NEW YORK (
) - Despite raising more than $8 million in June, ECOtality Inc. may be on the road to bankruptcy court after losing its funding from the Department of Energy and experiencing issues with its products.
The San Francisco-based provider of clean electric transportation technologies warned that it is currently exploring its options for a restructuring or the sale of its company after being unable to obtain financing to fund its continued operations.
According to an Aug. 12 filing with the Securities and Exchange Commission, ECOtality has hired FTI Consulting as its restructuring adviser. FTI Consulting declined to comment. ECOtality, which builds electric vehicle charging stations, may also be facing a bankruptcy petition "in the very near future," it said in the SEC filing.
ECOtality raised $8.2 million through the private placement of common stock and warrants to certain unidentified institutional investors on June 19. The company sold more than 5.12 million shares of its common stock at $1.60 per share to investors, who also received a five-year warrant exercisable at $2.04 per share.
ECOtality's shares, however, which trade on the Nasdaq Capital Market under the symbol ECTY, have since declined to 30 cents on Monday and 23 cents on Tuesday, from $1.64 on Aug. 9. The stock closed at 24 cents on Wednesday. The stock has been trading under $2 since June 13.
After the stock sale, ECOtality was looking to raise additional financing to supplement its cash flows from operations. ECOtality discovered on Aug. 8, however, that financing it was pursuing from an "existing investor would not be forthcoming," SEC filings said.
ECOtality warned of its possible bankruptcy filing after several events hamstrung its ability to meet its ongoing obligations and fund anticipated operating losses.
For one thing, the DOE pulled the plug on ECOtality's electric vehicle project funding. Upon learning that the company may not be able to fulfill its obligations under the project, the DOE suspended all payments under the project while it "investigates the situation and determines whether the award should continue," SEC filings said.
According to DOE spokesman Niketa Kumar, "the Energy Department's grant to Ecotality was used for the installation and data collection of charging stations in cities across America where sales of plug-in electric cars are on the rise. Meant to establish the seeds of infrastructure needed to support a growing market for advanced vehicles, the company installed more than 12,500 charging stations in 18 US cities -- or approximately 97% of their goal."
In September 2009, ECOtality received a cost-reimbursable contract from the DOE, of which a portion was subfunded to federal research and development centers. Under the agreement, the DOE was to reimburse 45.8% of total project costs incurred by the company, up to $100.2 million, with the company matching those funds with more than $110 million in cost-share. The contract was set to run out on Dec. 31. ECOtality has received about $97.7 million from the DOE to date.
Meanwhile, shareholder and consumer rights litigation firm Zeldes Haeggquist & Eck LLP announced on Tuesday that it was investigating the company to determine whether ECOtality and its officers and directors have violated federal securities laws or breached their fiduciary duties.
According to the SEC filings, ECOtality failed to generate sufficient sales of its electric vehicle service equipment and couldn't support its operations in the second half of the year.
The company also faced a setback when its new product, Minit Charger 12, had performance shortfalls during its prototype verification testing. Due to the issues with the new product, it won't be introduced this year as scheduled, meaning ECOtality won't reap any revenue from a launch.
Lastly, some of the company's installed electric vehicle service equipment has overheated and, in some cases, melted a connector plug that connects the equipment to the electric vehicle when charging.
In fact, some of the company's automotive original equipment manufacturers are considering advising their customers not to use the ECOtality's electric vehicle service equipment because of the connector plug issue if the company doesn't replace all connector plugs on its approximately 12,000 existing EVSEs in the market.
ECOtality listed its assets at $50.79 million and its liabilities at $37.65 million in its latest quarterly report, which was for the period ended March 31.The company reported a $588,000 net loss for the quarter and had a $114.93 million accumulated deficit as of March 31.
ECOtality has a $5 million 5.05% convertible note payable to ABB Technology Ventures Ltd. The note matures on March 13, 2015, and is convertible into shares of its stock at $1.27 per share.
ABB managing director and ECOtality board member Andrew Tang couldn't be reached for comment.
The company also has a $287,500 6.75% note from buying an office building. Last January, the company paid the note down by $100,000 and the remaining $187,500 of the note now bears interest at 7%. It comes due on Jan. 16, 2014. ECOtality's company spokesman Kathy Price refused to comment beyond the company's public filings.
Written by Jamie Mason in New York