The target for 2020 is to produce 300-400 vehicles.

By the way of releasing financial results, Workhorse announced that it already started production of the C-Series delivery vans, but the customer deliveries were delayed from Q1 2020 until April due to supply disruptions caused by the coronavirus.

Initially, the C-Series (currently represented by the Workhorse C1000 and smaller Workhorse C650) will be available in limited volume, while the 2020 sales target is 300-400 vehicles.

Those are reasonable numbers for a small company since all startups struggle to launch their first product.

Workhorse sales in 2019 were just symbolic $377,000 (compared to also low $763,000 in 2018). At such low revenues, the net losses are relatively high $37.2 million (compared to $36.5 million in 2018).

Release Updates and Highlights

  • Sold non-core assets and intellectual property allowing full strategic focus on last mile C-Series delivery vehicles and patented HorseFly drone truck mounted technology.
  • Started production and are obtaining certifications to allow for delivery of vehicles to customers in April.
  • Established a production and delivery target of 300-400 vehicles in 2020.
  • Recorded non-cash license income of $12.2 million associated with the Lordstown Motors Corporation (LMC) investment."

We don't know the prices of C-series vans for fleets, but even at the planned 300-400 sales in 2020 the company probably will stay in the red. The successful launch of the product and hopefully sales of thousands of vehicles per year (from 2021) would be a turning point, we guess.

By the way, the Workhorse C650 looks pretty cool actually:

Workhorse C-650
Workhorse C-650

Workhorse CEO Duane Hughes said:

"In the fourth quarter we were able to complete transactions that allowed us to narrow our focus on our unique business of providing an all-electric, customer-focused design C-Series delivery vehicles and patented vehicle-mounted drones that can meet the needs of an $18 billion market where 300,000 trucks are replaced annually," said .

"We also made meaningful progress in our transition from a development-stage company to a production-focused enterprise. We have now begun production and have obtained the needed certifications that will allow us to deliver a limited number of vehicles to our customers starting in April. While our intent had been to deliver initial vehicles in the first quarter of 2020, we were impeded by material supply disruptions related to the global outbreak of the novel coronavirus. Despite these near-term headwinds, we are setting a 2020 production target of 300-400 vehicles and are looking forward to delivering our state-of-the-art truck to our customers."

Gallery: Workhorse C-Series Electric Step Vans

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Workhorse Group Reports Fourth Quarter and Full Year 2019 Results

CINCINNATI, March 10, 2020 /PRNewswire/ -- Workhorse Group Inc. (NASDAQ: WKHS) ("Workhorse" or "the Company"), an American technology company focused on providing sustainable and cost-effective electric vehicles to the last mile delivery sector, today reported financial results for the fourth quarter and full year ended December 31, 2019.

Release Updates and Highlights

  • Sold non-core assets and intellectual property allowing full strategic focus on last mile C-Series delivery vehicles and patented HorseFly drone truck mounted technology.
  • Started production and are obtaining certifications to allow for delivery of vehicles to customers in April.
  • Established a production and delivery target of 300-400 vehicles in 2020.
  • Recorded non-cash license income of $12.2 million associated with the Lordstown Motors Corporation (LMC) investment.

Management Commentary
"In the fourth quarter we were able to complete transactions that allowed us to narrow our focus on our unique business of providing an all-electric, customer-focused design C-Series delivery vehicles and patented vehicle-mounted drones that can meet the needs of an $18 billion market where 300,000 trucks are replaced annually," said Workhorse CEO Duane Hughes.

"We also made meaningful progress in our transition from a development-stage company to a production-focused enterprise. We have now begun production and have obtained the needed certifications that will allow us to deliver a limited number of vehicles to our customers starting in April. While our intent had been to deliver initial vehicles in the first quarter of 2020, we were impeded by material supply disruptions related to the global outbreak of the novel coronavirus. Despite these near-term headwinds, we are setting a 2020 production target of 300-400 vehicles and are looking forward to delivering our state-of-the-art truck to our customers." 

Fourth Quarter 2019 and Recent Operational Highlights

  • December 2019: Completed an Asset Purchase Agreement with aerospace and defense company Moog for the sale of the Company's SureFlyTM electric helicopter for a cash purchase price of $4 million as well as formed a joint venture (JV) involving the Company's HorseFlyTM last-mile drone delivery system.
  • December 2019: Closed a $41 million financing from an institutional lender, the proceeds of which were used for general working capital as well as repayment of a pre-existing debt agreement with Marathon Asset Management.
  • November 2019: Entered into an agreement with EnerDel, a leading supplier of advanced lithium-ion batteries and electric systems solutions (ESS), to be one of the Company's key battery suppliers for its next generation C-Series delivery vehicle.
  • November 2019: Signed Intellectual Property Licensing Agreement (IPLA) with Lordstown Motors Corp. (LMC):
    • Agreement finalized in connection with General Motors (GM) Lordstown manufacturing facility acquisition announced on November 7, 2019.
    • Under the IPLA, Workhorse is granting LMC a three-year exclusive license of certain IP relating to the Company's W-15 electric pickup truck in exchange for an initial equity stake of 10% in LMC, which will be anti-dilutive for two years.
    • Workhorse is entitled to a license fee equal to 1% of the gross sales price of each LMC truck sold, up to the first 200,000 units.
    • LMC has agreed to pre-pay a portion of the license fee in an amount equal to 1% of the aggregate debt and equity commitments LMC intends to raise.
    • Once the pre-payment has been amortized over actual sales, LMC will pay on a per-unit-shipped basis up to the 200,000-unit cap.
    • Workhorse will also receive an additional 4% commission on the gross sales price of trucks sold which fulfill the 6,000 existing pre-orders for the W-15 transferred from the Company to LMC.
  • October 2019: Partnered with Unmanned Systems Operations Group, Inc. (USOG) to launch an initial pilot drone delivery program in the San Diego area with the goal of pursuing additional programs for healthcare providers, pharmacies, and specialized medical courier services using Workhorse's HorseFlyTM technology.

Full Year 2019 Highlights

  • Successfully transitioned the CEO, COO and CFO roles to further support the Company's evolution from R&D to production.
  • Collectively obtained over $100 million in capital facilities to support 2019 working capital needs and final design of the C-Series last mile delivery truck product lineup.
  • Formed strategic alliance with Duke Energy for infrastructure support and battery leasing opportunities.

Fourth Quarter 2019 Financial Results
Sales for the fourth quarter of 2019 were recorded at $3,000, which was down from $21,000 in the fourth quarter of 2018. The decrease in sales was primarily due to lower volume.

Cost of goods sold decreased to $2.1 million from $11.1 million in the fourth quarter of 2018. The decrease was driven by warranty expense and inventory write-downs in the previous year's quarter.

Selling, general and administrative expenses increased to $3.6 million from $2.7 million in the same period last year. The increase in selling, general and administrative expenses was due primarily to executive stock compensation and legal and professional fees related to this quarter's transactions offset by less advertising expenses compared to last year.

Research and development expenses increased to $4.0 million from $1.7 million in the fourth quarter of 2018. The increase in research and development expenses was primarily due to non-recurring engineering fees associated with the C1000-Series vehicles.

Other income was $15.8 million compared to $0 in 2018 with $12.2 million related to the technology licensing income from the Lordstown Motor Corporation investment and $3.6 million from the net gain on the divestiture of SureFly.

Interest expense, net increased to $5.6 million compared to $2.2 million from the same period last year due to prepayment of the Marathon debt facility offset by a mark-to-market adjustment on the warrant liability.

Net income was $655,000, compared with a net loss of $17.7 million in the fourth quarter of 2018.

As of December 31, 2019, the company had cash, cash equivalents and short-term investments of $23.9 million compared to $1.5 million as of December 31, 2018.

Full Year 2019 Financial Results
Sales for the full year 2019 were $377,000, compared to $763,000 in 2018. The decrease in sales was primarily due to lower volume of delivery truck sales.

Cost of goods sold for the full year decreased to $5.8 million from $15.9 million last year, which was driven by warranty expense and inventory write-downs in the previous year.

Selling, general and administrative expenses for the full year 2019 decreased to $10.2 million from $11.5 million in the same period last year. The decrease in selling, general and administrative expenses was due primarily to reduced advertising and lower employee headcount offset by an increase in executive stock compensation and higher professional and legal fees associated with 2019 transactions.

Research and development expenses for the full year 2019 increased to $8.2 million from $7.4 million in 2018. The increase in research and development expenses was due primarily to higher engineering and design expenses related to our C-Series delivery trucks.

Other income was $15.8 million compared to $0 in 2018 with $12.2 million related to the technology licensing income of the Lordstown Motor Corporation investment and $3.6 million from the net gain on the Surefly transaction.

Interest expense, net increased to $29.1 million compared to $2.4 million from the same period last year due to prepayment of the Marathon debt facility and by a mark-to-market adjustment on the warrant liability and higher debt balances.

Net loss for the full year 2019 was $37.2 million, compared with a net loss of $36.5 million in 2018.