Fisker & DOE Loan Delays Deal Blow to Quantum

It’s no secret that Quantum Fuel Systems Technologies Worldwide (s QTWW) is betting big on plug-in hybrid vehicle startup Fisker Automotive — the green car startup’s genesis was built on a vision of having the well-known luxury car designer Henrik Fisker design a vehicle around a Quantum drivetrain. The risk of that bet comes out loud and clear in Quantum’s latest earnings report, which covers the company’s financial results for the first nine months of the 2010 fiscal year.
Quantum’s revenue sank to just $1.5 million in the third quarter of fiscal year 2010, down from $5.9 million in the same three months of 2009. For the first nine months of fiscal year 2010, revenue dropped to $7.2 million, down from $17 million in the year-earlier period. According to Quantum’s earnings statement, discussed in a call with shareholders this morning, “The decrease in revenue for the third quarter and first nine months of fiscal 2010 is primarily related to delays at Fisker Automotive related to the Fisker Karma development program.”

Quantum anticipates that its contract revenues will continue to suffer this year as a result of the slow pace of development at Fisker, which it expects to be one of its biggest customers for the foreseeable future. Quantum still expects Fisker to hit its target of producing “a certified, saleable” plug-in hybrid vehicle towards the end of the 2010 calendar year. But it notes that “delays in funding at Fisker Automotive related to the finalization of their Department of Energy loan,” resulted in “reduced levels of activities,” on the development program for the upcoming Karma model. (See: “After DOE Nod, a Long Road Ahead for Green Car Startups.”)
Things are looking up for the next quarter, however, says Quantum. While Fisker has yet to gain access to the DOE funds (awarded on a conditional basis last fall), Quantum notes that the startup’s $115 million private equity financing round earlier this year (kick-started by an investment from battery supplier A123Systems (s AONE)), allowed “activities under the Fisker Karma program…to ramp up significantly near the end of January 2010.” Accordingly, Quantum expects its contract revenues in the fourth quarter of the 2010 fiscal year to pick up compared to the previous quarter.
In addition to benefiting from Fisker’s government funding, Quantum had also been hoping to garner a boost from Uncle Sam in the form of a direct loan. The company requested $175 million under the Department of Energy’s Advanced Technology Vehicles Manufacturing (ATVM) loan program back in December 2008, and has been working through the agency’s review process. But according to Quantum’s earnings statement, the company is all but out of the running for an award based on its current application, having, “recently been informed by the DOE that certain ATVM Program parameters and loan conditions have changed and that they believe we no longer fit within the parameters and conditions of the ATVM Program.”
As a result of this decision, Quantum explains that it’s now in the process of “withdrawing or revising” its loan application, although it may still pursue funding through DOE grant and loan programs for development of plug-in vehicle and battery tech.
Quantum faces serious pressure at this point to improve its finances. The company reports that last week, on March 8, the NASDAQ Stock Market notified Quantum that because the closing bid price for a share of its common stock has clocked in below $1.00 for 30 consecutive trading days, the company is no longer in compliance with NASDAQ’s minimum bid price rule for continued listing.
“In order to regain compliance with the minimum bid price rule, the closing stock price of a share of our Common Stock must be at least $1.00 per share for a minimum of ten consecutive business days prior to September 1, 2010,” Quantum explains. Among the options Quantum is now considering is a reverse stock split, but the company says, “We have not yet determined what action, if any, we will take in order to cure the deficiency.”