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AMPD > SEC Filings for AMPD > Form 10-Q on 19-Aug-2013All Recent SEC Filings

Show all filings for AMP HOLDING INC.

Form 10-Q for AMP HOLDING INC.


19-Aug-2013

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the Consolidated Financial Statements ("financial statements") and related notes included in Item 1 of this report and the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2012.

All references in this Form 10-Q that refer to the "Company", "AMP Holding", "AMP", "we," "us" or "our" are to AMP Holding Inc. and unless otherwise differentiated, its wholly-owned subsidiaries, AMP Electric Vehicles Inc. and AMP Trucks Inc.

Some of the statements contained in this Form 10-Q that are not historical facts are "forward-looking statements" which can be identified by the use of terminology such as "estimates," "projects," "plans," "believes," "expects," "anticipates," "intends," or the negative or other variations, or by discussions of strategy that involve risks and uncertainties. We urge you to be cautious of the forward-looking statements, that such statements, which are contained in this Form 10-Q, reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties and other factors affecting our operations, market growth, services, products and licenses. No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of the risks we face, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events. Factors that may cause actual results, our performance or achievements, or industry results, to differ materially from those contemplated by such forward-looking statements include without limitation:

Our ability to attract and retain management
Our ability to raise capital when needed and on acceptable terms and conditions
The intensity of competition
General economic conditions
Changes in regulations
Whether the market for electric vehicles continues to grow, and, if it does, the pace at which it may grow
Our ability to compete against large competitors in a rapidly changing market for electric vehicles

All written and oral forward-looking statements made in connection with this Form 10-Q that are attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Given the uncertainties that surround such statements, you are cautioned not to place undue reliance on such forward-looking statements.

Overview

On December 28, 2009, AMP Holding Inc. entered into and closed a Share Exchange Agreement with the AMP shareholders pursuant to which we acquired 100% of the outstanding securities of AMP in exchange for 14,890,904 shares of our common stock. Considering that, following the merger, the AMP Shareholders control the majority of our outstanding voting common stock and we effectively succeeded our otherwise minimal operations to those that are theirs, AMP is considered the accounting acquirer in this reverse-merger transaction. A reverse-merger transaction is considered, and accounted for as, a capital transaction in substance; it is equivalent to the issuance of AMP securities for our net monetary assets, which are deminimus, accompanied by a recapitalization. Accordingly, we have not recognized any goodwill or other intangible assets in connection with this reverse merger transaction. AMP is the surviving and continuing entities and the historical financials following the reverse merger transaction will be those of AMP. We were a "shell company" (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended) immediately prior to our acquisition of AMP pursuant to the terms of the Share Exchange Agreement. As a result of such acquisition, we were initially focused on developing automotive electric drive trains but have subsequently shifted our focus to the design, engineering, marketing and sale of both repowered and new class 3 through 6 commercial trucks with an all-electric drivetrain and battery system. Consequently, we believe that acquisition caused us to cease to be a shell company as we no longer have nominal operations. Since that time, we have devoted the majority of our resources to the development of an all-electric drive system capable of moving heavy large vehicles ranging from full size SUV's up to and including Medium Duty Commercial trucks.

Additionally, in February 2013 AMP Holding formed a new wholly owned subsidiary, AMP Trucks Inc., an Indiana corporation. On March 13, 2013 AMP Trucks Inc. closed on the acquisition of assets of Workhorse Custom Chassis, LLC ("Workhorse"). The assets included in this transaction were: the Workhorse brand, access to the dealer network of 440 dealers nationwide, intellectual property, and all physical assets which include the approximately 250,000 sq. ft. of facilities on 48 acres of land in Union City, Indiana (the "Workhorse Assets"). We believe this acquisition propels AMP Holding Inc. into the unique position as a medium duty OEM which we believe will be capable of producing new chassis with electric, propane, compressed natural gas, and hybrid configurations, as well as gasoline drive systems. Since the acquisition, we have hired sales consultants with strong relationships in the work truck/ medium duty truck segment to assist us in acquiring bookings for truck orders from the existing Workhorse customer base as well as other potential customers that purchase the type of chassis that the Workhorse facility is capable of producing.

As a subsequent event, on August 7, 2013 we delivered an all electric Para-transit 12 passenger bus to BARTA (Berks County Regional Transit Authority) of Pennsylvania. This initial vehicle was the conversion of a Ford E-450 chassis. Like the package delivery van, this type of chassis could also be produced at the AMP Workhorse facilities as an AMP/Workhorse chassis. The total revenue associated with the two unit conversation and integration of wireless induction charging was $355,000.


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Results of Operations

Three Months Ended June 30, 2013 Compared to Three Months Ended June 30, 2012

Revenue. We did not generate revenue for the quarter ended June 30, 2013. Revenue for the quarter ended June 30, 2012 of $222,098 consisted of $87,000 from the sale of two experimental SUV to a university for an engineering class and $135,098 from a manufacturer to develop two prototype step vans.

Expenses. Expenses for the three months ended June 30, 2013 and 2012 were $2,162,404 and $894,125, respectively. The increase in total expenses for the quarter over the prior year was primarily related to the value of stock based compensation for consultants introducing us to additional investors and helping in the acquisition of the Workhorse plant. Going forward, the plant will generate small fixed maintenance expenses of approximately $100,000 per quarter until it becomes operational. Expenses for the quarter included payroll and payroll taxes ($391,693), stock based compensation ($810,411), consulting ($349,700), batteries, motors and supplies ($72,084), and legal and professional ($135,803). Our expenses for the quarter ended June 30, 2012 were $894,125 and included payroll and payroll taxes ($398,223), stock based compensation ($66,894), batteries, motors and supplies ($130,220), legal and professional ($42,520), and consulting ($12,289).

Net loss. Net loss for the three months ended June 30, 2013 and 2012 were $2,162,404 and $672,027, respectively.

Operating Activities

Our operating activities from continuing operations resulted in net cash used by operations of $558,442 for the three months ended June 30, 2013 compared to net cash used by operations of $264,066 for the three months ended June 30, 2012. The net cash used by operations for the three months ended June 30, 2013 reflects a net loss of $2,162,404 offset by stock based compensation of $810,411, depreciation of $101,493, $260,075 of legal, consulting and professional services accepted as consideration for issuance of common stock, and increases in accounts payable of $206,574, accounts payable, related parties of $32,221, customer deposits of $210,000, and prepaid expenses and deposits of $16,812. The net cash used by operations for the quarter ended June 30, 2012 reflects a net loss of $672,027 offset by stock based compensation of $66,894, amortized discount on convertible debentures of $27,896, and depreciation of $16,682, and increases of $277,173 in accounts payable and $19,316 in accounts payable, related parties.

Investing Activities

There were no investing activities for the three months ended June 30, 2013. Investing activities for the three months ended June 30, 2012 resulted in net cash outflow of $28,753 for the acquisition of equipment.

Financing Activities

Financing activities for the three months ended June 30, 2013 resulted in a net cash inflow of $592,911 and included cash inflows from the issuance of common stock of $616,761, reduced by cash outflows for payments on long-term debt of $23,850. Financing activities for the three months ended June 30, 2012 resulted in a net cash inflow of $275,640 and included cash inflows from proceeds from debentures of $593,250, reduced by cash outflows for payments on long-term debt of $1,610 and net repayment of shareholder advances of $262,000.

Six Months Ended June 30, 2013 Compared to Six Months Ended June 30, 2012

Revenue. We did not generate revenue for the six months ended June 30, 2013. Sales for the six months ended June 30, 2012 were for prototype vehicle sales as detailed above in the three month analysis.

Expenses. Expenses for the six months ended June 30, 2013 and 2012 were $3,746,111 and $2,054,857, respectively. The increase in total expenses for the six months was primarily related to non-cash payments for consulting and fees associated with the Workhorse Plant acquisition mentioned above. Going forward the plant will generate small fixed maintenance expenses of approximately $100,000 per quarter until it becomes operational. Expenses for the six months ended June 30, 2013 included payroll and payroll taxes ($731,860), stock based compensation ($1,140,527), consulting ($675,171), batteries, motors and supplies ($225,816), and legal and professional ($284,732). Our expenses for the six months ended June 30, 2012 were $2,054,857 and included payroll and payroll taxes ($949,145), stock based compensation ($219,926), legal and professional ($154,158), batteries, motors and supplies ($123,507), and consulting ($74,468).

Net loss. Net loss for the six months ended June 30, 2013 and 2012 were $3,746,111 and $1,832,759, respectively.


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Operating Activities

Our operating activities from continuing operations resulted in net cash used by operations of $1,504,247 for the six months ended June 30, 2013 compared to net cash used by operations of $1,193,768 for the six months ended June 30, 2012. The net cash used by operations for the six months ended June 30, 2013 reflects a net loss of $3,746,111 offset by stock based compensation of $1,140,527, depreciation of $116,664, and $602,575 of legal, consulting and professional services accepted as consideration for issuance of common stock, increases in accounts payable of $92,080, accounts payable, related parties of $14,794, customer deposits of $320,000, and prepaid expenses and deposits of $44,776. The net cash used by operations for the six months ended June 30, 2012 reflects a net loss of $1,832,759 offset by stock based compensation of $219,926, legal and consulting services valued at $60,000 accepted as consideration for the issuance of common stock, amortized discount on convertible debentures of $31,770, and depreciation of $32,885, increases in accounts payable of $200,271 and accounts payable, related parties of $82,264, and a decrease in prepaid expenses and deposits of $11,875.

Investing Activities

Investing activity for the six months ended June 30, 2013 was the $5,000,000 purchase of the Workhorse Plant in Union City, IN. Investing activity for the six months ended June 31, 2012 was $28,753 for the acquisition of equipment in Loveland, OH.

Financing Activities

Financing activities for the six months ended June 30, 2013 resulted in a net cash inflow of $6,610,772 and included cash inflows from the issuance of common stock of $4,301,761, and proceeds from the issuance of a secured debenture payable to Workhorse Custom Chassis, LLC of $2,250,000 and proceeds from a note payable of $100,000, reduced by cash outflows for payments on long-term debt of $40,989. The $1,167,044 net cash inflow from financing activities for six months ended June 30, 2012 was $1,439,250 from the sale of debentures reduced by repayment of shareholder advances of $269,000 and payments on long-term debt of $3,206.

Presently, due to the lack of revenue we are not able to meet our operating and capital expenses. There is doubt about our ability to continue as a going concern, as the continuation of our business is dependent upon successful roll out of our products and maintaining a break even or profitable level of operations. We have incurred operating losses since inception, and this is likely to continue through the fiscal year ending December 31, 2013. Our independent auditors, for the year ended December 31, 2012, have issued an opinion on our financial statements that raise substantial doubt about our ability to continue as a going concern.

We require funds to enable us to address our minimum current and ongoing expenses, expand marketing and promotion activity connected with the development and marketing of our products and to generate market share. Our cash on hand will not be sufficient to satisfy all of our cash requirements as we continue to progress and expand. We estimate that we will require between $12,000,000 and $15,000,000 to carry out our business plan for the next twelve months. We anticipate we will be able to generate revenues from sales in 2014; therefore, we will need to raise additional funds to continue to finalize engineering design and validation, develop new business, and respond to unanticipated requirements or expenses. If we are not able to generate significant revenues in 2014 from the sale of our products, we will not be able to maintain our operations or achieve a profitable level of operations.

The financial requirements of our Company will be dependent upon the financial support through credit facilities and additional sales of our equity securities. The issuance of additional equity securities by us may result in a significant dilution in the equity interests of our current shareholders. Should additional financing be needed, there is no assurance that we will be able to obtain further funds required for our continued operations or that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will not be able to meet our other obligations as they become due and we will be forced to scale down or perhaps even cease our operations.

We can give no assurance that we will be successful in implementing any phase, all phases of the proposed business plan, or that we will be able to continue as a going concern.

Liquidity and Capital Resources

As of June 30, 2013, we had current assets of $645,147 including cash of $146,344 and inventory of $441,002 mainly from the purchase of the Workhorse plant. Current liabilities were $3,027,013, mainly accounts payable of $1,345,308 and shareholder advances of $558,000. As of December 31, 2012, we had current assets of $93,846 including cash of $39,819 and current liabilities of $2,438,540, mainly $1,253,228 of accounts payable and $558,000 of Shareholder advances.

Cash

The cash balance in mid-August 2013 is about $30,000. This will impact the payment of our outstanding accounts payable balance.


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Accounts Payable

The company has numerous delinquent obligations to suppliers, employees and business contracts. As of June 30, 2013 the accounts payable balance was $1,345,308. Obligations are being prioritized for payment as the timing of receipt of funds allows. Proactive communications to suppliers for delinquent current obligations have been ongoing. Additionally, several suppliers have been offered common stock of the Company in exchange of foregoing the balance due to them. The two largest payables, totaling $513,636, were converted to promissory notes during December 2012 with monthly payment plans extending to March and December 2014.

Credit Facility

Presently we have no revolving Credit Facility established. There is no guarantee that we will be able to enter into an agreement to establish a line of credit or that if we do enter into such agreement that it will be on favorable terms.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Federal Tax Credit Qualification by the IRS & Select State Incentive Programs

The Company has been qualified by the IRS for a vehicle federal tax credit of up to $7,500. The Company joins a list of plug-in electric drive motor vehicle manufacturers, including Ford Motor Company, General Motors Corporation, Tesla, Toyota, and 13 EV manufacturers in all, qualifying purchasers for up to a $7,500 tax credit when purchasing an electric vehicle. In June of 2013, California HVIP approved the AMP E-100 truck for a minimum point of purchase voucher of $35,000 per vehicle purchased. As a subsequent event, on August 9, 2013 NYSERDA the New York State point of purchase voucher program approved the AMP E-100 for an incentive of $60,000 per vehicle.

Critical Accounting Policies

We consider accounting policies involving significant judgments and assumptions by management that have, or could have, a material impact on the carrying value of certain assets or on income (loss) to be critical accounting policies. We consider the following to be our critical accounting policies: basis of presentation, development stage company, revenue recognition, and income taxes.

BASIS OF PRESENTATION - The consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has limited revenues and has negative working capital and stockholders' deficits. These conditions raise substantial doubt about the ability of the Company to continue as a going concern.

In view of these matters, continuation as a going concern is dependent upon the continued operations of the Company, which in turn is dependent upon the Company's ability to meet its financial requirements, raise additional capital, and the success of its future operations. The financial statements do not include any adjustments to the amount and classification of assets and liabilities that may be necessary should the Company not continue as a going concern.

The Company has continued to raise capital since the merger. Management believes the proceeds from these offerings, future offerings, and the Company's anticipated revenue provides an opportunity for the Company to continue as a going concern. If additional funding is required, the Company plans to obtain working capital from equity financing from the sale of common, preferred stock and/or convertible debentures. Obtaining such working capital is not assured.

The accompanying unaudited consolidated financial statements have been prepared in accordance with Form 10-Q instructions and in the opinion of management contain all adjustments, consisting of normal recurring accruals necessary to present fairly the financial position, results of operations and cash flows for the periods presented. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. These interim financial statements should be read in conjunction with the financial statements and accompanying notes included in the Annual Report on Form 10-K for the year ended December 31, 2012.

Operating results for the six months ended June 30, 2013 are not necessarily indicative of the results that may be attained in subsequent periods or for the year ending December 31, 2013.

Certain reclassifications were made to the prior year financial statements to conform to the current year presentation. These reclassifications had no effect on previously reported results of operation or stockholders' equity (deficit).


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DEVELOPMENT STAGE COMPANY - The Company is considered a development stage company since planned principal operations resulting in sustaining revenue have not fully commenced. Accordingly, the Company presents its consolidated financial statements in conformity with the accounting principles generally accepted in the United States of America that apply to developing enterprises. As a development stage enterprise, the Company discloses its retained earnings (or deficit accumulated) during the development stage and the cumulative statements of operations and cash flows from commencement of development stage to the current balance sheet date. The development stage began in 2007 when the Company was organized.

REVENUE RECOGNITION - It is the Company's policy that revenues will be recognized in accordance with SEC Staff Bulletin (SAB) No. 104, "Revenue Recognition". Under SAB 104, product revenues are recognized when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed and determinable, and collectability is reasonably assured. Customer deposit liabilities include monies from customers to reserve a production slot for conversion of an OEM powertrain to the AMP all electric powertrain. The final retail price and delivery date are yet to be determined, and the deposits are subject to a full refund at the request of the depositor. Revenues since the inception of the Company in 2007 through the date of these financial statements have not been significant and consist of sales of a limited number of experimental vehicles.

INCOME TAXES - As no taxable income has occurred from the date of this merger to June 30, 2013 cumulative deferred tax assets of approximately $5,712,000 are fully reserved, and no provision or liability for federal or state income taxes has been included in the financial statements. Net operating losses of approximately $3,600,000 are available for carryover to be used against taxable income generated through 2030, net operating losses of approximately $6,700,000 are available for carryover to be used against taxable income generated through 2031, net operating losses of approximately $3,900,000 are available for carryover to be used against taxable income generated through 2032, and net operating losses of approximately $2,600,000 are available for carryover to be used against taxable income generated through 2033. The Company had not filed income tax returns during its period as a shell company.

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