Workhorse Group Inc.
Unaudited Pro Forma Condensed Combined Financial Information
The following unaudited pro forma condensed combined financial information is based on the historical consolidated financial statements for Workhorse Group Inc. ("Workhorse" or the "Company") adjusted to give effect to the disposition of certain assets of Surefly, Inc. ("Surefly"). On November 27, 2019, the Company completed the sale of the Surefly assets for a sales price of $4.0 million. The accompanying unaudited pro forma condensed combined balance sheet presents the accounts of Workhorse as if the disposition occurred September 30, 2019. The accompanying unaudited pro forma condensed combined statements of operations present the accounts of Workhorse for the nine months ended September 30, 2019 and the year ended December 31, 2018, as if the disposition had occurred on January 1, 2018.
The adjustments reflect the removal of the assets and liabilities and operations of the Surefly business as if the transaction occurred as indicated above.
The unaudited condensed combined pro forma financial information is presented for informational purposes only and is subject to a number of uncertainties and assumptions and do not purport to represent what Workhorse's actual performance or financial position would have been had the transaction occurred on the dates indicated and does not purport to indicate the financial position or results of operations as of any future date or for any future period.
Workhorse Group Inc.
Unaudited Pro Forma Condensed Combined Balance Sheet
As of September 30, 2019
| | | | | | | | | | | | | | | | | | | | | | | |
| Historical | | Adjustments | | Notes | | Pro Forma |
| Assets | | | | | | | |
| Current assets: | | | | | | | |
| Cash and cash equivalents | $ | 9,261,151 | | | $ | 3,650,000 | | | (a) | | $ | 12,911,151 | |
| Restricted cash | 900,000 | | | — | | | | | 900,000 | |
| Lease receivable | 42,860 | | | — | | | | | 42,860 | |
| Inventory, net | 2,388,988 | | | — | | | | | 2,388,988 | |
| Prepaid expenses and deposits | 6,355,690 | | | — | | | | | 6,355,690 | |
| Total current assets | 18,948,689 | | | 3,650,000 | | | | | 22,598,689 | |
| | | | | | | |
| Property, plant and equipment, net of accumulated depreciation | 8,923,635 | | | — | | | | | 8,923,635 | |
| Lease receivable | 169,638 | | | — | | | | | 169,638 | |
| Total Assets | $ | 28,041,962 | | | $ | 3,650,000 | | | | | $ | 31,691,962 | |
| | | | | | | |
| Liabilities and Stockholders' Equity (Deficit) | | | | | | | |
| Current liabilities: | | | | | | | |
| Accounts payable | $ | 995,510 | | | $ | — | | | | | $ | 995,510 | |
| Accrued liabilities | 3,996,365 | | | — | | | | | 3,996,365 | |
| Warranty liability | 6,506,971 | | | — | | | | | 6,506,971 | |
| Warrant liability | 19,901,139 | | | — | | | | | 19,901,139 | |
| Customer deposits | 334,000 | | | — | | | | | 334,000 | |
| Duke financing obligation | 1,340,700 | | | — | | | | | 1,340,700 | |
| Current portion of long-term debt | 6,354,140 | | | — | | | | | 6,354,140 | |
| Total current liabilities | 39,428,825 | | | — | | | | | 39,428,825 | |
| | | | | | | |
| Long-term debt | 8,205,270 | | | — | | | | | 8,205,270 | |
| Mandatory redeemable series B preferred stock | 18,772,628 | | | — | | | | | 18,772,628 | |
| | | | | | | |
| Stockholders' equity (deficit): | | | | | | | |
| Series A preferred stock | — | | | — | | | | | — | |
| Common stock | 66,190 | | | — | | | | | 66,190 | |
| Additional paid-in capital | 141,030,711 | | | — | | | | | 141,030,711 | |
| Accumulated deficit | (179,461,662) | | | 3,650,000 | | | (b) | | (175,811,662) | |
| Total stockholders' equity (deficit) | (38,364,761) | | | 3,650,000 | | | | | (34,714,761) | |
| Total Liabilities and Stockholders' Equity (Deficit) | $ | 28,041,962 | | | $ | 3,650,000 | | | | | $ | 31,691,962 | |
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Information.
Workhorse Group Inc.
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Nine Months Ended September 30, 2019
| | | | | | | | | | | | | | | | | | | | | | | |
| Historical | | Adjustments | | Notes | | Pro Forma |
| | | | | | | |
| Net sales | $ | 4,258 | | | $ | — | | | | | $ | 4,258 | |
| Cost of sales | 1,423,904 | | — | | | | 1,423,904 |
| Gross loss | (1,419,646) | | — | | | | | (1,419,646) |
| | | | | | | |
| Operating expenses | | | | | | | |
| Selling, general and administrative | 2,551,406 | | (269,940) | | (c) | | 2,281,466 |
| Research and development | 1,640,454 | | (1,072,603) | | (d) | | 567,851 |
| Total operating expenses | 4,191,860 | | (1,342,543) | | | | 2,849,317 |
| | | | | | | |
| Loss from operations | (5,611,506) | | (1,342,543) | | | | (4,268,963) |
| | | | | | | |
| Interest expense, net | 5,882,081 | | — | | | | 5,882,081 |
| | | | | | | |
| Net loss | $ | (11,493,587) | | | $ | (1,342,543) | | | | | $ | (10,151,044) | |
| | | | | | | |
| Net loss attributable to common stockholders per share - basic and diluted | $ | (0.17) | | | | | | | $ | (0.15) | |
| | | | | | | |
| Weighted average number of common shares outstanding | 66,176,921 | | | | | | 66,176,921 |
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Information.
Workhorse Group Inc.
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 2018
| | | | | | | | | | | | | | | | | | | | | | | |
| Historical | | Adjustments | | Notes | | Pro Forma |
| | | | | | | |
| Net sales | $ | 763,173 | | | $ | — | | | | | $ | 763,173 | |
| Cost of sales | 15,953,565 | | — | | | | 15,953,565 |
| Gross loss | (15,190,392) | | — | | | | | (15,190,392) |
| | | | | | | |
| Operating expenses | | | | | | | |
| Selling, general and administrative | 11,485,482 | | (708,280) | | (c) | | 10,777,202 |
| Research and development | 7,391,693 | | (1,807,704) | | (d) | | 5,583,989 |
| Total operating expenses | 18,877,175 | | (2,515,984) | | | | 16,361,191 |
| | | | | | | |
| Loss from operations | (34,067,567) | | (2,515,984) | | | | (31,551,583) |
| | | | | | | |
| Interest expense, net | 2,434,749 | | — | | | | 2,434,749 |
| | | | | | | |
| Net loss | $ | (36,502,316) | | | $ | (2,515,984) | | | | | $ | (33,986,332) | |
| | | | | | | |
| Net loss attributable to common stockholders per share - basic and diluted | $ | (0.74) | | | | | | | $ | (0.67) | |
| | | | | | | |
| Weighted average number of common shares outstanding | 50,377,909 | | | | | | 50,377,909 |
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Information.
Workhorse Group Inc.
Notes to Unaudited Pro Forma Condensed Combined Financial Information
Note 1 - Basis of Presentation
The unaudited pro forma condensed combined financial information is based on Workhorse's historical consolidated financial statements adjusted to give effect to the disposition of certain assets of Surefly, Inc. On November 27, 2019, the Company completed the sale of the Surefly assets for a sales price of $4.0 million. The accompanying unaudited pro forma condensed combined balance sheet presents the accounts of Workhorse Group Inc. ("Workhorse") as if the disposition occurred September 30, 2019. The accompanying unaudited pro forma condensed combined statements of operations give effect to the accounts of Workhorse for the nine months ended September 30, 2019 and the year ended December 31, 2018, as if the disposition had occurred on January 1, 2018.
Note 2 - Pro Forma Adjustments
The following pro forma adjustments have been reflected in the unaudited condensed combined financial information:
Adjustments to the pro forma condensed combined balance sheet
(a)Reflects the receipt of cash consideration at the closing of the transaction, net of closing costs of $350,000.
(b)Reflects the estimated gain of $3,650,000 million arising from the sale of Surefly. This estimated gain has not been reflected in the pro forma condensed consolidated statement of operations as it is considered to be nonrecurring in nature.
Adjustments to the pro forma condensed combined statements of operations
(c)Reflects the elimination of selling, general and administrative expenses of Surefly.
(d)Reflects the elimination of research and development expenses of Surefly.