Filing summary: AMP Holding Inc. — quarter ended March 31, 2013
Entity clarification: The supplied filing is AMP Holding Inc.’s Form 10-Q, not a filing under the name Workhorse Group Inc. AMP Holding reported that its subsidiary acquired selected Workhorse Custom Chassis assets in March 2013. The filing describes the company as a development-stage business focused on commercial trucks and electric-vehicle technology.
Financial results and liquidity
| Metric | Q1 2013 | Q1 2012 or comparison |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $1.584 million | $1.161 million |
| Net loss | $1.584 million | $1.161 million |
| Basic and diluted loss per share | $(0.03) | $(0.03) |
| Cash used in operating activities | $946,000 | $930,000 |
| Cash and cash equivalents at quarter-end | $111,875 | $39,819 at December 31, 2012 |
| Current assets / current liabilities | $594,000 / $2.563 million | $94,000 / $2.439 million at December 31, 2012 |
| Total debt, including current portion | $2.826 million | $593,000 at December 31, 2012 |
Working capital was negative by approximately $1.969 million at March 31. The balance sheet reports stockholders’ equity of $294,000, alongside an accumulated development-stage deficit of $22.955 million. With no quarterly revenue, gross margin and operating margin are not meaningful.
Expenses and net loss each increased about 36% year over year. Payroll expense declined, while stock-based compensation and consulting costs rose. The company reported $5.0 million of investing cash outflow for the Workhorse asset acquisition and $6.018 million of net financing inflow, including $3.685 million from common-stock issuance and a $2.25 million secured debenture. Quarter-end cash increased by $72,000.
Material developments and outlook
- On March 13, AMP Trucks acquired Workhorse Custom Chassis operating assets for stated consideration of $5.0 million: $2.75 million cash and a $2.25 million secured debenture. Assets included the Workhorse brand, intellectual property, dealer-network access and facilities, land and equipment in Union City, Indiana. The company said the acquisition would position it to produce medium-duty chassis with multiple powertrain options.
- Management estimated a need for $5 million to $10 million over the following 12 months. It said losses were likely to continue through 2013 and that the company could not fund operating and capital requirements from revenue. Additional financing was not assured; failure to obtain it could force the company to scale back or cease operations.
- Management reported approximately $150,000 cash in mid-May 2013. Subsequent to quarter-end, investors purchased $515,000 of common stock with warrants on May 10; the company also settled $121,000 of consulting invoices with shares.
- Accounts payable were $1.139 million at quarter-end, with numerous delinquent obligations. The filing describes past payroll delays and unpaid compensation, although February through April 2013 payroll was reported paid on time.
- The company disclosed a covenant violation on $500,000 of shareholder notes: financing exceeding $2 million had occurred without repayment of the notes as required. A City of Loveland loan payment was past due after the company failed to meet conditions for forgiveness; escrow payments were required in 2013.
- The filing states that substantial doubt exists about the company’s ability to continue as a going concern. It also reports ineffective disclosure controls and material weaknesses, including limited segregation of duties, reliance on outside advisers and no formal audit committee.
Important investor verification points
- Confirm the registrant’s identity and relationship to Workhorse Group; this filing names AMP Holding Inc. as the issuer.
- Review whether the company raised the additional capital it estimated it needed, and assess the timing and terms of subsequent financing and dilution.
- Verify the Workhorse asset acquisition’s integration, operating status, production plans and ability to generate revenue; the filing reports no Q1 revenue.
- Check the status of delinquent payables, deferred compensation, the shareholder-note covenant violation and the past-due City loan.
- Assess cash runway, ongoing losses, debt service and the company’s ability to address the stated going-concern uncertainty.
- Review the scale of outstanding shares, options and warrants, including the March financing warrants and equity issued for services.