Shares of electric transportation and storage company ECOtality ECTY plunged over 70 percent in Monday trade as the company disclosed that it may be unable to meet its ongoing obligations and fund its operating losses. The shares were halted five times Monday morning due to the volatile trade.
Weak EVSE Sales
ECOtality disclosed that it has failed to attain the sales volume that was needed to of its commercial Electric Vehicle Service Equipment segment to finance its operating losses in the second half of 2013. Therefore, the company may be forced to raise more money, either through an additional equity offering or through extremely expensive debt financing.
"As cash flows from the EV Project declined, it was essential that the Company transition from subsidized installations of EVSEs under the EV Project to regular commercial sales and installations," the company disclosed in a Form 8-K filing with the Securities and Exchange Commission (SEC). "To this end, the Company reorganized its sales organization to support such efforts."
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"In addition to selling its products directly through its sales force, the Company formed commercial relationships with independent dealers for the purpose of distribution of its EVSEs and related products in the first half of 2013 with the expectation of selling substantial volumes of EVSE products in the second half of 2013. At this time, neither the Company's direct sales force nor the independent dealers have generated sales volumes of its commercial EVSE products sufficient, in combination with other sources of revenue, to support the Company's operations in the second half of 2013." Failure to Release Minit Charger Product Line The company also disclosed that it will fail to launch its scheduled Minit Charger product line due to performance shortfalls. "Because the Minit Charger 12 product exhibited unacceptable performance shortfalls during prototype verification testing, such product will not be introduced in 2013. Accordingly, there will be no revenues from the product in 2013." As if the news was not bad enough, the company also said that it was unable to raise additional financing and now may not be able to finance its operating losses throughout the rest of the year. "The Company continues its efforts to obtain additional capital but there can be no assurances that such financing will occur on reasonable terms, or at all. Even if we are able to obtain additional financing, we cannot assure you that such financing will be in an amount sufficient to meet the Company's short or long term capital needs." DOE Pulls the Plug Lastly, the company announced that the Department of Energy is pulling the plug on the company and will suspend payments to ECOtality and no longer give contracts to the company. "The Company has been notified by the U.S. Department of Energy (“DOE”) that the DOE is suspending payments to the Company in connection with the EV Project. In an abundance of caution on August 8, 2013, the Company notified the DOE that, even though the Company continues to aggressively pursue certain options for additional financing and is exploring other alternatives, in the event additional financing is not obtained, the Company may not be able to fulfill its operational obligations, including under the EV Project." "In the August 8, 2013 letter, the DOE also notified the Company that the Company is not authorized to incur any new cost or obligation under the award and that the DOE would not reimburse the Company for such costs during the suspension. Further, the DOE instructed the Company to provide notices to its vendors and subcontractors of the suspension." Read the full statement from ECOtality in the 8-K
Shares Plunge
Shares of ECOtality fell 75.23 percent Monday to $0.365 per share after dropping as low as $0.24. The shares closed at $1.46 on Friday.
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