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Smith Electric - The Next Solyndra

NEW YORK ( TheStreet -- Smith Electric Vehicles has backed itself into a corner and is hoping the IPO market will help it navigate its way out. The problem is that Smith could be the next Solyndra.

The Kansas City, Mo.-based company is a maker of commercial electric trucks and has never turned a profit. It is trying to raise $77 million and if Smith doesn't do this offering, it will not be able to operate after the third quarter of 2012, essentially running out of gas.

Revenues and orders are up, but since it costs so much to produce the vehicles, the price per truck is high. Smith has received millions from the Department of Energy, originally used for research, but the DOE has since changed that and insisted the money be used for customer incentives. The DOE is sensitive to helping pay for company development after guaranteeing over $500 million loans to solar panel maker Solyndra, which promptly went bankrupt.

The customers in the U.S. receive generous incentives to buy the trucks, anywhere between $55,000 and $94,000. Smith has $10.3 million in funding remaining in this program, but has applied for more. Considering the fate of Solyndra, it's hard to imagine the federal government sending more money to this company especially with the fiscal cliff looming. The absence of grants could send the company into a tailspin.

It also doesn't help that the DOE audit of Smith in 2010 found "significant deficiencies" in their accounting. Smith managed to address the weaknesses and convince the DOE to resume payments in February of 2012. However, if a future audit finds more "accounting weaknesses," the payments may stop.

Smith's problems started when it put the brakes on production in the fourth quarter of 2011 while shifting to new technology. In order to survive the switch, the company issued $30 million in convertibles that turned into preferred stock in November 2011. Then the company sold private placement shares to the tune of $15 million in early 2012. After that they borrowed $11.5 million from the $16.5 million in bridge notes they had entered into. So now they are up to their hub caps in debt and need this IPO bad.

On top of that, Smith has never achieved positive cash flow and even after the offering, may need additional financing.

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