Filing summary: AMP Holding Inc. — quarter ended September 30, 2012
Entity note: The supplied filing is AMP Holding Inc.’s Form 10-Q, not a filing under the name Workhorse Group Inc. The filing describes AMP’s electric-vehicle business; it does not explain the relationship to Workhorse Group.
Business context and reporting period
AMP was a development-stage company designing, marketing, and selling converted electric automobiles and commercial trucks. Planned principal operations had not reached a level of sustained revenue. The unaudited filing covers the three and nine months ended September 30, 2012, with comparisons to 2011.
Financial performance and liquidity
| Metric | Q3 2012 | Q3 2011 | Nine months 2012 | Nine months 2011 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $222,098 | $190,035 |
| Total expenses | $1,283,345 | $2,120,795 | $3,338,202 | $6,584,578 |
| Net loss | $1,283,345 | $2,120,795 | $3,116,104 | $6,394,543 |
| Operating cash used | $517,228 | $1,682,093 | $1,710,996 | $4,814,756 |
Nine-month 2012 revenue came from four converted-vehicle sales. The filing does not present gross profit or a gross margin, so those measures are unclear. Basic and diluted loss per share was $0.03 for Q3 2012 and $0.08 for the first nine months of 2012.
At September 30, 2012, cash was $15,148; current assets were $115,192 and current liabilities were $4,048,060, a working-capital deficit of $3,932,868. Total assets were $263,212 and stockholders’ deficit was $3,849,038. Current liabilities included $1,746,558 of accounts payable, $309,572 payable to related parties, and $1,902,770 of convertible debentures. Long-term debt was $64,190, with $21,160 classified as current. Accounts payable included $442,260 of accrued payroll. The filing reports numerous delinquent obligations; some suppliers had referred balances to collection agencies, and current purchases were being made cash-on-delivery.
Changes versus prior period
- Nine-month revenue increased to $222,098 from $190,035, while the company still had no Q3 revenue in either year.
- Nine-month net loss fell to $3.12 million from $6.39 million, and operating cash use fell to $1.71 million from $4.81 million. Management attributed lower expenses largely to reduced development activity and fewer employees.
- Cash declined from $89,488 at December 31, 2011 to $15,148 at September 30, 2012. Current liabilities rose from $1.94 million to $4.05 million, including newly recorded convertible debentures.
Outlook, financing, risks, and unusual items
- Funding and going concern: Management stated that cash on hand would not cover requirements and estimated needing $8 million–$10 million for the next 12 months. The filing says substantial doubt exists about the company’s ability to continue as a going concern; additional financing was not assured. Without funding, the company could reduce or cease operations.
- Financing and dilution: The company raised $1,939,250 in 2012 secured convertible debentures, generally bearing 10% interest and originally convertible at $0.50, with warrants. In November 2012, after quarter-end, holders converted principal and interest into 10,227,070 common shares and the warrant exercise price was reduced to $0.25. Separately, an August agreement with Kodiak Capital provided for a potential equity line of up to $7.5 million over 24 months, subject to conditions including an effective registration statement; individual puts were capped at $75,000 and priced at 90% of the lowest closing bid over a specified five-trading-day period. Availability and proceeds were not guaranteed.
- Subsequent funding: In October 2012, shareholders advanced $265,000 under one-year notes bearing 10% interest. In November, the company also settled $55,000 of consulting invoices with 500,000 shares.
- Operating risks: Management cited limited revenue, high costs, competition, dependence on key personnel and suppliers, technology and product-safety risks, regulatory requirements, and reliance on government incentives. A vehicle federal tax credit of up to $7,500 was noted as a potential customer incentive.
- Controls and unusual items: Management concluded disclosure controls and internal control over financial reporting were ineffective, citing inadequate segregation of duties and monitoring, accounting-software audit-trail limitations, and reliance on outside consultants and attorneys. The filing also recorded $475,000 of legal and professional services as consideration for common stock during the first nine months.
No specific revenue or profitability guidance was provided. Management said losses were likely to continue through 2012 and that continued operations depended on product rollout, revenue growth, and additional capital.
Most important facts for investors to verify
- Confirm the issuer’s identity and its relationship, if any, to Workhorse Group Inc.; the filing names AMP Holding Inc.
- Verify the status, terms, and actual proceeds of the Kodiak equity line and any other financing, including the November 2012 note conversion and resulting dilution.
- Assess the company’s near-term liquidity, overdue supplier and payroll obligations, and ability to meet the stated $8 million–$10 million funding need.
- Check whether vehicle deliveries and revenue scaled beyond the four converted vehicles reported for the first nine months, and whether production economics support eventual profitability.
- Track remediation of the disclosed material weaknesses and any subsequent changes to internal controls.