Business context and reporting period
Filing identity mismatch: The supplied filing is AMP Holding Inc.’s Form 10-K for the fiscal year ended December 31, 2011, filed April 4, 2012. It is not identified as a Workhorse Group Inc. filing. The requested “2011 Q4” is covered only as part of this annual report; standalone fourth-quarter results are not provided.
AMP was a development-stage electric-vehicle company focused on converting passenger vehicles and commercial trucks to all-electric powertrains. Its strategy targeted larger vehicles and fleet customers. The company reported limited sales and had not reached commercial-scale operations.
Key financial metrics
| Metric | FY 2011 | FY 2010 |
|---|---|---|
| Revenue | $190,035 | $140,707 |
| Total expenses | $8,895,746 | $5,168,813 |
| Net loss | $8,705,711 | $5,028,106 |
| Basic and diluted loss per share | $0.26 | $0.23 |
| Cash used in operating activities | $5,878,893 | $3,251,514 |
| Cash at year-end | $89,488 | $385,293 |
| Current assets | $267,717 | $453,190 |
| Current liabilities | $1,936,648 | $784,608 |
| Working capital | $(1,668,931) | $(331,418) |
| Total assets | $449,894 | $529,361 |
| Stockholders’ deficit | $(1,556,304) | $(280,500) |
Revenue increased about 35% year over year, but expenses rose about 72% and net loss widened about 73%. The filing does not provide a clear gross margin measure; sales were small relative to operating costs. Total long-term debt, including its current portion, was $90,191 at year-end; current liabilities also included $312,000 in shareholder advances and $1,367,367 in accounts payable.
Material changes versus prior year
- Revenue rose from $140,707 to $190,035, remaining limited to a small number of experimental vehicles and conversions.
- Payroll and payroll taxes increased to $2.90 million from $1.33 million; stock-based compensation rose to $2.00 million from $1.44 million; batteries, motors and supplies increased to $1.13 million from $719,644.
- Operating cash use increased by approximately $2.63 million. The company relied on $5.43 million from stock issuance and $269,000 in shareholder advances, among other financing, to fund operations.
- Year-end cash declined by $295,805, while the working-capital deficit expanded by approximately $1.34 million. Common shares outstanding increased from 27.7 million to 38.7 million.
Outlook, risks and unusual items
- Going concern and funding: The auditor’s report and management’s discussion raise substantial doubt about the company’s ability to continue as a going concern. AMP estimated it needed $7 million to $10 million for the next 12 months and said cash on hand was insufficient. It warned that without near-term financing it could scale back or cease operations.
- Subsequent liquidity stress: The filing states cash was near zero at the end of March 2012, payroll had been delayed or partially paid, and supplier, employee and other obligations were delinquent. Management warned that operations could cease by May 31, 2012 without immediate capital.
- Financing and dilution: From January through February 2012, AMP raised $900,000 through secured convertible debentures bearing 10% interest, convertible at $0.50 per share, with warrants for 900,000 shares at $0.50. Further equity or debt financing was not assured and could dilute shareholders.
- Commercial milestones remain uncertain: The Iceland distributor agreement contemplated purchases, including an initial 250 vehicles, but the development phase was delayed after Iceland did not approve the anticipated electric-vehicle VAT repeal. A Caribbean distribution MOU was subject to a definitive agreement. The filing also reported IRS qualification for a vehicle tax credit of up to $7,500 as a subsequent event.
- Other risks: Management cited slow-than-expected EV market growth, larger and better-funded competitors, production costs above projected revenue, dependence on a limited supplier and customer base, regulatory and vehicle-certification costs, battery safety and product-liability exposure, and reliance on pending intellectual-property protection.
- Controls and contingencies: Management concluded disclosure controls and internal control over financial reporting were ineffective, citing insufficient segregation of duties and reliance on outside consultants and attorneys. No material legal proceedings were reported. The company disclosed lease commitments of about $1.07 million under its principal facility lease.
- Reporting inconsistency to note: The MD&A describes 2011 investing cash outflow as $171,687, while the cash-flow statement and selected financial data report $156,750.
Important facts for investors to verify
- Confirm the issuer and filing: the supplied document is AMP Holding Inc.’s 2011 Form 10-K, not a filing named Workhorse Group Inc.
- Verify current cash, overdue payables and payroll, and whether the company obtained financing sufficient to continue operations after the filing date.
- Check the status and terms of the $900,000 convertible debenture financing, any additional capital raises, and resulting dilution or secured claims.
- Confirm whether distributor agreements translated into binding orders, deliveries and collected revenue, particularly the delayed Iceland program.
- Reconcile the reported 2011 investing cash outflow and review the auditor’s going-concern paragraph and management’s disclosed control weaknesses.