SEC Filing Summary: Title Starts Online, Inc. (Workhorse Group Inc.)
Business Context and Reporting Period
Filing Type: Form 8-K (Current Report)
Date of Report: December 28, 2009
Registrant: Title Starts Online, Inc. (Nevada Corporation)
Acquired Entity: Advanced Mechanical Products, Inc. ("AMP")
Reporting Period: The filing details a reverse-merger transaction closed on December 28, 2009. Financial data presented covers AMP's operations from inception (February 2007) through September 30, 2009.
On December 28, 2009, Title Starts Online, Inc. (a shell company) acquired 100% of AMP in exchange for 1,063,636 shares of common stock. AMP is the accounting acquirer. Post-transaction, the Company is no longer a shell company and focuses on designing, marketing, and selling modified automobiles with all-electric drivetrains and battery systems. The Company converts existing vehicles (e.g., Saturn Sky, Aura, VUE) by replacing internal combustion engines with electric powertrains.
Key Financial Metrics
Revenue: $0. The Company has generated no revenue since inception in February 2007.
Profitability:
- Net Loss (9 months ended Sept 30, 2009): $863,657
- Net Loss (Year ended Dec 31, 2008): $1,383,884
- Accumulated Deficit (as of Sept 30, 2009): $2,703,686
Cash Flow (9 months ended Sept 30, 2009):
- Operating Activities: Net cash used of $728,858
- Investing Activities: Net cash used of $8,502
- Financing Activities: Net cash provided of $688,500 (from stock sales)
Liquidity and Balance Sheet (as of Sept 30, 2009):
- Cash and Cash Equivalents: $9,443
- Total Current Assets: $31,432
- Total Current Liabilities: $328,217
- Working Capital Deficiency: $296,785
Debt: No revolving credit facility exists. The Company received $445,000 in bridge loans between October and December 2009. On December 28, 2009, $385,000 of these loans were converted into equity (Series A Preferred Stock and Common Stock).
Material Changes vs. Prior Period
Corporate Structure: The most significant change is the reverse-merger with AMP, transitioning the registrant from a shell company with nominal operations to an operating entity in the electric vehicle conversion sector.
Financial Performance:
- Expenses: Expenses for the nine months ended September 30, 2009 ($865,754) were slightly lower than the same period in 2008 ($885,915), primarily due to reduced advertising and professional fees, offset by increased payroll and R&D costs for product development.
- Cash Position: Cash on hand declined significantly from $58,303 (Dec 31, 2008) to $9,443 (Sept 30, 2009) due to operating losses.
Capitalization: Following the merger and subsequent agreements, the Company issued 1,063,636 shares for the AMP acquisition and converted bridge loans into 8,375 shares of Series A Preferred Stock and 10,638 shares of Common Stock.
Guidance, Outlook, Risks, and Contingencies
Outlook and Capital Needs:
- The Company estimates a need for $1,500,000 to $2,000,000 to execute its business plan for the next twelve months.
- Management anticipates continued net losses and a worsening working capital deficiency until the product rollout is successful.
- There is substantial doubt about the Company's ability to continue as a going concern without additional financing.
Risks and Contingencies:
- Going Concern: Lack of revenue and significant accumulated deficits create high risk of insolvency if financing is not secured.
- Competition: Intense competition from well-capitalized entities like Tesla, GM (Volt), and Nissan.
- Regulatory Compliance: Subject to strict federal and state regulations regarding vehicle safety, emissions, and manufacturing. Non-compliance could result in fines or business cessation.
- Intellectual Property: The Company holds no patents and relies on trade secrets, creating a risk of IP infringement or inability to protect proprietary technology.
- Key Personnel: Operations depend heavily on Stephen S. Burns (CEO). Loss of key personnel could materially harm the business.
- Stock Liquidity: Common stock is subject to SEC "penny stock" regulations, which may limit liquidity and trading volume.
Unusual Items:
- Share Cancellation: On December 29, 2009, significant shareholder Mark DeFoor returned 3,105,000 shares for cancellation in exchange for a release of the Company and transfer of assets from a former subsidiary.
- Loan Conversions: Multiple bridge loans were converted to equity immediately following the merger to alleviate debt pressure.
Investor Verification Checklist
- Capital Sufficiency: Verify if the Company has secured the estimated $1.5M–$2.0M required for operations, given the current cash balance of only $9,443.
- Revenue Generation: Confirm if any sales of electric vehicle conversions have occurred since the filing date, as the company has had zero revenue since 2007.
- Regulatory Status: Investigate the status of vehicle safety certifications and compliance with EPA/NHTSA regulations for the converted vehicles.
- Intellectual Property: Assess the risk of operating without patent protection in a competitive industry.
- Management Continuity: Monitor the retention of Stephen S. Burns and the appointment of independent directors as planned.
- Debt Conversion Terms: Review the specific terms of the Series A Preferred Stock conversion (conversion price of $4.70588) and potential dilution.