Lithium-ion battery maker A123 Systems is struggling to survive even with plans to raise about $39 million in cash through the sale of shares and warrants to institutional investors. The share price is set at $1.30 per share. Recent documents filed with the Security and Exchange Commission (SEC) says that after the stock and warrant sale, A123 Systems will have approximately four or five months of operating cash available.

A123 reported a $125 million loss for first quarter 2012, $66.8 million of which stems from a major recall when a battery failed during a Consumer Reports test of a Fisker Karma plug-in hybrid. The fault was traced back to a poorly calibrated automatic welding machine at the company’s manufacturing plant in Livonia, Mich. The problem led to potential electrical shorts and failure of batteries delivered to five of A123′s customers, which include General Motors, BMW, Smith Electric Vehicles, Tata Motors and SAIC Motor Corp.

The recall announcement sent the company’s stock reeling, landing on April 4 at its lowest mark of 82 cents a share. The stock clawed its way back up from that low, but then fell back 11 percent on the announcement last week with the SEC (as of this writing, A123 stock is quoted at 84 cents).

The current struggles for A123 are in sharp contrast to its 2009 initial public offering, raising $378 million with an “unFacebook-like” 50 percent surge in the stock’s first day of trading. The company also received a $249 million government loan guarantee to develop advanced lithium-ion battery technology, a fact sure to draw the breathless ire of GOP clean tech naysayers.

Despite their current woes, A123 continues to pursue its R&D mission, recently launching a nanophosphate-ion battery and announcing plans to hire 400 additional workers over the next few months in response to increased demand in its grid and commercial transportation business. The Waltham Michigan-based company currently employs 780 workers.

Analysts say the company needs to raise another $75 million by the fourth quarter of 2012 and $200 million in 2013. A123 says it expects to achieve positive gross profit margins in 2013 instead if by the end of the year as it had originally hoped. As with any emerging market, the shakeout in clean tech continues. Certainly the next few month will tell if A123 Systems will survive and continue its mission of innovating new battery technologies for the 21st century.

Main photo credit: A123 Systems