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Zenn raises $2-million, without its electric car

Ian Clifford, CEO of Zenn Motor Company, drives an electric Zenn car at the company's plant in St-Jerome, Que., in 2007.

Paul Chiasson/The Canadian Press

Just a few years ago, Zenn Motor Company, Canada's zero-emission car maker, had tons of buzz. Environmentalism was all the rage, consumers had high discretionary incomes and the company had enough money to splurge on TV commercials.

In the aftermath of the financial crisis, there's barely been a peep about Zenn . Not only is the company rarely talked about, its stock has plummeted from around $6 per share to less than 70 cents. So you can imagine my surprise when Zenn announced this week that it has raised $2-million in a new private placement.

To get you up to speed: the company no longer makes electric cars, its former chief executive officer and chairman previously stepped down, and the new $2-million injection was desperately needed because the company is currently burning about $225,000 per quarter, and only has $750,000 in the bank.

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That Zenn no longer makes cars isn't new news. Back in late 2009, the company announced that it was halting production, just three years after the automobiles first hit the market. The company explained why in a public document: "The credit crisis saw an erosion of discretionary income, the price of oil drop by half and many auto manufacturers bring smaller, fuel efficient low priced cars to the market."

But if Zenn no longer makes cars, what exactly are the recent investors investing in? A car battery. Since halting production, Zenn has focused exclusively on opportunities around the EEStor ESU barium titanate ceramic battery. Sounds fancy.

However, very little has been released about this new technology. Zenn recently promised to release more details over the next few months, and there are estimates that it will weigh one-tenth the weight of a lead acid battery but still produce the same amount of energy, and that its charge retention shouldn't fluctuate much in extreme heat or cold. But no one knows for sure

By focusing on the battery, Zenn has moved from being an car maker to automotive parts supplier, turning management over in the process. Clearly, though, some investors still see promise.

And at least for now, they're the ones laughing. The new private placement was completed at 85 cents per unit. The stock is now at $1.60.

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