Business Context and Reporting Period
Workhorse Group Inc. filed this Form 8-K on May 3, 2018, to disclose a material restatement of its audited consolidated financial statements for the year ended December 31, 2017. The filing addresses errors identified by management regarding accrued liabilities and inventory balances.
Key Financial Metrics and Errors
The filing does not provide current revenue, profit, cash flow, or margin figures. Instead, it details specific corrections to the December 31, 2017, balance sheet:
- Accrued Liabilities: Overstated by $700,000 due to the application of an improper, higher allowance rate on vehicles sold.
- Inventory: Understated by $385,436 due to the improper exclusion of inventory in transit.
These errors necessitate restatements to the Consolidated Balance Sheets, Statements of Operations, Stockholders' Equity, and Cash Flows.
Material Changes and Restatement Impact
The primary material change is the correction of the previously issued financial statements. The net impact of the errors results in a reduction of total liabilities and an increase in total assets for the period ended December 31, 2017. Consequently, previously issued press releases and investor communications regarding this period should not be relied upon.
Management Commentary and Risks
Management has discussed the errors with the Audit Committee, the Board of Directors, and the current independent registered public accounting firm, Grant Thornton LLP. The former auditor, Clark Schaeffer Hackett & Co., has also been notified. The company intends to file restated financial information with the SEC. No specific forward-looking guidance or new risk factors were disclosed in this filing beyond the restatement itself.
Investor Verification Checklist
- Verify the upcoming filing of restated financial statements for the year ended December 31, 2017.
- Review the corrected Consolidated Balance Sheet for the $700,000 reduction in accrued liabilities and $385,436 increase in inventory.
- Assess the impact of these corrections on the previously reported net income and cash flow for 2017.
- Confirm that all prior investor communications referencing 2017 financial results are superseded by the restatement.