Workhorse Group Inc. Form 8-K Summary
Business Context and Reporting Period
Workhorse Group Inc. (WKHS) filed this Current Report on Form 8-K on October 28, 2019. The filing addresses a material accounting error requiring the restatement of unaudited financial statements for the three and six months ended June 30, 2019. The Company will file an Amendment No. 1 to its Form 10-Q to reflect these corrections.
Key Financial Metrics and Adjustments
The filing does not provide current revenue, profit, cash flow, or liquidity figures. Instead, it details specific adjustments to previously reported financial statements:
- Interest Expense: Reduced by approximately $16.9 million.
- Warrant Liability: Reduced by approximately $16.9 million due to the removal of mark-to-market adjustments.
- Shareholders' Deficit: Reduced by approximately $17.6 million.
Material Changes and Accounting Misstatements
The Audit Committee concluded that the previously issued financial statements should no longer be relied upon due to misclassifications of warrant instruments:
- 2018 Warrants: Warrants issued in July 2018 were incorrectly kept as liabilities subject to mark-to-market accounting. Analysis determined they should have been reclassified to equity as of January 1, 2019.
- 2019 Warrants: Certain warrants issued to lenders in 2019 were misclassified as liability financial instruments but should have been classified as equity instruments.
Management Commentary and Risks
Management has discussed the matter with its independent registered accountants. The primary risk identified is the reliability of prior interim financial reporting. The Company is in the process of filing a restated Form 10-Q/A to correct the consolidated financial statements and related notes.
Investor Verification Checklist
- Verify the filing of the Form 10-Q/A for the period ended June 30, 2019, to review the restated financial statements.
- Confirm the reclassification of 2018 and 2019 warrants from liability to equity in the amended reports.
- Review the updated shareholders' deficit and interest expense figures in the restated filings.
- Monitor for any additional disclosures regarding the impact on debt covenants or liquidity ratios resulting from the liability reduction.