Q4 2019 Earnings Call
Ladies and gentlemen, we appreciate your patience and please could you did a standby the workforce group conference call will begin momentarily again, we thank you for your patience and please could you need to stand by the workforce Group conference call will begin momentarily. Thank you.
[music].
Ladies and gentlemen, greetings and welcome to workforce groups fourth quarter and full year 2019 Investor Conference call.
As a reminder, this conference call is being recorded it is now my pleasure to introduce your host workforce Chief operating officer Dr. Whopper Allison. Thank you Dr. Wilson you may begin.
Thank you operator, and good morning, everyone. We appreciate you taking the time to join us for coal.
The market open we issued a press release with our full year results for the period ended December 31st 2019.
I want to talk about the progress of our award winning C series.
We have achieved for certification the milestones as they relate to our Q1 production activities I.
I will elaborate.
What is EPA certification.
On February 13th we received the EPA certification of conformity. We're C. O C for the 650 and see 1000, which are our full electric zero emission last mile delivery vehicles.
He CRC is issued by the EPA do a vehicle manufacturer to officially confirm a specific vehicle class conforms to all the EPA regulations and emission standards.
With this approval the vehicle class also has the right.
Sorry to operate on U.S. roads and highways.
Clearly EPA approval murky step in the delivery of production vehicles in the west.
The second one is break testing on February 26 C series completed tests for final calibration of its ABS and walk break functionality.
For a vehicle this size blending regenerative braking and ABS and certifying the system was a considerable effort. We're pleased to report this has been successfully completed.
The third milestone is a myriad of federal motor vehicle safety standards, where it can be assessed ranging from headlights.
Switches to Hood watch systems, and we have passed testing of each of these standards, except one which we anticipate.
We will be completed in March.
Lastly, workforces earned its ISO 9001, 2015 certification for its quality management system.
So 9001 2015.
The globally recognized quality management standard developed was published by the international organization for standardization.
It was issued by Perry, John C. Registrars and the scope of Workforces certification includes a design development and service on electric vehicles support equipment and services.
I recently posted a video to linked and that down or do a lot of attention. The video showed the C 1000 on the durability tracking Transportation Research Center, Denise Liberty, Ohio.
It showed how impressed with the suspension absorbs the bumps the independent front, where suspension is a first in this class of commercial last mile delivery vehicles and the video the C 1000 running on the test track shows right. A driver can expect this paired with a lower oil canning composite body on frame makes a superior worked.
Like environments and less fatigue for drivers.
Our see 650 is also accumulating additional tests miles here and Loveland.
We're confident in our technology and overall platform.
We have many potential customers drive the vehicles to assess the new features and this confirms we are meeting markets needs and expectations.
Speaking of which we hosted a ride and drive last month directed our fleet customers Severable largest worldwide fleet operators attending there were glowing reviews of the vehicles operations.
As a customer focused company, it's great to hear their ultralow floor.
Hi driver visibility flexibility in order configuration and cost is attractive to potential customers.
And a little about the award previously mentioned.
At the end T. a show last week were of course. The C. 650 won the prestigious innovation award and the Green category.
We are happy with the accolades and that the C series is being recognized for the groundbreaking vehicle. It is designed to be.
In a few moments I'm going to turn the call over to our CFO, Steve Schrader will walk us through our financial results for the quarter in here.
After that or C O Dwayne here's what I will come online provide an update to our business our production and an outlook for the remainder of the year.
But before we begin I want to call your attention to our safe Harbor provision for forward looking statements is posted on our website as part of our year end up there. So.
The safe Harbor provision that identifies risks factors that may cause actual results could differ materially from the content of our forward looking statements.
Our 2019 form 10-K, and other periodic filings will provide further details about the risk factors related to our business.
With that I would like to turn the call over to our CFO, Steve Schrader Steve.
Thanks, Rob and thank you to everyone joining us for today's call.
Well I began I just want to say that I'm excited to be part of war course, which is clearly at the forefront of commercial electric delivery vehicle space.
I've only been on the team for a few months now I'm incredibly encouraged and excited by the work and the progress we're making against our long term goals going forward. My intention is to play an increasingly integral role in helping the company minutes manufacturing and financial goals.
As many of you've been following workforce are aware, we're in the final stages of transitioning from our first generation vehicles to our next new generation vehicles, which are now known as the C series. The absence of significant revenue is primarily due to our migration to this new platform.
Just a minute Dwayne will be able to provide the latest updates with respect to our production efforts.
First I'll now discuss our financial results for the fourth quarter and full year ended December 31st 20 Nike.
Sales for the fourth quarter at 2019 recorded at $3000, which was down from $21000 in the fourth quarter 2018.
The full year sales were 377000 compared to 763000 2080.
The decrease in sales for both the quarter engineer was wholly due to decrease in the volume of trucks deliberate and a focus on the engineering and design or C series vehicles.
Cost of goods sold decreased 2.1 million from 11.1 million in the fourth quarter 2018.
The decrease was driven by warranty expense and inventory write down in the previous years quarter.
The 40 or cost of goods sold were 5.5 million compared to 15.9 million in 2018 for the same reason as noted in the fourth quarter.
Selling general and administrative expenses in the fourth quarter 2019 were 3.6 million compared to 2.7 million in the fourth quarter 2018.
The increase in SGN expenses was primarily due to executive stock based compensation and legal and professional fees related to the fourth quarters transactions, which was offset by less advertising expenses compared to the prior year.
For the full year, selling general and administrative expenses decreased to 10.2 million, an 11.5 million in 2018.
The decrease in S. DNA was due primarily to reduced advertising and lower employee headcount offset by an increase in executive stock based compensation and higher professional and legal fees associated with the various financial transactions throughout the year.
Research and development expenses in the fourth quarter plenty 19 increased to 4 million from 1.7 billion in the fourth quarter 2018.
The full year 2019 research and development expenses increased to 8.2 million.
From 7.4 million in the previous year. This increase in R&D expenses for what the quarter any here, that's primarily due to nonrecurring engineering and design expenses associated with the C series delivery trucks.
Other income for both the fourth quarter and the full year plenty 19 was 15.8 million compared to zero in Q4 last year end up for your meeting.
The increase is due to the 12.2 million related to licensing income from the company's Lordstown Motor Corporation its estimate.
And 3.6 million from a net gain on the sale of our former sure fly personal helicopter.
Interest expense net in the fourth quarter 2019 increased to 5.6 million compared to 2.2 me 2 million from the same period last year.
For the full year interest expense net.
Decreased to 29.1 million compared to 2.4 million in 2018.
Increase in interest expense for both the quarter ending year was impacted by the pre payment of the marathon that facility and by a mark to market adjustment on the Companys warrant liability.
Mark to market as a noncash adjustment that is primarily driven by movement in the company's stock price.
Net income for the fourth quarter was 655000 that compared with a net loss of 17.7 million in the fourth quarter 20.
Net loss for the full year 2019 was 37.2 million compared to a net loss in 2018 at 36.5 million.
Moving to our capital markets activities in November of last year, we announced that workforce and entered into a convertible debenture financing agreement the institutional lender, which net the company 39 million.
Lets proceeds along with the Shutterfly sale allowed us to repay our existing debt held by marathon asset management and let the company with nearly 24 million as shown on our latest balance sheet.
As part of the convertible debenture agreement. We are required told that 8 million of cash required are all providing us with 16 million of cash for operation.
It's kind of this financing activities to provide working capital and to support initial small scale production output.
As production output ramps up to a more material amount in the second quarter 2020, we will need additional financing and are actively pursuing a traditional credit revolver debt facility to support the tooling materials and components needed for our manufacturing process.
At the new CFL My experience is that most companies issue an earnings release prior to 10-K Entente filings.
But you should expect <unk> filing later this week.
Finally, before turning the call right at the Wayne I'm happy to report that through the hard work of our staff and the addition of enhancements to our internal controls and financial systems.
We have eliminated our previously recorded a material weaknesses.
But that overview completed I'll now turn the call over to workwear, CEO Dwayne who used to discuss some are a major operational updates and provide an outlook for our business in the current quarter in for the rest of the year.
Well done Steve and welcome everyone. We appreciate you joining us on our call. This morning.
Before I jump into our 2019 discussion I want to a first address the most recent change in our management team as you just heard from Steve Schrader, Yes, our CFO, having joined the company in December 2019 don't show us with many years of experience and CFO positions, perhaps the most significant experience was asked.
Oh, Duke Energys regulated business with synergy.
It was acquired by Duke Energy and 2006.
We're excited to ask Steve joined the workforce management beam and fully appreciate his knowledge and experience helping to continue workforces growth welcome aboard Steve.
[noise], reflecting on 2019, it was quite a year with a very specific set of goals to be Matt.
Some of you may recall I took the range as CEO officially on February four and quickly announced Rob will lessen as our chief operating officer Robin I together spelled out our plan for the remainder of 2000 Nike.
Beyond the all important vehicle specific engineering and production priorities. We also recognize the need to implement sox controls eliminate the eliminating our previously reported material weakness as Steve mentioned earlier, our accounting team led the charge and together. We also spent a significant amount of <unk>.
And energy designing and executing appropriate controls, enabling us to remedy the material weakness previously identified.
To reiterate in February of 2019, we began the transition from an entrepreneurial development stage company to a highly focused production oriented company as such we identified our to do list designed to help us better manage a smaller portfolio of innovative products.
And to focus on creating a manufacturing the vehicles our customers have ordered.
Our focus was set squarely on our commercial vehicle business, specifically I know last mile delivery segment with our engine platform now known as the C series electric delivery vans.
I said, Dan and reiterate today designing and building electric vehicles is a complex and challenging business to compete in the space requires meaningful capital.
Strong partnerships proven performance and a healthy dose of stick to it took us we continue to focus on last mile delivery as we strengthened our position in this space with our C series platform and our integrated truck launched or slide delivery drone technology.
We also announced last year that we would work to monetize other highly innovative technologies with the workforce portfolio.
This time last year, we had two additional vehicle based platforms and our development engineering cues, we had both assure fly our man Doctor to Doctor and R.W. 15 electric pickup truck. We stated we would search for a buyer of the Shutterfly and ultimately completed the sale of the sure fly.
Hi to move incorporated in December 2019, not only did we improve our cash position through this non dilutive sale. We also entered into a joint venture with Mo whereby we improved our opportunities to achieve required epay certifications as well as to bring the horse slide to Mark.
We are actively working with two customers using our vehicle our strong technology.
We haven't yet named the second customer, but we are well entrenched and use basis third party testing and certification processes required to bring the technology to market.
On November seven 2019, we announced that we had signed an intellectual property licensing agreement with Lordstown Motor Corporation, which concurrently acquired the Lordstown Assembly complex from General Motors.
The terms of the agreement Workforces granting LMC intellectual property license related to our electric truck platform in exchange for a 10% non dilutive equity stake in the company. This transaction has tremendous value to workforce, we benefited by eliminating the need to raise and spare.
And hundreds of millions of dollars to bring the aforementioned W 15 to market, which would have diluting our shareholders.
10% non dilutive equity position as already contributed 12.2 million as licensing income in the fourth quarter and it also represents the potential for additional workforce revenue and cash streams through licensing royalties and engineering services from LMC.
For example, workforce is entitled to a license fee equal to 1% of the gross sales on the first 200000 units sold. Additionally, the agreement calls for Lmps age of prepaid a portion of the royalty no not equal to 1% other capital raise.
Well, our south complex includes a 6.2 million square foot manufacturing facility on 740 acres with more than 1200 robots and an experienced workforce that has been producing automobiles for generations.
This complex.
And the workforce experience provides workforce with many options for contract manufacturing Assembly and engineering services for future Workhorse vehicle platforms. We're now envisioning LM ceased production volumes may further help decrease workforce component costs and engineering costs.
Costs on our workforce specific platforms.
I mean affiliated company with this level of automotive production capacity engineering expertise and supply chain that gives workforce and engineering capability and manufacturing footprint unrivaled into commercial electric delivery truck manufacturing.
We are quite pleased with our lordstown ownership.
All of these 2019 achievements are important to workforces future as they demonstrate we have revamp the company. These achievements give us the opportunity to improve our focus on our vehicle engineering and assembly operations in 2019, we cleared the clutter that so many people felt it was a distress.
We strengthened our operational capability.
Developed an even more experienced management team and we've engineered the most innovative electric last mile delivery van available to date.
I will start our operational discussion by talking about our C series production activities. In Q1 2022. They said we produced three C series vehicles to 1000 cubic foot vehicles and Onesix hundred 50 cubic.
These vehicles are used to achieve the required regulatory approvals and the durability results to move to production intent vehicles and for the sales and marketing team to attract new prospects and close additional orders say the C. Six spot 650 was on display at into his work truck show last week.
And the Annapolis, where Rob mentioned, we were the recipients of the innovation Award and the Green category I'm pleased to report we had tremendous activity at our booth and we received a lot of interest from prospective new customers, we expect to turn their interest into repeat orders going forward.
As Rob said, we have been working toward the final stages of preparation and certification of our C series vehicles with the intent to began initial production and delivery in the first quarter of this year during the quarter, we were impacted by the global Corona virus outbreak as the U.S. based manufacturer we.
We remain focused on sourcing parts in the U.S. as often as possible. However in February we were notified by two suppliers with factories in infected areas that these companies have been through extended shutdown periods, which in turn negatively impacted the timing of a of our parts being received from our supply.
Slide show.
At least one case, we have a minimum six week delay in receiving components necessary for the final assembly of our vehicles.
Yes, we are working on potential art alternatives and trying to reduce the delays as much as possible, while keeping an eye on costs and preparing for any additional negative impacts that may or may be present.
Having said this we expect to produce and deliver vehicles to our customers beginning in April as.
As of today accounting for Assembly line setup substation Assembly, South and production employee training, we have the internal capacity to produce two C series trucks per day at our Union City Assembly complex as training continues and substation Assembly processes are completed we can't.
We move to five trucks per day with the ability to scale. So as many as 10 trucks per day before we consider additional automation upgrades.
Unfortunately, like any manufacturing process starting mass production.
Downside to the initial production ramp up as bill of materials cost that is higher due to smaller volume a material orders for a limited production Ross.
I am SDK objective to achieve the positive gross margin numbers. We require mission is to get to the volume now for parts purchasing while building a limited number of units to demonstrate proof of performance and durability, except ultimately, enabling us to play substantially larger purchase orders knowing we have a full.
We've added recipe.
Our highly innovative and eagerly awaited C series, all electric delivery trucks with outstanding sales orders require parts from hundreds of suppliers. They have been engaged with key suppliers to negotiate most effective parched pricing, which again as a volume issue. We are encouraged substantial nonrecurring engineering charges that are required.
As part of the tolling fixtures and supply chain set up for the parts require as you might imagine millions of dollars at NRT has been spent since March 2019 to get our currency serious suite of products engineer and sort of testing and certification process.
While many parts of the current limited production run for the C series are common to other OEM parts that our initial production output, we are paying a low volume pricing, while demonstrating proof of performance. Once our final parts are confirmed our engineers will then work with our suppliers to create our own tooling. Unfortunately offers so we can.
Acquire these parts at the most efficient pricing, enabling us to reach our margin goals, we're making steady progress in production mode. While also focusing on conserving capital and expanding our supply chain options. While building the least number of early production vehicles as possible, we expect to move from our current fit up from our.
Correct limited production state to moderate production in Q2, 2020, well hitting our stride into more steady state production prior to the end of year.
Our intent is to produce and deliver a limited number of vehicles to our customers in the second quarter, and then move to higher volumes.
And deliveries with a target of delivering roughly three to 400 delivery trucks and 22 warning.
In conclusion I'll provide a brief comment as we always do with respect to the United States Postal service next generation delivery vehicle program as many of you are well aware under our India workforce is only able to provide information, which is already and the public domain as high.
Has been the case throughout this process any further information or announcements will be issued by the United States personal service. We appreciate the continued interest we received and will provide updates to the market as we are able.
We do not have any updates to share at this time.
This concludes my prepared remarks. Thank you all for your time. This morning, we look forward to updating you on our progress going forward and we're now ready to open the call for your questions. Operator, please provide the appropriate constructions.
Thank you, ladies and gentlemen, we will now be conducting the question and answer session. If he would like to ask a question. Please press star one on your telephone keypad. The confirmation told the indicate that your line is in the question Q you May Press Star too if you would like to remove your question from the Q for participants using speaker equipment and may be necessary to pick up your.
But for pressing the star keys, one moment, please poll for questions.
Thank you. Our first question comes from the line of Greg Lewis with BTG. Please proceed with your question.
Yes, Thank you and good morning, everybody and congratulations on on a busy few months.
Yes, I guess, Robert Duane you mentioned in the prepared remarks about.
The last standard that needs to be met in March but.
Before you can kind of start ramping up production.
Just kind of curious how we should think about that.
Is that going to be impacted by travel bans or anything or is that any kind of color you could give around that I think would be helpful. Just as the seems like the last piece of the puzzle.
Sure. This is Rob will listen.
The last excuse me last us that we're doing is a seat belt pull to validation.
Being conducted currently in Indiana.
I will be completed at the end of this month.
Or by the end of this month.
There was some logistics to two are getting be the vehicle out there, but we don't.
Dissipate any any issues with it but that is the last of the F. Mbss test.
Okay, Perfect and then Duane you mentioned you know the two.
To to trucks today up to five and.
And thanks for the guidance of 300 to 400 units.
This year I guess, what I would be wondering is what do you what do you see as potential hurdles, if any did sort of kind to.
Hit that.
The hit that guidance range.
Yeah like any other type of hurdles in this business from a supply chain perspective, making sure that we have all of our sub.
All of our suppliers in alignment with the actual number of units that they need to have in there to you and in their scheduled to deliver us timely.
Our.
Actively trying to do as much as possible as we can again to conserve capital and so on what I'll call. It just in time parts and so on.
So we don't have a backlog if you will or a shelf below parts that we can pull off to build truck. So we're really dependent on working very closely with our supply chain to have a continual flow of parts coming in to meet the number of units that we plan to look to deliver going forward.
Okay, Great and this and just to follow up just to piggyback on that you know you kind of mentioned the two trucks today I guess, you're thinking about a little differently what type of run rate do you think maybe we could see in the fourth quarter in terms of each of units per month like how should I be thinking about that just as I think.
About what maybe 2021 could look like what that exit rate in 20 will look like.
Greg This is as Steve Schrader, I think the way I would frame. It is to some extent is when when talking about capacity is talking more about what we have the ability to do at the plant Upper an assembly standpoint, that's not really the issue I think it's more thinking about any kind of production.
Somebody going from R&D or equipment, putting installing equipment going to mass production and it certainly is you have to kind of ramped up slowly. So I think you expect to be the first quarter and the second quarter will be a lot smaller quantities and we'll be back loaded towards the.
Fourth quarter in the.
Three to 400.
And then thinking about.
Hey, I think what we see from a standpoint to and.
As we have baby basically we think 200, a month will be kind of steady state production and it gets us to the gross margins that you would expect them an OEM to have and also profitable state.
Okay, Great perfect and then just just one more for me on loan on you and the LMC timeline.
Great I guess you received the 12 12 million in income the this this quarter.
I guess is as we think about the roll out of that much of that truck.
How should any kind of gone and she can give around other potential income and maybe this year, how you're thinking about additional cash being monetized from from that.
You know from that from those licensing fees.
Yes, Greg again as Steve.
Thank you now obviously been a private company part of the.
Investment and the value comes from when they actually raise more money as well as some of the fees that we get so I think we don't anticipate in 2020 that will receive any kind of.
Fees for the most part unless they have a big.
Capital raise which will get 1% of that.
So, but you know and it's all dependent on when they actually sell the truck too. So some of these other fees going forward from a cash standpoint on the investment obviously changes when they raise more money at different values.
Great all right. Thank you very much as Don.
Thank you Greg Thanks, Greg.
Thank you. Our next question comes from Jeff Osborne with Cowen. Please proceed with your question.
Yeah. Thanks, guys. Appreciate all the detail in the call just a couple of quick ones on my end.
Steve can you talk about what the volumes would need to be per quarter to get to gross margin positive I'm just trying to triangulate that the two week capacity to 200, a month being the ultimate destination.
What sort of bridges, the gap to get to to breakeven gross margins as that is that possible with the guidance that you just gave for the fourth quarter run rate for example.
It wouldn't be in the fourth quarter, most likely I think we have to get the 200, a month or 600 per quarter.
It kind of the gross margins that you expect in a breakeven kind of profitable situation.
That's gross margin breakeven that net income breakeven I wasn't sure, which break you know Thats Bruce art.
No. That's gross margin that's actually a our target is in a 20% gross margin very similar to other OEM. So it's more BA 15% to 20% gross margin rate and then that will make us profitable to at 200, a month kind of.
Great 600 reporter.
Got it Taj I was trying to get to what do you have any sense of what the volume would need to be to be a gross margin of zero.
When you look at again I think this year, it's kind of where most companies when they go from again R&D or building capital al and going for mass production, what you're trying to do is good at gross margin.
Positive.
We think at 100, a month, we think we're pretty close to a gross margin positive. Okay. That's helpful and then.
Can you just give us a sense of the you mentioned the credit facility that you were pursuing.
Two part question around that one can you give us a sense of of scope and potential rates on that.
And then also you know any sense of what the Capex needs are the company to move from two to five to 10 per week. It sounds like there's some cost involved so I didn't know what the Capex budget was for the guidance that you just provided.
I think what Dwayne said on the Capex budget is it's only about and we actually would need capex. So I think from that standpoint, we don't need really any additional capex. This year regarding that be assembly plant.
From a standpoint the.
Capital that we're looking for and the facility, we're looking for probably be in the range of 40 million dollar facility.
Credit revolver I'm not sure that we would need all that initially obviously, but thats kind of the range interest rates, obviously, we're still talking too.
Parties, and we'll figure out where that when that will yeah got it and then is there any sense.
You know sort of a 33 different.
Inter related topics here, but can you give us a sense of of the U.P.S. order book, where that stands where the Duke relationship is that going to be I assume you PS is that the initial customer receiving the deliveries.
Will that be using the Duke facility or not.
Anything you can share about the order book more broadly post the show last week as well would be helpful. Yes.
Yeah. This is Duane I appreciate the question, Jeff, Yes, so as you know you'd be us being our our customer of record for the last several years. They have a thousand 60 units.
On order that we are beginning to deliver.
In anticipation in.
Late Q2 or Q3 this year, followed by a couple of other customers will some simultaneous deliveries that include DHL writer and anticipating additional customers that we are expecting to close in short order not just from the M.T. a show, but other work that we've been doing a leading up to this point of production. So.
Have clearly been.
A number of prospects in the queue that we think we can flip to closed orders pretty quickly.
That said.
To your question about I.
I guess timelines again. This this all goes towards building out to that 100 to 200 units a month, where we have a consistent run rate going into 2021. So that we can reach those gross margin positive numbers as well as maintain and increase the run rate from month to month.
Yes, there's clearly still you know in all important.
Customer to us because they have the highest volume currently and we expect that they will continue to be excited by the trucks that were delivering the feedback we've received from them from the early pilot reviews has gone quite well and giving us good constructive feedback for how we can no configure these vehicles with additional.
Options that all that involve collision mitigation features as well as Configurable battery packs and different things that we've designed the truck to be able to do so that we can offer them trucks in a more configurable and dynamic mode. So they even they fit better on each individual route based on the duty side.
Before that route.
Makes sense and the Duke part of the question going are you gonna be using their involvement that you had press release, maybe six nine months ago at all or no.
Yeah, I think I do partnership is very helpful from a standpoint of customers and they may want to have a battery leasing as an option and also from an standpoint of the infrastructure. So we're currently working with customers right now, they're dealing with their infrastructure and waiting for delivery of trucks from that standpoint.
So that is another important relationship we have it's interesting Jeff they're not all elaborate a little bit is that we you know as part of the process. We're introducing our customers to do get you will from the perspective of building out infrastructure battery leasing and so on so it's it's a direct relationship between do.
That customer of ours, but all three of US working together in terms of how that meets with delivery needs. The number of units going to which locations et cetera. So it's it's progressing forward as we anticipate.
That's good to hear last question I had for you Steve is just a housekeeping one im sure its in the 10-K, but I missed it in the press release.
Today do you happen to have the the share count.
I think it's I don't know if I have exactly I think it's 70 million or so.
Got it.
71.
Okay all right. Thank you.
Thank you Jeff Thanks, Jeff.
Thank you as a reminder, ladies and gentlemen, if he would like to ask a question at this time. Please press star one on your telephone keypad. Please hold while we pull for additional questions.
Thank you. Our next question comes from the line of J burden with Armory Advisors. Please proceed with your question.
Hi, guys.
A quick question on the.
Senior secured convertible note.
I see that there's some mandatory conversion provisions in there where you are required to convert.
Second I would like February 1st in a certain amount by April 1st can you go over where you stand with those conversions.
Yeah, we.
We'll decide kind of whether we convert those not when when we do convert and they're going to be converted first stock.
We also the option to kind of make those conversions later as a catch up in another quarter as well.
So my reading the provision incorrectly because they're called mandatory provisions and it says you're required to convert two and half million principal about like February 1st.
And 5 million by April 1st.
Yes, Scott we've done the 5 million already it can vary okay. That's my question.
Okay, sorry may Miss an urban to that.
Thanks.
And then on the lower discount investment.
How much will you have that value that on your 12 31.
<unk>.
It's 12 12.2, it's already valued out there it's in that it's in the balance sheet on the press release.
Okay. Thank you.
Thank you at this time. This concludes the company's question and answer session. If your question was not taken you may contact Workforces Investor Relations team.
WK H S at Gateway IR Dotcom I'd now like turn the call back over to Mr. He was for his closing remarks.
Well. Thank you everyone for joining us on todays call I, especially want to thank our employees partners and our all important investors for their continued support. We appreciate your continued interest in workforce and look forward to updating you on our next call operator.
Thank you for joining us today for workforce group's fourth quarter and full year 2019 earnings Conference call you may now disconnect.
[music].