Ecotality Warns It May Need To File For Bankruptcy

(RTTNews) - Ecotality, Inc. (ECTY) said Monday that it may need to file for bankruptcy, citing adverse developments that may impact its ability to meet ongoing obligations and also fund anticipated operating losses. The company's shares are down more than 74 percent in the regular trading session.

The San Francisco-based maker of electric vehicle charging and energy storage systems said in a filing with the Securities and Exchange Commission or SEC that while it is exploring options for a restructuring or sale of its entire businesses or assets, it need for file for bankruptcy as part of any such process or otherwise in the very near future.

The company said that recent adverse developments include, among others, failure to attain sales volumes of its commercial electric vehicle service equipment or EVSE that were needed to support the company's operations in the second half of 2013.

Further, Ecotality said it was unable to release a scheduled new product offering in its Minit Charger industrial line and was also not able to obtain additional financing to supplement its cash flow from operations. The company said that the Minit Charger 12 product exhibited unacceptable performance shortfalls during prototype verification testing and will not be introduced in 2013.

In addition, the U.S. Department of Energy informed Ecotality that it was suspending payments to the company in connection with the EV Project. The company noted that the suspension has had a significant impact on receivables that were anticipated to be collected from the DOE, in addition to remaining amounts anticipated to be invoiced and collected under the EV Project.

Ecotality also incurred significant expenses and liquidated damages in connection with a previously disclosed investigation of the company by the Department of Labor under the Fair Labor Standards Act and the Davis-Bacon Act. The company has agreed to pay back wages and liquidated damages totaling about $855 thousand to certain employees and contractors in consideration for releasing the company of any liability with respect to wage-related matters.

Ecotality said it revised its March 31, 2013 accrual of $597 thousand to reflect the about $855 thousand expected to be paid, in addition to about $89,000 in estimated payroll taxes, for a total accrual of $943 thousand as of June 30, 2013. This resulted in an additional charge of about $346 thousand to general and administrative expenses in the second quarter of 2013.

Further, Ecotality said it was facing some uncertainty in resolving a phenomenon occurring in some of its previously installed EVSEs that causes overheating, and in certain rare cases melting, of the connector plug that connects the EVSE to the electric vehicle when charging.

Ecotality said its board of directors has retained FTI Consulting as a restructuring advisor.

In Monday's regular trading session, ECTY is trading at $0.37, down $1.09 or 74.66 percent on a volume of 4.99 million shares.