Ener1: Rehearsing the Dead Man Shuffle

| About: Ener1 Inc (HEV)

As I predicted in a May 12th article titled "Ener1 Q1 Earnings: Pain on the Installment Plan," Ener1 (NASDAQ:HEV) filed a Form 8-K yesterday to report that it would book a second quarter impairment loss of $34.5 million in connection with the write-down of its loans receivable from Think Holdings AS and its accounts receivable from Think Global AS. The Form 8-K further disclosed that Ener1 believes its potential recovery from the Think bankruptcies is not likely to be substantial.

After adjusting Ener1's first quarter balance sheet for the impairment losses, I show that Ener1 would have had $19.3 million of unrestricted cash, $19.7 in working capital and $101.6 million in stockholders equity on a pro forma basis at March 31st. After allowing for an estimated second quarter loss in the $15 to $20 million range, Ener1 has to be running on fumes by now.

Ener1 hasn't bit the bullet yet and impaired $10.7 million of intangible assets and $52.8 million of goodwill that were created from the accounting aether when it issued stock in exchange for a 19.5% interest in its EnerDel subsidiary and an 83% interest in its Enertech subsidiary, but I can't see how $63.5 million in mushy assets that represent 63% of Ener1's pro forma stockholders equity will survive the current year.

At the current price of $1.19 per share, Ener1 has a market capitalization of $200 million. I don't believe additional capital will be available to Ener1 at anywhere close to that valuation premium. Without substantial new financing on what are likely to be very unattractive terms, we can look forward to an Ener1 version of the dead man shuffle later this year.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.