Business Context and Reporting Period
This Form 8-K Current Report from Workhorse Group Inc. (WKHS) covers events occurring on November 27, 2019. The filing details the completion of a material asset disposition and the formation of a strategic joint venture.
Key Financial Metrics and Transaction Details
- Transaction Type: Sale of substantially all assets of wholly-owned subsidiary Surefly, Inc. to Moog Inc.
- Purchase Price: $4.0 million in cash.
- Assets Excluded: Surefly's cash, cash equivalents, insurance policies, and certain pre-closing causes of action.
- Liabilities: Moog assumed certain liabilities; Workhorse retained specific liabilities.
- Indemnification: Subject to a $25,000 tipping basket and a $2.0 million cap.
- Joint Venture: Formation of Certus Unmanned Aerial Systems LLC (50% owned by Workhorse, 50% by Moog) to develop Horsefly truck-based electrically powered unmanned aerial systems.
Material Changes Versus Prior Period
The filing reports a significant structural change to the Company's operations through the divestiture of Surefly assets. This transaction was originally agreed upon on October 1, 2019, and amended on October 4 and October 31, 2019, before closing on November 27, 2019. The filing includes unaudited pro forma condensed combined financial statements as of September 30, 2019, and for the nine months ended September 30, 2019, and the year ended December 31, 2018, to reflect the impact of this transaction. The filing text does not provide specific comparative revenue, profit, or cash flow figures for the current period versus the prior period outside of the referenced pro forma exhibits.
Guidance, Outlook, and Risks
- Non-Solicitation: Workhorse and Surefly agreed not to solicit orders of certain products from specified customers for two years following the closing date.
- Future Operations: The new joint venture, Certus, will license Horsefly Assets to both Workhorse and Moog for use in their respective businesses.
- Risks and Contingencies: The transaction is subject to customary representations, warranties, and covenants. Indemnification obligations exist for breaches or misrepresentations under the Purchase Agreement.
- Management Commentary: The filing focuses on the execution of the agreement and the establishment of the joint venture rather than providing forward-looking financial guidance.
Important Facts for Investor Verification
- Verify the specific terms of the pro forma financial statements filed as Exhibit 99.1 to understand the financial impact of the Surefly divestiture.
- Review the full text of the Asset Purchase Agreement (Exhibit 10.1) and its amendments (Exhibits 10.2 and 10.3) for details on retained liabilities and indemnification caps.
- Confirm the scope of the non-solicitation agreement regarding specified customers and product lines.
- Examine the Operating Agreement of Certus Unmanned Aerial Systems LLC (Exhibit 10.4) to understand the governance and profit-sharing structure of the new joint venture.