
$ 16,402,546 *See accompanying notes to consolidated financial statements.*** 

Consolidated Statements of Operations**
TOC
 
Year Ended   
Year Ended   
Year Ended    
March 31, 2009
March 31, 2008
March 31, 2007
Revenue:    
Contract services
$   2,717,246   
 2,591,939   
   2,907,536   
Product sales
  6,011,065   
  4,916,383   
  3,745,658   
  8,728,311   
  7,508,322   
  6,653,194  
Operating costs and expenses: 
Costs of contract services
2,279,956   
2,039,017   
2,666,316   
Costs of product sales
4,682,711   
4,392,442   
3,323,577   
Research and development
593,209   
461,791   
321,160   
Production engineering
1,869,848   
1,706,978   
1,286,761   
Selling, general and administrative
3,782,840   
3,905,495   
2,855,213   
Loss (gain) on disposal of assets
       (   510)  
        (2,159)  
                889  
13,208,054   
 12,503,564   
10,453,916          
Loss before other income (expense)
(4,479,743)  
(4,995,242)  
(3,800,722)       
Other income (expense):    
Interest income
198,947   
463,248   
445,578   
Interest expense
(33,387)  
(40,652)  
(47,422)  
Impairment of investment
(89,369)  
-         
-         
Other
         1,533   
     (13,459)  
      (28,791)   
       77,724   
     409,137   
     369,365         
Net loss
$ (4,402,019)  
  (4,586,105)  
(3,431,357)   
 
    
Net loss per common share-basic and diluted:
$(0.17)       
(0.18)       
(0.14)        
  
    
Weighted average number of shares of common   
stock outstanding - basic and diluted
26,651,130   
26,196,278   
25,116,354  
*See accompanying notes to consolidated financial statements.*

 
** 

Consolidated Statements of Stockholders' Equity

TOC
 
Number of     
common   
Additional  
Total        
shares    
Common 
paid-in   
Accumulated 
stockholders' 
    issued    
    stock    
    capital    
     deficit       
     equity      **Balances at April 1, 2006
24,776,042 
 $ 247,760 
69,293,461 
(56,796,847)
12,744,374 
Issuance of common stock under
employee stock purchase plan
7,095 
71 
17,695 
-       
17,766 
Issuance of common stock upon
exercise of employee options
215,440 
2,154 
681,539 
-       
683,693 
Issuance of common stock upon
exercise of warrants
165,812 
1,659 
426,136 
-       
427,795 
Issuance of common stock to
directors
12,500 
125 
39,875 
-       
40,000 
Compensation expense from
employee and director stock
option and common stock grants
-       
-       
917,756 
-       
917,756 
Cumulative effect of adoption of
SAB 108
-       
-       
-       
(208,911)
(208,911)
Net loss
          -       
      -       
           -       
 (3,431,357)
 (3,431,357)**Balances at March 31, 2007
25,176,889 
251,769 
 71,376,462 
(60,437,115)
11,191,116 
Issuance of common stock in follow-on
offering, net of offering costs
1,250,000 
12,500 
5,171,177 
-       
5,183,677 
Issuance of common stock under******************************************************************************************************************