Workhorse Group Reports Third Quarter 2020 Results
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Workhorse Group Reports Third Quarter 2020 Results

CINCINNATI, Nov. 9, 2020 — (PRNewswire) — Workhorse Group Inc. (Nasdaq: WKHS) ("Workhorse" or "the Company"), an American technology company focused on providing sustainable and cost-effective drone-integrated electric vehicles to the last-mile delivery sector, today reported financial results for the third quarter ended September 30, 2020.

Release Updates and Highlights

Management Commentary
"Our strategic partnership approach to engaging with dealerships has paid off very quickly as evidenced by our recent 500 truck order from Pritchard Auto Company that will be financed by HCA," said Workhorse CEO Duane Hughes. "We believe this initial sale is just the start of this channel's growth. We were also encouraged by the results of a positive dealer survey administered by HCA that looked favorably on the long-term prospects for the EV delivery truck market and, in particular, Workhorse within that ecosystem."

Hughes added, "Previously, we projected 300-400 vehicles to be produced by the end of 2020, mostly in the fourth quarter. Although we will still manufacture and deliver vehicles in Q4, it will be a substantially lower amount than our previous guidance. We are unable to give a specific estimate for the following reasons:

"We view this as only a delay in our progress. We've introduced several new battery supplier options into our supply chain and will have supplemental volume additions in the first quarter of 2021. While we cannot predict the full impact from COVID right now, let alone in 2021, when conditions improve and the coronavirus is no longer a business issue for us and our suppliers, then we would anticipate producing approximately 1,800 units in 2021."

Third Quarter and Recent Operational Highlights

Third Quarter 2020 Financial Results
Sales for the third quarter of 2020 were recorded at $565,000 compared to $4,000 in the third quarter of 2019.

Cost of goods sold increased to $2.8 million from $1.4 million in the third quarter of 2019. The increase was primarily driven by increases in labor and materials relating to costs for the C-Series production.

Selling, general and administrative expenses increased to $6.0 million from $2.6 million in the same period last year. The increase is attributable to an increase in consulting expenses, higher employee-related costs, and incentive stock expenses.

Research and development expenses were $1.6 million, which was flat compared to $1.6 million reported in the third quarter of 2019.

Interest expense, net increased to $74.3 million compared to an interest expense, net of $5.9 million in the same period last year. The significant increase in interest expense was almost exclusively due to a change in fair value of the Company's convertible note, the loss on its conversion to stock and the loss on the redemption of Series B Preferred Stock. These GAAP adjustments are non-cash and were dependent on the underlying stock components of the financial instruments, respectively.

Net loss was $84.1 million, compared with a net loss of $11.5 million in the third quarter of 2019. The increased net loss was due to the increase in interest expense (net) just noted. With these considerations, the Company believes operating income would be a better indication of operating and cash performance. Operating income during the period was a loss of $9.8 million compared to a loss of $5.6 million in the third quarter of 2019. 

As of September 30, 2020, the Company had cash, cash equivalents and short-term investments of $80.2 million compared to $23.9 million as of December 31, 2019. Subsequent to the quarter end, the Company entered into, and closed, a convertible note financing with a group of institutional lenders for gross proceeds of $200 million. In conjunction with these efforts, Workhorse entered into a separate agreement with the holder of its prior 4.5% convertible notes to exchange the full $70.0 million outstanding principal amount of those existing notes for shares of the Company's common stock. Currently, the Company has a cash balance of over $260 million.

Conference Call
Workhorse management will hold a conference call today (November 9, 2020) at 10:00 a.m. Eastern time (7:00 a.m. Pacific time) to discuss these results.

Workhorse management will host the presentation, followed by a question and answer period.

U.S. dial-in: 877-407-8289
International dial-in: 201-689-8341

Please call the conference telephone number 10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Investor Relations at 949-574-3860.

The conference call will be broadcast live and available for replay here and via the Investor Relations section of Workhorse's website.

A telephonic replay of the conference call will be available after 4:00 p.m. Eastern time today through November 16, 2020.

Toll-free replay number: 877-660-6853
International replay number: 201-612-7415
Replay ID: 13712406

About Workhorse Group Inc.
Workhorse is a technology company focused on providing drone-integrated electric vehicles to the last-mile delivery sector. As an American original equipment manufacturer, we design and build high performance, battery-electric vehicles including trucks and aircraft. Workhorse also develops cloud-based, real-time telematics performance monitoring systems that are fully integrated with our vehicles and enable fleet operators to optimize energy and route efficiency. All Workhorse vehicles are designed to make the movement of people and goods more efficient and less harmful to the environment. For additional information visit  workhorse.com.

Forward-Looking Statements
This press release includes forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements may be identified by words such as "believes," "expects," "anticipates," "estimates," "projects," "intends," "should," "seeks," "future," "continue," or the negative of such terms, or other comparable terminology. Forward-looking statements are statements that are not historical facts. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from the forward-looking statements contained herein. Factors that could cause actual results to differ materially include, but are not limited to: our limited operations and need to expand in the near future to fulfill product orders; risks associated with obtaining orders and executing upon such orders; the ability to protect our intellectual property; negative impacts stemming from the continuing COVID-19 pandemic; the potential lack of market acceptance of our products; potential competition; our inability to retain key members of our management team; our inability to raise additional capital to fund our operations and business plan; our inability to satisfy covenants in our financing agreements; our inability to maintain our listing of our securities on the Nasdaq Capital Market; our inability to satisfy our customer warranty claims; our ability to continue as a going concern; our liquidity and other risks and uncertainties and other factors discussed from time to time in our filings with the Securities and Exchange Commission ("SEC"), including our annual report on Form 10-K filed with the SEC. Workhorse expressly disclaims any obligation to publicly update any forward-looking statements contained herein, whether as a result of new information, future events or otherwise, except as required by law.

Media Contact:

Mike Dektas
Creative Storm PR
513-266-3590
mike@creativestorm.com

Investor Relations Contact:

Matt Glover and Tom Colton
Gateway Investor Relations
949-574-3860
WKHS@gatewayir.com

Workhorse Group Inc.

Condensed Consolidated Balance Sheets

(Unaudited)



Three Months Ended September 30,


Nine Months Ended September 30,


2020


2019


2020


2019









Net sales

$                564,707


$                  4,258


$                740,949


$              373,948









Cost of sales

2,815,242


1,423,904


6,074,577


3,751,674

Gross loss

(2,250,535)


(1,419,646)


(5,333,628)


(3,377,726)









Operating expenses








Selling, general and administrative

5,950,058


2,551,406


15,464,926


6,638,350

Research and development

1,614,485


1,640,454


5,133,325


4,219,456

Total operating expenses

7,564,543


4,191,860


20,598,251


10,857,806









Other income

-


-


864,900


-









Loss from operations

(9,815,078)


(5,611,506)


(25,066,979)


(14,235,532)









Interest expense, net

74,315,644


5,882,081


185,638,961


23,582,427









Loss before provision for income taxes

(84,130,722)


(11,493,587)


(210,705,940)


(37,817,959)

Provision for income taxes

-


-


-


-









Net loss

(84,130,722)


(11,493,587)


(210,705,940)


(37,817,959)









 

Workhorse Group Inc.

Condensed Consolidated Statements of Operations

(Unaudited)



September 30, 2020


December 31, 2019





Assets




Current assets:




Cash and cash equivalents

$           80,222,741


$        23,868,416

Restricted cash held in escrow

-


1,000,000

Accounts and lease receivable, current

560,896


41,021

Inventory, net

5,965,710


1,798,146

Prepaid expenses and deposits

12,959,268


4,812,088

Total current assets

99,708,615


31,519,671





Property, plant and equipment, net

7,545,291


6,830,181

Investment in LMC

13,059,700


12,194,800

Lease receivable, long-term

134,694


129,177





Total Assets

$         120,448,300


$        50,673,829





Liabilities and Stockholders' Deficit




Current liabilities




Accounts payable and accrued liabilities

$             5,763,531


$          4,784,167

Warranty liability

3,565,942


6,001,864

Warrant liability

-


16,335,000

Customer deposits

77,000


303,000

Current portion of PPP Term Note

862,278


-

Current portion of Convertible Note, at fair value

121,817,001


19,620,000

Total current liabilities

132,085,752


47,044,031





PPP Term Note

548,722


-

Convertible Note, at fair value

-


19,400,000

Mandatory redeemable Series B preferred stock

-


19,142,908





Total stockholders' deficit

(12,186,174)


(34,913,110)





Total Liabilities and Stockholders' Deficit

$         120,448,300


$        50,673,829





 

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SOURCE Workhorse Group Inc.

Contact:
Company Name: Workhorse Group Inc., Lordstown Motor Corporation
Web: http://www.workhorse.com
Financial data for Workhorse Group Inc., Lordstown Motor Corporation