TABLE OF CONTENTS

~~PART I~~	~~FINANCIAL INFORMATION~~
PART I			FINANCIAL INFORMATION
~~Item 1.~~			~~Financial Statements~~		1
Item 1.			Financial Statements		1
			Condensed Consolidated Balance Sheets		1

	Condensed Consolidated Statements of Operations	2
			Condensed Consolidated Statements of Comprehensive Loss		3
			Condensed Consolidated Statements of Stockholders’ Equity (Deficit)		4
			Condensed Consolidated Statements of Cash Flows		3 6

	Notes to Condensed Consolidated Financial Statements	4 7

Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations		14 15

Item 3.	Quantitative and Qualitative Disclosures About Market Risk			19

Item 4.	Controls and Procedures			19 20

PART II			OTHER INFORMATION		21

Item 1.			Legal Proceedings		20 21
Item 1A.			Risk Factors		22
~~Item 1A.~~			~~Risk Factors~~	20

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			30 22

Item 3.	Defaults Upon Senior Securities			30 22

Item 4.	Mine Safety Disclosures			30 22
Item 5.			Other Information		22
Item 5.6.			~~Other Information~~ Exhibits		30 23
			SIGNATURES
~~Item 6.~~	~~Exhibits~~	31

	~~SIGNATURES~~	34 24

Forward-Looking Statements

The discussions in this Quarterly Report on Form 10-Q (this “Report”) contain forward-looking statements reflecting our current expectations that involve risks and uncertainties. When used in this Report, the words “anticipate”, “expect”, “plan”, “believe”, “seek”, “estimate” and similar expressions are intended to identify forward-looking statements. These are statements that relate to future periods and include, but are not limited to, statements about the features, benefits and performance of our products, our ability to introduce new product offerings and increase revenue from existing products, expected expenses including those related to selling and marketing, product development and general and administrative, our beliefs regarding the health and growth of the market for our products, anticipated increase in our customer base, expansion of our products functionalities, expected revenue levels and sources of revenue, expected impact, if any, of legal proceedings, the adequacy of liquidity and capital resource, and expected growth in business. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks and uncertainties include, but are not limited to, market acceptance for our products, our ability to attract and retain customers for existing and new products, our ability to control our expenses, our ability to recruit and retain employees, legislation and government regulation, shifts in technology, global and local business conditions, our ability to effectively maintain and update our product and service portfolio, the strength of competitive offerings, the prices being charged by those competitors and the risks discussed elsewhere herein. These forward-looking statements speak only as of the date hereof. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

All references in this ~~Form 10-Q~~Report that refer to the “Company”, “Workhorse Group”, “Workhorse”, “we,” “us” or “our” are to Workhorse Group Inc. ~~and unless otherwise differentiated, its wholly-owned subsidiaries, Workhorse Technologies Inc., Workhorse Motor Works Inc. and Workhorse Properties Inc.~~

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Workhorse Group Inc.

Condensed Consolidated Balance Sheets

~~September 30, 2017 and December 31, 2016~~

September 30,
2017 December 31,
2016
Assets

Current assets:
Cash and cash equivalents $ 9,839,977 $ 469,570
Accounts receivable 225,000 628,700
Lease receivable current 57,060 98,400
Inventory 7,468,333 2,464,835
Prepaid expenses and deposits 1,901,350 255,163
19,491,720 3,916,668

Property, plant and equipment, net 5,673,044 6,002,631
Lease receivable long-term 227,341 320,494

$ 25,392,105 $ 10,239,793

Liabilities and Stockholders’ Equity (Deficit)

Current liabilities:
Accounts payable $ 10,111,256 $ 3,923,758
Accounts payable, related parties 146,854 101,339
Shareholder advances 7,000 229,772
Current portion of long-term debt 61,484 79,521
10,326,594 4,334,390

Long-term debt 2,037,118 2,088,429
Stockholders' equity (deficit):
Series A preferred stock, par value of $.001 per share 75,000,000 shares authorized, 0 shares issued and outstanding at September 30, 2017 and December 31, 2016 - -
Common stock, par value of $.001 per share 100,000,000 shares authorized, 41,126,934 shares issued and outstanding at September 30, 2017 and 27,578,864 shares issued and outstanding at December 31, 2016 41,126 27,579
Additional paid-in capital 105,848,374 66,862,608
Accumulated deficit (92,861,107 ) (63,073,213 )
13,028,393 3,816,974

$ 25,392,105 $ 10,239,793

(Unaudited)


	June 30, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	156,610,794	$	46,817,825
Restricted cash held in escrow	0		194,411,242
Investment in LMC	182,251,126		0
Accounts and lease receivable, less allowance for credit losses of 0 at June 30, 2021 and December 31, 2020, respectively	1,954,609		1,132,164

Inventory, net	49,505,118		15,467,012
Prepaid expenses	40,259,135		32,759,216
Total current assets	430,580,782		290,587,459
Property, plant and equipment, net	13,891,532		11,398,166
Investment in LMC	0		330,556,744
Total Assets	$	444,472,314	$	632,542,369
Liabilities
Current liabilities:
Accounts payable	$	7,542,280	$	4,790,763
Accrued liabilities	5,195,889		5,995,302
Warranty liability	4,866,213		5,400,000




PPP Term Note	0		1,411,000
Total current liabilities	17,604,382		17,597,065
Other long-term liabilities	207,040		207,040
Deferred tax liability	2,919,491		21,833,930
Convertible notes, at fair value	200,900,000		197,700,000
Total Liabilities	221,630,913		237,338,035
Commitments and contingencies	0		0
Stockholders’ Equity:
Series A preferred stock, par value $0.001 per share, 75,000,000 shares authorized, 0 shares issued and outstanding as of June 30, 2021 and December 31, 2020	0		0
Common stock, par value $0.001 per share, 250,000,000 shares authorized, 123,414,045 shares issued and outstanding as of June 30, 2021 and 121,922,532 shares issued and outstanding as of December 31, 2020	123,414		121,923
Additional paid-in capital	506,073,876		504,112,442
Accumulated deficit	(273,155,889)		(109,030,031)
Accumulated other comprehensive loss	(10,200,000)		0
Total stockholders’ equity	222,841,401		395,204,334
Total Liabilities and Stockholders’ Equity	$	444,472,314	$	632,542,369

See accompanying notes to the condensed consolidated financial statements.

Workhorse Group Inc.

Condensed Consolidated ~~Statement~~Statements of Operations

~~For the Three and Nine Months Ended September 30, 2017 and 2016~~

(Unaudited)

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016

Sales $ 3,285,000 $ 1,906,000 $ 5,333,037 $ 3,376,600

Cost of Sales 7,558,082 4,173,364 12,866,095 6,932,416
Gross loss (4,273,082 ) (2,267,364 ) (7,533,058 ) (3,555,816 )

Operating Expenses
Selling, general and administrative 3,283,196 1,968,260 8,031,368 4,755,642
Research and development 5,084,419 1,024,470 14,139,074 4,224,208
Total operating expenses 8,367,615 2,992,730 22,170,442 8,979,850

Interest expense, net 26,891 2,765 84,394 43,035

Net loss $ (12,667,588 ) $ (5,262,859 ) $ (29,787,894 ) $ (12,578,701 )

Basic and diluted loss per share $ (0.35 ) $ (0.25 ) $ (0.83 ) $ (0.61 )

Weighted average number of common shares outstanding 35,930,125 20,665,480 35,930,125 20,665,480


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net sales	$	1,202,876	$	91,942	$	1,723,936	$	176,242

Cost of sales	14,796,130		1,511,360		21,021,429		3,259,335

Gross loss	(13,593,254)		(1,419,418)		(19,297,493)		(3,083,093)

Operating expenses
Selling, general and administrative	7,005,537		3,949,081		13,891,367		9,514,868
Research and development	2,123,860		1,616,604		5,987,575		3,518,840
Total operating expenses	9,129,397		5,565,685		19,878,942		13,033,708

Other (loss) income	(11,699,666)		0		(148,305,618)		864,900

Loss from operations	(34,422,317)		(6,985,103)		(187,482,053)		(15,251,901)

Interest expense (income), net	10,478,717		124,346,806		(4,441,756)		111,323,317

Loss before benefit for income taxes	(44,901,034)		(131,331,909)		(183,040,297)		(126,575,218)
Benefit for income taxes	(1,281,947)		0		(18,914,439)		0

Net loss	$	(43,619,087)	$	(131,331,909)	$	(164,125,858)	$	(126,575,218)

Net loss per share of common stock - basic and diluted	$	(0.35)	$	(1.76)	$	(1.33)	$	(1.77)


Weighted average number of common shares outstanding - basic and diluted	123,414,045		74,701,343		122,984,218		71,583,551

See accompanying notes to the condensed consolidated financial statements.

Workhorse Group Inc.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net loss	$	(43,619,087)	$	(131,331,909)	$	(164,125,858)	$	(126,575,218)
Other comprehensive (loss) income
Change in fair value of convertible notes attributable to credit risk	(10,200,000)		0		(10,200,000)		1,100,000
Comprehensive loss	$	(53,819,087)	$	(131,331,909)	$	(174,325,858)	$	(125,475,218)

See accompanying notes to the condensed consolidated financial statements.

Workhorse Group Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(Unaudited)


	Common Stock			Series A Preferred Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total Stockholders’ Deficit
	Number of Shares	Amount		Number of Shares	Amount
Balance as of March 31, 2020	69,493,836	$	69,494	0	$	0	$	150,883,717	$	(174,049,839)	$	1,100,000	$	(21,996,628)
Stock options and warrants exercised, and vesting of restricted shares	12,479,122	12,479		—	—		46,902,920		—		—		46,915,399
Common stock issued for preferred stock dividends	308,642	309		—	—		499,691		—		—		500,000
Conversion of convertible notes	6,837,381	6,837		—	—		33,534,630		—		—		33,541,467
Common stock issued for interest on convertible notes	211,142	211		—	—		724,474		—		—		724,685
Stock-based compensation	—	—		—	—		1,170,191		—		—		1,170,191
Net loss for the three months ended June 30, 2020	—	—		—	—		—		(131,331,909)		—		(131,331,909)
Other comprehensive income	—	—		—	—		—		—		—		0
Balance as of June 30, 2020	89,330,123	$	89,330	0	$	0	$	233,715,623	$	(305,381,748)	$	1,100,000	$	(70,476,795)


	Common Stock			Series A Preferred Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total Stockholders’ Deficit
	Number of Shares	Amount		Number of Shares	Amount
Balance as of December 31, 2019	67,105,000	$	67,105	0	$	0	$	143,826,315	$	(178,806,530)	$	0	$	(34,913,110)
Stock options and warrants exercised, and vesting of restricted shares	12,911,234	12,911		—	—		47,145,488		—		—		47,158,399
Common stock issued for preferred stock dividends	617,284	618		—	—		999,382		—		—		1,000,000
Conversion of convertible notes	8,384,270	8,384		—	—		38,726,635		—		—		38,735,019
Common stock issued for interest on convertible notes	312,335	312		—	—		988,585		—		—		988,897
Stock-based compensation	—	—		—	—		2,029,218		—		—		2,029,218
Net loss for the six months ended June 30, 2020	—	—		—	—		—		(126,575,218)		—		(126,575,218)
Other comprehensive income	—	—		—	—		—		—		1,100,000		1,100,000
Balance as of June 30, 2020	89,330,123	$	89,330	0	$	0	$	233,715,623	$	(305,381,748)	$	1,100,000	$	(70,476,795)

See accompanying notes to the condensed consolidated financial statements.

Workhorse Group Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(Unaudited)


	Common Stock			Series A Preferred Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Number of Shares	Amount		Number of Shares	Amount
Balance as of March 31, 2021	123,254,853	$	123,255	0	$	0	$	505,017,758	$	(229,536,802)	$	0	$	275,604,211
Stock options and warrants exercised, and vesting of restricted shares	159,192	159		—	—		(83,795)		—		—		(83,636)
Stock-based compensation	—	—		—	—		1,139,913		—		—		1,139,913
Net loss for the three months ended June 30, 2021	—	—		—	—		—		(43,619,087)		—		(43,619,087)
Other comprehensive loss	—	—		—	—		—		—		(10,200,000)		(10,200,000)
Balance as of June 30, 2021	123,414,045	$	123,414	0	$	0	$	506,073,876	$	(273,155,889)	$	(10,200,000)	$	222,841,401


	Common Stock			Series A Preferred Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Number of Shares	Amount		Number of Shares	Amount
Balance as of December 31, 2020	121,922,532	$	121,923	0	$	0	$	504,112,442	$	(109,030,031)	$	0	$	395,204,334
Stock options and warrants exercised, and vesting of restricted shares	1,491,513	1,491		—	—		(70,907)		—		—		(69,416)
Stock-based compensation	—	—		—	—		2,032,341		—		—		2,032,341
Net loss for the six months ended June 30, 2021	—	—		—	—		—		(164,125,858)		—		(164,125,858)
Other comprehensive loss	—	—		—	—		—		—		(10,200,000)		(10,200,000)
Balance as of June 30, 2021	123,414,045	$	123,414	—	$	0	$	506,073,876	$	(273,155,889)	$	(10,200,000)	$	222,841,401

See accompanying notes to the condensed consolidated financial statements.

Workhorse Group Inc.

Condensed Consolidated Statements of Cash Flows

~~For the Nine Months Ended September 30, 2017 and 2016~~

(Unaudited)

2017 2016

Cash flows from operating activities:
Net loss $ (29,787,894 ) $ (12,578,701 )
Adjustments to reconcile net loss from operations to cash used by operations:
Depreciation 415,163 286,316
Stock based compensation 1,076,120 853,609
Write down of inventory - 78,917
Accounts receivable 403,700 (536,600 )
Inventory (5,003,498 ) (3,568,972 )
Prepaid expenses and deposits (1,646,187 ) 733,469
Accounts payable 6,187,498 1,737,918
Accounts payable, related parties 72,242 (343,638 )

Net cash used by operations (28,282,856 ) (13,337,682 )

Cash flows from investing activities:
Capital expenditures (85,576 ) (148,095 )
Proceeds from lease receivable 134,493 -

Net cash provided by (used in) investing activities 48,917 (148,095 )

Cash flows from financing activities:
Payments on long-term debt (69,348 ) -
Conversion of note payable - (2,722,500 )
Shareholder advances, net of repayments 7,000 1,309,073
Issuance of common and preferred stock 37,032,831 -
Exercise of warrants and options 633,863 10,271,294

Net cash provided by financing activities 37,604,346 8,857,867

Change in cash and cash equivalents 9,370,407 (4,627,910 )

Cash at the beginning of the period 469,570 7,677,163
Cash at the end of the period 9,839,977 3,049,253

~~Supplemental disclosure of non-cash activities:~~

Six Months Ended June 30,
2021 2020
Cash flows from operating activities:
Net loss $ (164,125,858) $ (126,575,218)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 787,846 368,372
Tooling expense 0 353,786
Amortization of discount on mandatorily redeemable Series B preferred stock 0 762,614
Change in fair value of convertible notes and loss on conversion to common stock (7,000,000) 96,145,019
Change in fair value of warrant liability 0 12,176,690
Change in fair value of investment in LMC 148,305,618 (864,900)
Dividends for mandatorily redeemable Series B preferred stock paid in common stock 0 1,000,000
Interest on convertible notes paid in common stock 0 988,897
Stock-based compensation 2,032,341 2,029,218
Write down of inventory (7,560,774) 0
Forgiveness of PPP Term Note (1,411,000) 0
Deferred taxes (18,914,439) 0
Effects of changes in operating assets and liabilities:
Accounts and lease receivable (822,445) (15,348)
Inventory (26,477,331) (2,378,143)
Prepaid expenses (7,499,919) 59,882
Accounts payable and accrued liabilities 1,952,104 117,047
Warranty liability (533,787) (1,922,095)
Net cash used in operating activities (81,267,644) (17,754,179)
Cash flows from investing activities:
Capital expenditures (3,281,213) (974,115)
Net cash used in investing activities (3,281,213) (974,115)
Cash flows from financing activities:
Proceeds from PPP Term Note 0 1,411,000
Exercise of warrants and options and restricted share award activity (69,416) 18,646,709
Net cash (used in) provided by financing activities (69,416) 20,057,709
Change in cash and cash equivalents (84,618,273) 1,329,415
Cash, cash equivalents and restricted cash, beginning of the period 241,229,067 24,868,416
Cash and cash equivalents, end of the period $ 156,610,794 $ 26,197,831

During the ~~nine~~three and six months ended ~~September~~June 30, ~~2017,~~2021, the increase in fair value of the convertible notes included a $10.2 million adjustment attributable to changes in credit risk. The Company ~~converted Shareholder advances of $229,772 and accrued interests of $26,727 to common stock of $172 and additional paid-in capital of $256,327.~~

~~During~~recorded Other Comprehensive Loss with the ~~nine months ended September 30, 2017, there were cashless exercises of stock options resulting in 25,995 shares of $0.001 par value common stock being issued.~~

~~During the nine months ended September 30, 2016, notes payable of $13,534,426 and accounts payable of $112,487, net of $2,271,637 in prepaid expenses related~~offset as an increase to the ~~2015 PPM offering, were converted to equity.~~

fair value of the convertible notes.

See accompanying notes to the condensed consolidated financial statements.

Workhorse Group Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1.	~~SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES~~

~~The following accounting principles and practices are set forth to facilitate the understanding of data presented in the financial statements:~~

1.SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING PRINCIPLES

Nature of operations and ~~principles~~basis of ~~consolidation~~

presentation

Workhorse Group Inc. ~~(Workhorse,~~(“Workhorse”, the ~~Company, we, us~~“Company”, “we”, “us” or ~~our)~~“our”) is a technology company focused on providing sustainable and cost-effective solutions to the commercial transportation sector. As an American manufacturer, we ~~design~~create all-electric delivery trucks and ~~build high performance battery-electric vehicles~~drone systems, including the technology that optimizes the way these mechanisms operate. We are last-mile delivery’s first purpose-built electric mobility solution and aircraft that make movement of people and goods more efficient and less harmful to the environment. As part of the Company’s solution, it also develops cloud-based, real-time telematics performance monitoring systems that enable fleet operators to optimize energy and route efficiency. Although the Company operates as a single unit through its subsidiaries, it approaches its development through two divisions, Automotive and Aviation. The Company’s core products, under development and/or in manufacture,we are ~~the medium duty step van, the light duty pickup, the delivery drone and the manned multicopter.~~

Workhorse, formerly known as Title Starts Online, Inc. and AMP Holding Inc., was incorporated in the State of Nevada in 2007 with $3,100 of capital from the issuance of common shares to the founding shareholder. On August 11, 2008, the Company received a Notice of Effectiveness from the U.S. Securities and Exchange Commission, and on September 18, 2008, the Company closed a public offering in which it accepted subscriptions for an aggregate of 200,000 shares of its common stock, raising $50,000 less offering costs of $46,234. With this limited capital, the Company did not commence operations and remained a “shell company” (as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended).

On December 28, 2009, the Company entered into and closed a Share Exchange Agreement with the Shareholders of Advanced Mechanical Products, Inc. (n/k/a Workhorse Technologies, Inc.) (AMP or Workhorse Technologies) pursuant to which the Company acquired 100% of the outstanding securities of AMP in exchange for 14,890,904 shares of the Company’s common stock. Considering that, following the merger, the AMP Shareholders control the majority of the outstanding voting common stock of the Company, and effectively succeeded the Company’s otherwise minimal operations to those that are AMP. AMP is considered the accounting acquirer in this reverse-merger transaction. A reverse-merger transaction is considered and accounted for as a capital transaction in substance; it is equivalent to the issuance of AMP securities for net monetary assets of the Company, which are de minimis, accompanied by a recapitalization. Accordingly, goodwill or other intangible assets have not been recognized in connection with this reverse merger transaction. AMP is the surviving entity and the historical financials following the reverse merger transaction will be those of AMP. The Company was a shell company immediately prior to the acquisition of AMP pursuant to the terms of the Share Exchange Agreement. As a result of such acquisition, the Company operations were nowcurrently focused on our core competency of bringing the ~~design, marketing~~C-Series electric delivery trucks to market and ~~sale~~fulfilling our existing backlog of vehicles with an all-electric power train and battery systems. Consequently, we believe the acquisition has caused the Company to cease to be a shell Company as it had operations following the acquisition. The Company formally changed its name to AMP Holding Inc. on May 24, 2010.

Since the acquisition, the Company has devoted the majority of its resources to the development of an all-electric drive system capable of moving heavy large vehicles ranging from full size SUV’s up to and including Medium Duty Commercial trucks. Additionally, in February 2013, the Company formed a new wholly owned subsidiary, Workhorse Motor Works Inc. (f/k/a AMP Trucks Inc.), an Indiana corporation. On March 13, 2013, Workhorse Motor Works Inc. closed on the acquisition of assets from Workhorse Custom Chassis, LLC. The assets included in this transaction included: The Workhorse brand, access to the dealer network of 440 dealers nationwide, intellectual property, and all physical assets which included the approximately 250,000 sq. ft. of facilities on 48 acres of land in Union City, Indiana. This acquisition allows the Company to position itself as a medium duty OEM capable of producing new chassis with electric, propane, compressed natural gas, and hybrid configurations, as well as gasoline drive systems.

On April 16, 2015, the Company filed Articles of Merger with the Secretary of State of the State of Nevada to change the name from “AMP Holding Inc.” to “Workhorse Group Inc.”. The Company believes that this change will allow investors, customers and suppliers to better associate the Company with the Workhorse brand, which is well known in the market.

~~The~~orders. Our consolidated financial statements ~~include Workhorse Group Inc. and its wholly owned subsidiaries, together referred as “The Company”. Intercompany transactions and balances~~ are ~~eliminated~~prepared in ~~consolidation.~~

~~The Company’s wholly owned subsidiaries include Workhorse Technologies Inc., Workhorse Motor Works Inc. and Workhorse Properties Inc.~~

conformity with U.S. generally accepted accounting principles (“GAAP”).

~~Basis of presentation~~

The financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has limited revenues and a history of negative working capital and stockholders’ deficits. These conditions raise substantial doubt about the ability of the Company to continue as a going concern.

In view of these matters, continuation as a going concern is dependent upon the continued operations of the Company, which, in turn, is dependent upon the Company’s ability to meet its financial requirements, raise additional capital, and successfully carry out its future operations. The financial statements do not include any adjustments to the amount and classification of assets and liabilities that may be necessary, should the Company not continue as a going concern.

The Company has continued to raise capital. Management believes the proceeds from these offerings, future offerings, and the Company’s anticipated revenue, provides an opportunity to continue as a going concern. If additional funding is required, the Company plans to obtain working capital from either debt or equity financing from the sale of common stock, preferred stock, and/or convertible debentures. Obtaining such working capital is not assured.

The preparation of financial statements in conformity with ~~generally accepted accounting principles~~GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates.

In the opinion of our management, the Unaudited Condensed Consolidated Financial Statements include all adjustments that are necessary for the fair presentation of Workhorse’s financial conditions, results of operations and cash flows for the interim periods presented. Such adjustments are of a normal, recurring nature. The results of operations and cash flows for the interim periods presented may not necessarily be indicative of full-year results. Reference should be made to the financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2020.

Principles of consolidation

The condensed consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Reclassifications

Certain reclassifications were made to the prior year condensed consolidated financial statements to conform to the current year presentation. These reclassifications had no effect on previously reported results of ~~operation~~operations or ~~stockholders’~~stockholders' equity.

~~Financial instruments~~

Impact of COVID-19 Pandemic

In December 2019, a novel coronavirus disease (“COVID-19”) was reported. On January 30, 2020, the World Health Organization (“WHO”) declared COVID-19 a Public Health Emergency of International Concern. On February 28, 2020, the WHO raised its assessment of the COVID-19 threat from high to very high at a global level due to the continued increase in the number of cases and affected countries, and on March 11, 2020, the WHO characterized COVID-19 as a pandemic.

As of June 30, 2021, our locations and primary suppliers continue to operate. The number of COVID-19 cases amongst our employees decreased significantly during the three and six months ended June 30, 2021 as compared to the fourth quarter of 2020. During the first half of 2021, there has been a trend in many parts of the world of increasing availability and administration of the vaccine against COVID-19, as well as an easing of restrictions on social, business, travel and government activities and functions. However, infection rates and regulation continue to fluctuate, and there continues to be global impacts resulting from the pandemic, including increases in costs in connection with logistics services and supply chains, port congestion, supplier delays and shortfalls in microchip supply. We continue to work through supplier constraints caused by the COVID-19 outbreak, as well as the microchip shortage. For further discussion of the possible impact of the COVID-19 pandemic on our business, see “Part I – Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020.

2. INVENTORY, NET

Inventory, net consists of the following:


	June 30, 2021		December 31, 2020
Raw materials	$	44,283,636	$	16,759,232
Work in process	6,296,029		422,176
Finished goods	8,478,042		277,419
	59,057,707		17,458,827
Less: inventory reserve	(9,552,589)		(1,991,815)
Inventory, net	$	49,505,118	$	15,467,012

We write-down inventory for excess or obsolete inventories or when we believe the net realizable value of inventory is less than its carrying ~~amounts~~value. During the three months ended June 30, 2021 and 2020, we recorded write-downs of ~~financial instruments including cash, inventory, accounts payable~~approximately $7.2 million and ~~short-term debt approximate~~$0.1 million in Cost of Sales, respectively. During the six months ended June 30, 2021 and 2020, we recorded write-downs of $7.6 million and $0.2 million in Cost of Sales, respectively.

3. INVESTMENT IN LMC

As of June 30, 2021 and December 31, 2020, the Company owned approximately 16.5 million shares of Lordstown Motors Corp. (“LMC”) Class A Common Stock (“Investment in LMC”). The investment is measured at fair value, ~~because~~which was approximately $182.3 million and $330.6 million as of June 30, 2021 and December 31, 2020, respectively. The Company recognized the change in fair value of the ~~relatively~~Investment in LMC in Other Income (Loss) on its Condensed Consolidated Statements of Operations.

As of December 31, 2020, the Company reported the fair value of the Investment in LMC in the non-current assets section of its Consolidated Balance Sheets due to the Company’s intention to hold this investment for purposes of continued affiliation and business advantage. In connection with the merger involving LMC, which closed in October 2020, the Company agreed, subject to certain exceptions, to not sell any of its LMC shares for a period of six months. In April 2021, the six month holding period ended and the Company has the ability and intent to monetize a portion or all of the investment. Therefore, the Company reported the fair value of its Investment in LMC in the current assets section of its Condensed Consolidated Balance Sheets as of June 30, 2021.

See Note 12 for additional information regarding the fair value measurement of the Investment in LMC and Note 14 for additional information regarding certain subsequent events involving the Investment in LMC.

4. REVENUE

Revenue Recognition

Net sales include products and shipping and handling charges, net of estimates for customer allowances. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products. All revenue is recognized when we satisfy our performance obligations under the contract. We recognize revenue by transferring the promised products to the customer, with the majority of revenue recognized at the point in time the customer obtains control of the products. We recognize revenue for shipping and handling charges at the time the products are delivered to or picked up by the customer. The majority of our contracts have a single performance obligation and are short ~~maturity~~term in nature.

Revenues related to repair and maintenance services are recognized over time as such services are provided. Payments for products, services, and merchandise are typically received at the point when control transfers to the customer or in accordance with payment terms customary to the business.

Accounts Receivable

Credit is extended based upon an evaluation of ~~these instruments.~~

~~Accounts receivable~~

the customer’s financial condition. Accounts receivable ~~consist of collectible amounts for products and services rendered.~~are stated at their estimated net realizable value. The ~~Company carries its accounts receivable at invoice amount less an~~ allowance for ~~doubtful accounts. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for doubtful accounts~~credit losses is based on aan analysis of customer accounts, which considers history of past write-offs, ~~and~~ collections, and current and future credit conditions.

Disaggregation of Revenue

Our revenues related to the following types of business were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Automotive	$	1,120,000	$	85,000	$	1,615,000	$	85,000
Aviation	0		0		22,400		60,783
Other	82,876		6,942		86,536		30,459
Total revenues	$	1,202,876	$	91,942	$	1,723,936	$	176,242

Automotive - consists of sales of any of our electric delivery truck platforms.

Aviation - consists of sales of our drone systems.

Other - consists of shipping and handling charges, extended vehicle warranties, and non-warranty after-sales vehicle services.

5. CONVERTIBLE NOTES AND PPP TERM NOTE

4.0% Senior Secured Convertible Notes Due 2024 (“2024 Notes”)

The ~~Company generally does not require collateral for accounts receivable.~~

~~Lease receivable~~

~~The Company’s leasing activities consist~~contractual principal balance of the ~~leasing~~2024 Notes was $200.0 million as of ~~trucks which are classified as direct financing leases. Revenue is recognized at~~June 30, 2021 and December 31, 2020, and the ~~inception of the lease. The leases have a term of 8 years. Future payments to be received on the leases are as follows:~~

2017 $ 18,069
2018 $ 57,060
2019 $ 57,060
2020 $ 57,060
2021 $ 57,060
Thereafter $ 38,092
$ 284,401

~~Inventory~~

~~Inventory is stated at the lower of cost or market using the average cost method, and consists of parts and work in process.~~

~~Property, plant and equipment, net~~

Property and equipment is recorded at cost. Major renewals and improvements are capitalized while maintenance and repairs, which do not improve or extend the lives of the respective assets, are expensed. When property and equipment is retired or otherwise disposed of, a gain or loss is realized for the difference between the net bookfair value of the ~~asset~~2024 Notes was approximately $200.9 million and $197.7 million as of June 30, 2021 and December 31, 2020, respectively.

The following table sets forth a reconciliation of the ~~proceeds realized thereon. Depreciation~~fair value of the 2024 Notes:


	June 30, 2021
Balance, December 31, 2020	$	197,700,000
Change in fair value (1)	(15,500,000)
Change in fair value attributable to credit risk (2)	0
Balance, March 31, 2021	182,200,000
Change in fair value (1)	8,500,000
Change in fair value attributable to credit risk (2)	10,200,000
Balance, June 30, 2021	$	200,900,000

(1) The change in fair value of the 2024 Notes was primarily driven by changes in our stock price during the periods presented. The Company recognized the changes in fair value in Interest (Income) Expense.

(2) The change in fair value of the 2024 Notes attributable to credit risk is ~~calculated using~~primarily due to moderate improvements in the ~~straight-line method, based upon~~Company’s synthetic credit rating. The Company recognized the ~~following estimated useful lives:~~

~~Buildings:~~change in fair value attributable to credit risk in Other Comprehensive Loss.

The 2024 Notes are due October 14, 2024 and are convertible at a rate of $35.29 per share, subject to change for anti-dilution adjustments and adjustments for certain corporate events. No portion of the principal balance was converted during the three and six months ended June 30, 2021.

Interest is payable quarterly beginning January 15, -2021 at a rate of 4.0% per annum. Interest expense for the three and six months ended June 30, ~~years~~

~~Leasehold improvements: 7 years~~

~~Software: 3 - 6 years~~

~~Equipment: 5 years~~

~~Vehicles~~2021 related to the 2024 Notes was $2.0 million and ~~prototypes: 3 - 5 years~~

~~Common stock~~

~~On April 22, 2010,~~$4.0 million, respectively.

There are no required redemptions of the ~~directors~~2024 Notes, and they will generally not be redeemable at the option of the Company ~~approved~~prior to the third anniversary of their issue date. Accordingly, the Company has classified the full balance of the 2024 Notes as long-term debt on its Condensed Consolidated Balance Sheets.

The 2024 Notes include certain covenants, including limitations on liens, additional indebtedness, investments, dividends and other restricted payments, and customary events of default. The Company is also required to have a ~~forward~~minimum sales backlog of at least $25.0 million as of the period ending March 31, 2022, $50.0 million as of the period ending June 30, 2022, $75.0 million as of the period ending September 30, 2022 and $100.0 million as of the period ending December 31, 2022. As of June 30, 2021, the Company is not aware of any default or breach of any covenant under the 2024 Notes.

PPP Term Note

On April 14, 2020, the Company entered into a Paycheck Protection Program Term Note (“PPP Term Note”) with PNC Bank, N.A. under the Paycheck Protection Program of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The Company received total proceeds of approximately $1.4 million from the PPP Term Note, which was due on April 13, 2022. In accordance with the requirements of the CARES Act, the Company used the proceeds primarily for payroll costs. Interest accrued on the PPP Term Note at the rate of 1.0% per annum. The Company elected to account for the PPP Term Note as debt and accrued interest over the term of the note. The Company did not make any repayments on any amount due on the PPP Term Note.

On January 15, 2021, the outstanding principal and interest accrued on the PPP Term Note were fully forgiven. The Company recognized approximately $1.4 million in gain on the forgiveness of the PPP Term Note, which was recorded in Interest Income for the six months ended June 30, 2021.

6. MANDATORILY REDEEMABLE SERIES B PREFERRED STOCK

On June 5, 2019, the Company closed agreements for the sale of 1,250,000 units consisting of one share of Series B Preferred Stock (the “Preferred Stock”), with a stated value of $20.00 per share (the “Stated Value”) and a common stock ~~split~~purchase warrant to purchase 7.41 shares of the Company’s common stock (the “Warrants”) for an aggregate purchase price of $25.0 million. The Preferred Stock was not convertible and did not hold voting rights.

On September 28, 2020, the Company redeemed its Series B Preferred Stock in full for cash. Dividends on all shares of Series B Preferred Stock were paid in full as of the redemption date and have ceased to accumulate.

The Preferred Stock ranked senior to the Company’s common stock with respect to dividend rights and rights upon liquidation, winding-up or dissolution. The Preferred Stock was entitled to annual dividends at a rate equal to 8.0% per annum on the Stated Value. The Warrants had an exercise price of $1.62 per share and expired seven years from the date of issuance. Accrued dividends were payable quarterly in shares of common stock of the Company based on a ~~14:1 basis. On May 12, 2010,~~fixed share price of $1.62. During the ~~stockholders of~~three and six months ended June 30, 2020, the Company voted to approve the amendment of the certificate of incorporation resulting in a decrease of the number of shares of common stock. Management filed the certificate of amendment decreasing the authorized shares of common stock with the State of Nevada on September 8, 2010. On February 11, 2015, the Company filed a certificate of amendment to its articles of incorporation to increase the authorizedissued approximately 0.3 million and 0.6 million shares of common stock to ~~50,000,000.~~

~~On December 9, 2015,~~ the ~~Company filed a Certificate of Amendment to its Certificate of Incorporation to implement a one-for-ten reverse split~~holders of the ~~Corporation’s issued~~Preferred Stock, respectively.

As the Preferred Stock was mandatorily redeemable, it was classified as a liability on the Condensed Consolidated Balance Sheets. All dividends payable on the Preferred Stock were classified as Interest Expense.

The Preferred Stock and ~~outstanding common stock (the “Reverse Stock Split”),~~Warrants were considered freestanding financial instruments and were accounted for separately. The Warrants were considered equity instruments and not marked-to-market at each reporting period. On the date of issuance, the value of the Warrants was $6.7 million, which was determined using the Black-Scholes valuation model. The fair value of the Warrants was recorded as ~~authorized~~an increase to Additional Paid-In Capital and a discount of the Preferred Stock. The discount was amortized to Interest Expense using the effective interest method. Amortization of the discount for the three and six months ended June 30, 2020 was approximately $0.4 million and $0.8 million, respectively.

7. STOCK-BASED COMPENSATION

The Company maintains, as approved by the ~~stockholders~~board of directors, the 2019 Stock Incentive Plan (the “Plan”) providing for the issuance of stock-based awards to employees, officers, directors or consultants of the Company. ~~The Reverse Stock Split became effective at the open of trading on December 11, 2015 (the “Effective Date”). As of the Effective Date, every ten shares of issued and outstanding common~~Non-qualified stock ~~were combined into one newly issued share of common stock. No fractional shares were issued in connection~~options may only be granted with ~~the Reverse Stock Split. Total cash payments made by the Company to stockholders in lieu of fractional shares was not material.~~

~~All references in the financial statements and MD&A to number of common shares,~~an exercise price per share and weighted average shares of common stock have been adjusted to reflect the Reverse Stock Split on a retroactive basis for all prior periods presented, unless otherwise noted, including reclassifying an amount equal to the ~~reduction in par~~market value of the Company’s common stock on the grant date. Awards under the Plan may be either vested or unvested options, or unvested restricted stock. The Plan has authorized 8.0 million shares for issuance of stock-based awards. As of June 30, 2021 and June 30, 2020, there were approximately 6.3 million and 6.6 million shares available for issuance of future stock awards, respectively, which includes shares available under the 2019 and 2017 incentive plans.

Stock-based compensation expense

The following table summarizes stock-based compensation expense:


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Stock options	$	21,210	$	347,328	$	91,622	$	427,758
Restricted stock	1,118,703		822,863		1,940,719		1,601,460
Total stock-based compensation	$	1,139,913	$	1,170,191	$	2,032,341	$	2,029,218

Stock options

The following table summarizes option activity:


	Number of Options	Weighted Average Exercise Price per Option		Weighted Average Grant Date Fair Value per Option	Weighted Average Remaining Contractual Life (Years)
Balance, December 31, 2020	2,351,240	$	2.00		5.5
Granted	0	0		0
Exercised	(770,677)	3.11

Forfeited	0	0
Expired	(29,000)	4.99
Balance, June 30, 2021	1,551,563	$	1.40		5.6

Number of options exercisable at June 30, 2021	1,280,688	$	1.43		6.2

As of June 30, 2021, unrecognized compensation expense was $0.1 million for unvested options which is expected to ~~additional paid in capital.~~

be recognized over the next 1.7 years.

Restricted stock

The ~~capital~~following table summarizes restricted stock activity:


	Number of Unvested Shares	Weighted Average Grant Date Fair Value per Share
Balance, December 31, 2020	1,377,889	$	2.70
Granted	304,164	14.57
Vested	(444,843)	2.75
Forfeited	0	0
Balance, June 30, 2021	1,237,210	$	5.64

As of June 30, 2021, unrecognized compensation expense was $5.4 million for unvested restricted stock awards which is expected to be recognized over the ~~Company is as follows:~~

~~Preferred Stock -~~next 2.3 years.

8. INCOME TAXES

As of June 30, 2021 and December 31, 2020, the Company's deferred tax liability was approximately $2.9 million and $21.8 million, respectively. The Company has ~~authorized 75,000,000 shares of preferred stock with a par~~not generated taxable income since inception and the fair value of ~~$.001 per share. These shares may be issued~~our investment in ~~series with such rights~~LMC decreased substantially during the three and ~~preferences as may be determined by the Board~~six months ending June 30, 2021, which resulted in a tax benefit of ~~Directors. There are no shares of preferred stock outstanding.~~

Common Stock - On August 7, 2017 the Workhorse approved the amendment to the Certificate of Incorporation to increase the authorized shares of common stock to 100,000,000. This matter was approved by a majority of the shares outstanding.approximately $1.3 million and $18.9 million, respectively. The ~~Company has authorized 100,000,000 shares of common stock with a par value of $0.001 per share.~~

~~Revenue recognition / customer deposits~~

It is the Company’s policy that revenues will be recognized in accordance with SEC Staff Bulletin (SAB) No. 104, “Revenue Recognition”. Under SAB 104, product revenues (or service revenues) are recognized when persuasive evidence of an arrangement exists, delivery has occurred (or service has been performed), the sales price is fixed and determinable, and collectability is reasonably assured.

~~Income taxes~~

With the consent of its shareholders, at the date of inception, the Company elected under the Internal Revenue Code to be taxed as an S corporation. Since shareholders of an S corporation are taxed on their proportionate share of the Company’s taxable income, an S corporation is generally not subject to either federal or state income taxes at the corporate level. On December 28, 2009, pursuant to the merger transaction the Company revoked its election to be taxed as an S-corporation.

~~As no taxable income has occurred from the date of this merger to September 30, 2017~~ cumulative deferred tax assets ~~of approximately 27.7 million~~ are fully reserved ~~and no provision or~~as of June 30, 2021, as there is not sufficient evidence to conclude that it is more likely than not that deferred tax assets are realizable. No current liability for federal or state income taxes has been included in ~~the financial statements. Carryover amounts are:~~

Approximate net operating loss
($ millions) Carryover to be used against taxable income generated through year

3.6 2030
6.7 2031
3.9 2032
4.7 2033
6.1 2034
9 2035
18.7 2036
28.7 2037

~~Research and development costs~~

The Company expenses research and development costs as they are incurred. Research and Development costs were approximately $5.1 million and $1.0 million for the three months ended September 30, 2017 and 2016, respectively, consisting primarily of personnel costs for our teams in engineering and research, prototyping expense, and contract and professional services. Union City plant expenses prior to the start of production are also included in research and development expenses.

~~Basic and diluted loss per share~~

these Condensed Consolidated Financial Statements.

9. EARNINGS PER SHARE

Basic loss per share of common stock is ~~computed~~calculated by dividing net loss ~~available to common shareholders (numerator)~~ by the ~~weighted average number of~~weighted-average shares outstanding ~~(denominator) during~~for the period. ~~For all periods, all~~Potentially dilutive shares, which are based on the weighted-average shares of ~~the Company’s~~ common stock ~~equivalents~~underlying outstanding stock-based awards and warrants using the treasury stock method, and convertible notes using the if-converted method, are included when calculating the diluted net loss per share of common stock when their effect is dilutive.

The following table presents the potentially dilutive shares that were excluded from the ~~calculation~~computation of diluted net loss per share of common ~~share~~stock, because ~~they were anti-dilutive, due~~their effect was anti-dilutive:


	Three Months Ended June 30,		Six Months Ended June 30,
	2021	2020	2021	2020
Stock-based awards and warrants	3,827,804	24,294,118	3,827,804	24,294,118
Convertible notes	5,667,328	9,958,506	5,667,328	12,488,899

Excluded from the table above are the warrant shares related to the ~~Company’s net losses.~~

~~Stock based compensation~~

High Trail Convertible Note, which represented approximately 11.8 million and 13.3 million warrants calculated using the if-converted method for the three and six months ended June 30, 2020. The Company accounts for its stock based compensation in accordance with “Share-Based Payments” (codified in FASB ASC Topic 718 and 505). The Company recognizes in its consolidated statement of operations the grant-date fair value of stock options and warrants issued to employees and non-employees. The fair value is estimated on the date of grant using a lattice-based valuation model that uses assumptions concerning expected volatility, expected term, and the expected risk-free rate of return. For the awards granted, the expected volatility was estimated by management as 50% based on a range of forecasted results. The expected term of the awards granted was assumed to be the contract life ofwere issuable at the option or warrant (one, two, three, five or ten years as determined in the specific arrangement). The risk-free rate of return was based on market yields in effect on the date of each grant for United States Treasury debt securities with a maturity equal to the expected term of the award.

~~Related party transactions~~

Certain employees have performed services for the Company. These services are believed to be at market rates for similar services from non-related parties. Related party accounts payable are segregated in the balance sheet.

~~Subsequent events~~

The Company evaluates events and transactions occurring subsequent to the date of the consolidated financial statements for matters requiring recognition or disclosure in the consolidated financial statements. The accompanying consolidated financial statements consider events through November 7, 2017, the date on which the consolidated financial statements were available to be issued.

2.	~~INVENTORY~~

~~As of September 30, 2017, and December 31, 2016, our inventory consisted of the following:~~

September 30,
2017 December 31,
2016
Finished Goods - 212,884
Work in Process 674,713 987,665
Parts 6,793,620 1,264,286
7,468,333 2,464,835

3.	~~PROPERTY, PLANT AND EQUIPMENT, NET~~

~~As of September 30, 2017, and December 31, 2016, our property, plant and equipment, net, consisted of the following:~~

September 30,
2017 December 31,
2016
Land 700,000 700,000
Buildings 5,900,000 5,900,000
Leasehold Improvements 19,225 19,225
Software 86,050 57,587
Equipment 829,742 808,512
Vehicles and prototypes 98,788 62,905
7,633,805 7,548,229
Less accumulated depreciation (1,960,761 ) (1,545,598 )
5,673,044 6,002,631

4.	~~LONG-TERM DEBT~~

~~Long-term debt consists of the following:~~

September 30,
2017 December 31,
2016

Secured mortgage payable to Bank for the purchase of the 100 Commerce Drive Building due in monthly installments of $11,900. 1,748,602 1,767,950
Note payable, former building owner interest payment only due in monthly installments of $1,604 interest at 5.5%. A balloon payment of $350 thousand plus unpaid interest due August 2018. 350,000 350,000
Note payable to the City of Loveland paid off in May 2017 - 50,000
2,098,602 2,167,950
Less current portion 61,484 79,521
Long term debt 2,037,118 2,088,429

~~Aggregate maturities of debt are as follows:~~

2018 358,067
2019 33,607
2020 35,858
2021 38,260
2022 44,345
Thereafter 1,526,981
2,037,118

5.	~~SHAREHOLDER AND RELATED PARTY ADVANCES~~

~~As of September 30, 2017, the Company had deposits for $7,000 that were not yet issued as common stock.~~

6.	~~LEASE OBLIGATIONS~~

~~On October 1, 2011, the Company began leasing operating facilities under an agreement expiring on September 30, 2018. The building subject to the lease was purchased in December 2016.~~

7.	~~STOCK BASED COMPENSATION~~

~~Options to directors, officers and employees~~

The Company maintains, as adopted by the board of directors, the 2014 Stock Incentive Plan, the 2014 Stock Compensation Plan, 2013 Incentive Stock Plan, the 2012 Incentive Stock Plan, the 2011 Incentive Stock Plan and the 2010 Stock Incentive Plan (the plans) providing for the issuance of up to 1,100,000 options to employees, officers, directors or consultants of the Company. Incentive stock options granted under the plans may only be granted with an exercise price of not less than fair market value of the Company’s common stock on the date of grant (110% of fair market value for incentive stock options granted to principal stockholders). Non-qualified stock options granted under the plans may only be granted with an exercise price of not less than 85% of the fair market value of the Company’s common stock on the date of grant. Awards under the plans may be either vested or unvested options. The unvested options vest ratably over two years for options with a five or three-year term and after one year for options with a two-year term.

The 2017 Incentive Plan was adopted by the Board of Directors and the shareholders of the Company. 5,000,000 shares of Common Stock have been reserved for issuance under the 2017 Incentive Plan. Under the Plan, options may be granted which are intended to qualify as Incentive Stock Options (“ISOs”) under Section 422 of the Internal Revenue Code of 1986 (the “Code”) or which are not (“Non-ISOs”) intended to qualify as Incentive Stock Options thereunder. The 2017 Incentive Plan is not a qualified deferred compensation plan under Section 409(a) of the Internal Revenue Code and is not subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”). The primary purpose of the 2017 Incentive Plan is to attract and retain the best available personnel for the Company in order to promote the success of the Company’s business and to facilitate the ownership of the Company’s stock by employees. The 2017 Incentive Plan is administered by a committee of the Board that is designated by the Board to administer the Plan, composed of not less than two members of the Board all of whom are disinterested persons, as contemplated by Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the “ ~~Exchange Act~~ ”). All questions of interpretation of the 2017 Incentive Plan are determined by the Committee, and its decisions are final and binding upon all participants. Under the 2017 Incentive Plan, options may be granted to key employees, officers, directors or consultants of the Company ~~as provided in~~following the ~~2017 Incentive Plan.~~

~~In addition to the plans, the Company has granted, on various dates, stock options to directors, officers and employees to purchase common stock~~full or partial redemption of the ~~Company. The terms, exercise prices and vesting of these awards vary.~~

~~The following table summarizes option activity for directors, officers and employees:~~

Outstanding Stock Options
Options Available for Grant Number of Options Weighted
Average
Exercise Price
per Option Weighted
Average Grant
Date Fair Value
per Option Weighted
Average
Remaining
Exercise Term
in Months
Balance December 31, 2015 757,471 1,980,434 $ 2.21 $ 1.46 49
Additional stock reserved 500,000 - $ - $ - -
Granted (794,500 ) 794,500 $ 6.38 $ 2.82 58
Exercised - (138,113 ) $ 1.79 $ 0.49 -
Forfeited - - $ - $ - -
Expired 492,500 (492,500 ) $ 3.83 $ 1.65 -
Balance December 31, 2016 955,471 2,144,321 $ 2.46 $ 1.53 43
Additional stock reserved 944,529 - $ - $ - -
Granted (1,900,000 ) 1,900,000 $ 5.01 $ 1.11 72
Exercised - (137,419 ) $ 2.11 $ 1.00 -
Forfeited - - $ - $ - -
Expired - - $ - $ - -
Balance September 30, 2017 0 3,906,902 $ 3.17 $ 1.84 43

The Company recorded $1,070,862 and $823,253 compensation expense for stock options to directors, officers and employees for the nine months ended September 30, 2017 and 2016 respectively. As of September 30, 2017, unrecognized compensation expense of $2,376,998 is related to non-vested options granted to directors, officers and employees which is anticipated to be recognized over the next 7 months, commensurate with the vesting schedules.

~~Options to consultants~~

The Company has also granted, on various dates, stock options to purchase common stock of the Company to consultants for services previously provided to the Company. The terms, exercise prices and vesting of these awards vary.

~~The following table summarizes option activity for consultants:~~

Outstanding Stock Options
Options
Available for
Grant Number of
Options Weighted
Average
Exercise Price
per Option Weighted
Average Grant
Date Fair Value
per Option Weighted
Average
Remaining
Exercise Term in Months
Balance December 31, 2015 99,303 306,773 $ 0.36 $ 1.01 41
Granted (9,000 ) 9,000 $ 4.99 $ 0.44 52
Exercised - (138,312 ) $ 0.34 $ 0.81 -
Balance December 31, 2016 90,303 177,461 $ 0.49 $ 1.05 37
Exercised - (5,000 ) $ 1.50 $ 0.83 -
Balance September 30, 2017 90,303 172,461 $ 0.57 $ 1.11 32

The Company recorded $5,258 and $31,356 compensation expense for stock options to consultants for the nine months ended September 30, 2017 and 2016 respectively. As of September 30, 2017, there was no unrecognized compensation expense for options granted to consultants.

~~Warrants to placement agent and consultants~~

The Company has compensated the placement agents for assisting in the sale of the Company’s securities by paying the placement agent commissions and issuing the placement agent common stock purchase warrants to purchase shares of the Company’s common stock. The warrants have a five-year term and various exercise prices.

The Company has also granted, on various dates, stock warrants to purchase common stock of the Company to consultants for services previously provided to the Company. The terms, exercise prices and vesting of these awards vary.

~~The following table summarizes warrant activity for the placement agent and consultants:~~

Outstanding Warrants
Warrants
Available for
Grant Number of
Warrants Weighted
Average Exercise Price per Warrant Weighted
Average Grant
Date Fair Value
per Warrant Weighted
Average
Remaining
Exercise Term
in Months
Balance December 31, 2015 210,227 306,823 $ 2.79 $ 1.26 9
Exercised - (60,160 ) $ 2.69 $ 0.43 -
Expired - (87,458 ) $ 6.00 $ 2.70 -
Balance December 31, 2016 210,227 159,205 $ 2.56 $ 1.16 17
Balance September 30, 2017 210,227 159,205 $ 1.38 $ 0.68 21

The Company recorded no compensation expense for stock warrants to the placement agent and consultants for the nine months ended September 30, 2017 and 2016, respectively. There is no unrecognized compensation expense for the placement agent warrants because they are fully vested at date of grant.

~~Warrants to directors and officers~~

In December 2010 and May 2011, the Company issued to certain directors’ and officers’ common stock purchase warrants to acquire shares of common stock at an exercise price of $20.00 per share for a period of five years. In November 2011, under the terms of a Promissory Note issued to a director and officer, common stock purchaseHigh Trail Convertible Note. No warrants were issued to acquire 100,000 shares of common stock at an exercise price of $5.00 per share for a period of one year. In May 2012, a director and officer received common stock purchase warrants to acquire common stock ofin connection with the Company at an exercise price of $5.00 for a period of three years. In June 2012, a director and officer converted secured and unsecured loans provided to the Company from September 2011 to June 2012 in the aggregate amount of $389,250 into Promissory Notes and common stock purchase warrants. In November 2012, the Company entered into aHigh Trail Convertible Note and ~~Warrant Amendment and Conversion Agreement whereby the holders~~it was fully converted all principal and interest under such Promissory Notes into shares of common stock. Further, the exercise price of the common stock purchase warrants was reduced to $2.50 per share. The $7,388 cost of the reduction in the exercise price is included in stock based compensation expense forduring the year ended December 31, ~~2012.~~

2020.

~~The following table summarizes warrant activity for directors and officers:~~

Outstanding Warrants
Warrants Available for Grant Number of Warrants Weighted
Average
Exercise Price
per Warrant Weighted
Average Grant
Date Fair Value
per Warrant Weighted
Average
Remaining
Exercise Term
in Months
Balance December 31, 2015 348,925 338,925 $ 20.00 $ 1.02 4
Expired - (150,000 ) 20.00 0.15 -
Balance December 31, 2016 348,925 188,925 $ 20.00 $ 1.02 4
Balance September 30, 2017 348,925 188,925 $ 20.00 $ 1.30 4

The Company recorded no compensation expense for stock warrants to directors and officers for the nine months ended September 30, 2017 and 2016. There is no unrecognized compensation expense for these warrants because they are fully vested at date of grant.

8.	~~RECENT PRONOUNCEMENTS~~

10. RECENT ACCOUNTING DEVELOPMENTS

Accounting Standards Recently Adopted

In ~~April 2016,~~December 2019, the Financial Accounting Standards Board ~~(FASB)~~(“FASB”) issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The ASU removes certain exceptions for recognizing deferred taxes for investments, performing an intra-period allocation, and calculating income taxes in interim periods. The ASU also adds guidance to simplify accounting for income taxes, such as recognizing deferred taxes for goodwill and allocating taxes to members of a consolidated group. The Company adopted the ASU as of January 1, 2021. The adoption of this guidance did not have a material impact on the Company’s financial condition and operations.

Accounting Standards ~~Update (ASU) No. 2016-10, Revenue from~~Not Yet Adopted

In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts ~~with Customers (Topic 606): Identifying Performance Obligations and Licensing, and affects~~in an Entity’s Own Equity. The ASU simplifies the accounting for certain convertible instruments, amends the guidance on derivative scope exceptions for contracts in ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which is not yet effective. ASU No. 2016-10 clarifies the following two aspects of Topic 606: evaluating whether promised goods and services are separately identifiable, and determining whether an entity’s ~~promise to grant~~own equity and requires the use of the if-converted method for calculating diluted earnings per share. The ASU removes separation models for convertible debt with a ~~license provides~~cash conversion feature. Such convertible instruments will be accounted for as a ~~customer with either a right to use the entity’s intellectual property, which is satisfied~~single liability measured at ~~a point in time, or a right to access the entity’s intellectual property, which is satisfied over time.~~amortized cost. The ASU ~~No. 2016-10~~ is effective for ~~public companies for~~interim and annual ~~reporting~~ periods beginning after December 15, ~~2017, including interim periods within that reporting period. Transitional guidance is included in the update. Earlier~~2021, with early adoption is permitted ~~only as of annual reporting periods beginning~~ after December 15, ~~2016, including interim reporting periods within that reporting period.~~2020, which can either be on a modified retrospective or full retrospective basis. Adoption of the ASU ~~No. 2016-10~~ is not expected to have a material impact on the ~~Company’s consolidated~~Company's financial ~~statements.~~

~~In March 2016,~~condition and operations.

11. OTHER TRANSACTION

On October 31, 2019, the ~~FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements~~Company and ST Engineering Hackney, Inc. (“Hackney”) entered into an Asset Purchase Agreement to ~~Employee Share-Based Payment Accounting,~~purchase certain assets and ~~affects all entities that issue share-based payment awards to their employees. The new guidance involves several aspects~~assume certain liabilities of Hackney. Upon execution of the ~~accounting~~agreement, the Company deposited $1.0 million in cash and shares of its common stock having a value of $6.6 million into an escrow account. The number of shares held in escrow was subject to adjustment if the value of the shares is less than $5.3 million or greater than $7.9 million on certain dates.

The purchase price for ~~share-based~~the acquired assets was $7.0 million, $1.0 million of which was released from the escrow account in January 2020 upon satisfaction of certain conditions and accounted for as customer acquisition costs. The remaining $6.0 million was payable in cash within 45 days if additional conditions were met or in shares of common stock held in escrow in the event the payment ~~transactions, including income tax consequences,~~was not made within 105 days of when the payment was due. The additional conditions were not met and, as a result, the remaining $6.0 million is not due.

12. FAIR VALUE MEASUREMENTS

Accounting guidance on fair value measurements for certain financial assets and liabilities requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

Level 1 — Quoted market prices in active markets for identical assets or liabilities.

Level 2 — Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3 — Unobservable inputs reflecting the reporting entity’s own assumptions or external inputs from inactive markets.

A financial asset or liability’s classification ~~of awards as either equity or liabilities, and classification~~within the hierarchy is determined based on the ~~statement~~lowest level of ~~cash flows. Under ASU No. 2016-09, any excess tax benefits~~input that is significant to the fair value measurement. Assets and liabilities measured at fair value and fair value measurement level were as follows:


	June 30, 2021								December 31, 2020
	Fair Value		Level 1		Level 2		Level 3		Fair Value		Level 1		Level 2		Level 3
Assets
Investment in LMC	$	182,251,126	$	182,251,126	$	0	$	0	$	330,556,744	$	330,556,744	$	0	$	0
Total assets at fair value	$	182,251,126	$	182,251,126	$	0	$	0	$	330,556,744	$	330,556,744	$	0	$	0

Liabilities
Convertible notes	$	200,900,000	$	0	$	0	$	200,900,000	$	197,700,000	$	0	$	0	$	197,700,000
Total liabilities at fair value	$	200,900,000	$	0	$	0	$	200,900,000	$	197,700,000	$	0	$	0	$	197,700,000

Investment in LMC

The Company's investment in LMC is measured at fair value using Level 1 inputs because it is valued using a quoted price in an active market. The Company recognizes changes in fair value of the investment in Other Income (Loss) on the Condensed Consolidated Statements of Operations.

Convertible Notes

The Company's convertible notes are measured at fair value using Level 3 inputs on issuance and at each reporting date. Considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the Company’s estimates are not necessarily indicative of the amounts that the Company, or ~~tax deficiencies should be recognized as income tax expense or benefit~~holders of the instruments, could realize in a current market exchange. Significant assumptions used in the ~~income statement. Excess tax benefits are~~fair value model include estimates of the redemption dates, credit spreads and the market price and volatility of the Company’s common stock. The use of different assumptions and/or estimation methodologies could have a material effect on the estimated fair values.

The Company recognizes changes in fair value of the convertible notes related to ~~be classified as an operating activity~~changes in credit risk, if any, in Other Comprehensive Income (Loss) and the remaining changes in fair value in Interest (Income) Expense.

13. COMMITMENTS AND CONTINGENCIES

The Company is party to various negotiations and legal proceedings arising in the ~~statement~~normal course of business. The Company provides reserves for these matters when a loss is probable and reasonably estimable. The Company does not disclose a range of potential loss because the likelihood of such a loss is remote. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s financial position, results of operations, cash ~~flows. In accruing compensation cost,~~flows or liquidity.

During the quarter ended June 30, 2021, the Company became aware of an ~~entity can make an entity-wide accounting policy election to either estimate~~issue regarding our E-Series vehicles that will require retrofitting of such vehicles. Management is currently working on remediation and does not expect the number of awards that are expected to vest, as required under current guidance, or account for forfeitures when they occur. For an award to qualify for equity classification, an entity cannot partially settle the award in excess of the employer’s maximum statutory withholding requirements. Such cash paid by an employer when directly withholding shares for tax withholding purposes should be classified as a financing activity in the statement of cash flows. The amendments in ASU No. 2016-09 are effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. Adoption of ASU No. 2016-07 is not expectedissue to have a material impact on the ~~Company’s consolidated~~Company's financial ~~statements.~~

~~In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net),~~condition and affects the guidance in ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” which is not yet effective. When another party is involved in providing goods or services to a customer, ASU No. 2014-09 requires an entity to determine whether the nature of its promise is to provide the specified good or service itself (that is, the entity is a principal) or to arrange for that good or service to be provided by the other party (that is, the entity is an agent). The amendments in ASU No. 2016-08 are intended to improve the operability and understandability of the implementation guidance in ASU No. 2014-09 on principal versus agent considerations by offering additional guidance to be considered in making the determination. ASU No. 2016-08 is effective for public companies for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Transitional guidance is included in the update. Earlier adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. Adoption of ASU No. 2016-08 is not expected to have a material impact on the Company’s consolidated financial statements.

operations.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires a lessee to recognize in the statement of financial position a liability to make lease payments (“the lease liability”) and a right-of-use asset representing its right to use the underlying asset for the lease term, initially measured at the present value of the lease payments. When measuring assets and liabilities arising from a lease, the lessee should include payments to be made in optional periods only if the lessee is reasonably certain, as defined, to exercise an option to the lease or not to exercise an option to terminate the lease. Optional payments to purchase the underlying asset should be included if the lessee is reasonably certain it will exercise the purchase option. Most variable lease payments should be excluded except for those that depend on an index or a rate or are in substance fixed payments. A lessee shall classify a lease as a finance lease if it meets any of five listed criteria: 1) The lease transfers ownership of the underlying asset to the lessee by the end of the lease term. 2) The lease grants the lessee and option to purchase the underlying asset that the lessee is reasonably certain to exercise. 3) The lease term is for the major part of the remaining economic life of the underlying asset. 4) The present value of the sum of the lease payments and any residual value guaranteed by the lessee equals or exceeds substantially all of the fair value of the underlying asset. 5) The underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. For finance leases, a lessee shall recognize in the statement of comprehensive income interest on the lease liability separately from amortization of the right-of-use asset. Amortization of the right-of-use asset shall be on a straight-line basis, unless another basis is more representative of the pattern in which the lessee expects to consume the right-of-use asset’s future economic benefits. If the lease does not meet any of the five criteria, the lessee shall classify it as an operating lease and shall recognize a single lease cost on a straight-line basis over the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. The amendments in this update are to be applied using a modified retrospective approach, as defined, and are effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018. Early application is permitted.

14. SUBSEQUENT EVENTS

The Company ~~is currently evaluating~~has evaluated subsequent events for potential recognition and disclosures through the ~~financial statement impact of adopting~~date the ~~new guidance.~~

9.	~~PRIVATE PLACEMENT MEMORANDUM AND STOCK OFFERING~~

Condensed Consolidated Financial Statements were filed.

Investment in LMC

During ~~2015,~~the period beginning July 1, 2021 through August 6, 2021, the Company entered into a placement agency agreement with a third party to assist in raising capital. Direct costs of this private placement memorandum (PPM) were deferred and reduced the proceeds from the shares sold ~~in the PPM. The PPM was completed, and all costs were charged to equity in the three-month period ended in March 31, 2016.~~

~~Total amount converted to common stock including accrued interest on the notes payable was $11,375,276 net of the deferred costs.~~

~~On February 1, 2017, the Company announced the completion of its underwritten public offering of 6,500,000~~approximately 11.9 million shares of ~~its common stock~~LMC Class A Common Stock at ~~a public offering~~an average price of $3.00 per share. In addition, the underwriters exercised an option to purchase an additional 975,000 shares of common stock at the public offering price, less the underwriting discounts and commissions.

All of the shares in the offering were sold by Workhorse Group, with gross proceeds to Workhorse Group of approximately $22.4 million and net proceeds of approximately $20.5 million, after deducting underwriting discounts and commissions and estimated offering expenses.

On June 22, 2017, Workhorse entered into an at the market issuance sales agreement (the “Cowen Agreement”) with Cowen and Company, LLC (“Cowen”) under which the Company may offer and sell, from time to time at its sole discretion, shares of its Common Stock having an aggregate offering price of up to $25,000,000 through Cowen as its sales agent.~~As of September 30, 2017, the Company issued 1,060,783 shares from this facility.~~

On September 14, 2017, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Cowen relating to the public offering and sale (the “Offering”) of 3,749,996 shares of the Company’s common stock, and five year warrants (exercisable beginning on the date of issuance) to purchase up to an aggregate of 2,812,497 shares of the Company’s common stock. Each investor received a warrant to purchase 0.75 shares of the Company’s common stock at an exercise price of $3.80$6.67 per share for ~~each share~~expected net proceeds, after transaction expenses and brokers’ commissions, of ~~common stock purchased.~~

~~Pursuant to the Underwriting Agreement, Cowen purchased 3,749,996 shares~~approximately $78.8 million. As a result of the ~~Company’s common stock and accompanying warrants at a price per share of $3.20. The net proceeds to~~sales, the Company ~~were~~recorded a loss of approximately $10.9 million after deducting underwriting discounts and commissions and offering expenses. The sale of such shares and accompanying warrants closed on September 18, 2017. The warrants contain full ratchet anti-dilution protection upon the issuance of any common stock, securities convertible into common stock or certain other issuances at a price below the then existing exercise price of the warrants, with certain exceptions.

$52.1 million.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Recent Events

On July 27, 2021, Workhorse Group Inc. (“Workhorse”, the “Company”, “we”, or “us”) announced the hiring of Richard (“Rick”) Dauch as our Chief Executive Officer, President and member of the Board of Directors, effective August 2, 2021. Mr. Dauch joins us with nearly 30 years of experience in the automotive and manufacturing industries, including most recently as the Chief Executive Officer of the publicly traded automotive supplier firm, Delphi Technologies (NYSE: DLPH). Previously, Mr. Dauch served as the President and CEO of Accuride Corporation from 2011 to 2019 and Acument Global Technologies from 2008 to 2011, in various executive roles at American Axle & Manufacturing from 1995 to 2008 and United Technologies from 1992 to 1995 and as an officer in the United States Army from 1983 to 1990. Mr. Dauch attended the United States Military Academy at West Point, where he graduated with a bachelor’s of science degree in engineering, and the Massachusetts Institute of Technology, where he graduated with a dual master’s of science in engineering and management.

In connection with the hiring of Mr. Dauch, we also announced that the Company is withdrawing its previously stated guidance. One of Mr. Dauch’s initial priorities as Chief Executive Officer will be to work with management to conduct a thorough review of all aspects of our operations and to develop a strategic plan to address and improve our vehicles and operational capabilities. The Company also announced the departure of Duane Hughes, Chief Executive Officer, President and member of our Board of Directors, effective August 2, 2021, and that Stephen Fleming and Tony Furey, Vice President and General Counsel and Vice President, Finance, respectively, notified us of their intention to depart the Company.

Overview and Quarter Highlights

We are a technology company focused on providing sustainable and cost-effective ~~electric mobility~~ solutions to the commercial transportation sector. As an American manufacturer, we ~~design~~create all-electric delivery trucks and ~~build high-performance, battery-electric vehicles~~drone systems, including the technology that optimizes the way these mechanisms operate. We are last-mile delivery’s first purpose-built electric mobility solution and ~~aircraft that make movement of people and goods more efficient and less harmful to the environment. We approach our development through two divisions, Automotive OEM and Aviation Manufacturer.~~

~~Automotive~~

~~Last Mile Electric Delivery Vehicles~~

~~Workhorse battery-electric and range-extended delivery vans~~we are currently ~~in production at~~focused on our ~~Union City, Indiana plant~~core competency of bringing the C-Series electric delivery trucks to market and fulfilling our existing backlog of orders.

Our electric delivery trucks are in use by our customers on daily routes across the United States. ~~To date, we have built and delivered over 300 electric and range extended delivery trucks to our customers. To our knowledge, we are the only OEM to achieve such a milestone, worldwide.~~ Our delivery customers include companies such as ~~UPS,~~Alpha Baking, FedEx Express, ~~Alpha Baking, Brink’s~~Fluid Market, Inc., Pride Group Enterprises, Pritchard, Ryder, UPS and W.B. Mason. Data from our ~~in-house-developed~~in-house developed telematics system demonstrates our first generation vehicles ~~have logged nearly 2,000,000 customer miles~~ on the road ~~and are averaging approximately~~achieve as much as a 500% ~~improvement~~increase in fuel economy as compared to conventional gasoline-based trucks of the same size and duty cycle.

In addition to ~~a five-fold improvement in~~improved fuel economy, we anticipate ~~that~~ the performance of our vehicles ~~on-route~~ will reduce long-term vehicle maintenance expense by approximately ~~50%~~60% as compared to fossil-fueled trucks.

~~We produced 73 of~~ Over a 20-year vehicle life, we estimate our ~~E-GEN electric~~C-Series delivery trucks will save over $170,000 in fuel and maintenance savings. We expect fleet operators will be able to ~~customers in~~achieve a three-year or better total cost of ownership break-even without government incentives.

Our goal is to continue to increase sales and production, while executing on our cost-down strategy to a point that will enable us to achieve gross margin profitability of the ~~third quarter 2017. This was~~last-mile delivery truck platform. As a record production and revenue level for Workhorse. We also delivered our six prototype vehicles to the United States Postal Service (USPS) in the third quarter. Looking ahead, in the first 37 days of this current quarter,key strategy, we have ~~already built and delivered 64 E-Gen vehicles.~~

~~Today, we announced~~developed the Workhorse C-Series platform, which has been accelerated from our new NGEN low floor electric delivery van with a stylish composite body. This next generational vehicle was designed with Last Mile Delivery in mind, and incorporates our work with traditional delivery customers, our USPS prototypes and the new delivery demands that are the result of the ever increasing packages being delivered due to e-commerce. We believe this new, lightweight, all wheel drive electric vehicle with best in class turning radius coupled with its optional roof mounted HorseFly delivery drone represents the most efficient last mile delivery system available. As with allprevious development efforts.

The Workhorse ~~chassis and trucks, Ryder will be our sales and national service organization for the new NGEN vehicle.~~

~~In addition to extending our “first mover” status in the~~C-Series electric delivery truck ~~marketplace,~~platform is available in 650 and 1,000 cubic feet configurations. This ultra-low floor platform incorporates state-of-the-art safety features, economy and performance. We expect these vehicles offer fleet operators the ~~NGEN~~most favorable total cost-of-ownership of any comparable vehicle ~~also leverages~~available today. We believe we are the first American OEM to market a U.S. built electric delivery truck, and early indications of fleet interest are significant.

Horsefly™

Our HorseFly Unmanned Aerial System (“UAS”) is a custom-designed, purpose-built, all-electric drone system that is incorporated into our ~~existing supply chain partners~~trucks and safely and efficiently delivers packages. HorseFly is designed with a maximum gross weight of 30 lbs., a 10 lb. payload and a maximum air speed of 50 mph. Our first aircraft can deliver a meaningful payload up to ~~achieve~~10 miles, automatically lowering packages safely from 50 feet above the delivery point via our ~~goal~~proprietary winch system. It is designed and built to be rugged and consisting of ~~being gross margin positive~~redundant systems to further meet the FAA’s required rules and regulations. Workhorse was granted a patent on our ~~trucks.~~

~~In March of 2013, we purchased~~UAS, and though initially designed as a complimentary system delivering packages from our electric trucks, the former Workhorse Custom Chassis assembly plant in Union City, Indiana from Navistar International (NAV: NYSE). With this acquisition, we acquired the capability to be an Original Equipment Manufacturer (OEM) of Class 3-6 commercial-grade, medium-duty truck chassis, to be marketed under the Workhorse® brand.

The Workhorse Custom Chassis acquisition includes other important assets including the Workhorse brand and logo, intellectual property, schematics, logistical support from Up-Time Parts (a Navistar subsidiary) and access to a network of 400-plus sales and service outlets across North America. We believe the combinationlatest iteration of our ~~assembly capability, coupled with our battery-electric product development expertise gives Workhorse~~UAS supports package delivery point-to-point, enabling deliveries to and from almost

anywhere, allowing it to serve a ~~unique opportunity to manufacture at scale in the U.S.~~

~~W-15 Pickup Truck~~

The success of our E-GEN total-cost-of-ownership value proposition to fleet buyers of medium-duty vehicles encouraged us to bring this same philosophy to the much higher volume segment of light-duty trucks. Our first product offering in the light-duty truck environment is our W-15 Range-Extended Electric Pickup Truck, which is presently under development and is targeted for initial production to begin in late 2018. We believe that the W-15 has the potential to transform the pickup truck market in the United States.

~~We had a highly successful unveiling of our W-15 pickup truck in Long Beach, CA the week of May 1~~^st~~, 2017.~~broader customer base. As part of the ~~unveiling,~~divestiture of SureFly, we ~~also announced that~~formed a 50/50 joint venture to which we ~~had secured letters-of-intent for~~contributed our HorseFly technology.

Impact of COVID-19 Pandemic

In December 2019, a novel coronavirus disease (“COVID-19”) was reported. On January 30, 2020, the ~~W-15~~World Health Organization (“WHO”) declared COVID-19 a Public Health Emergency of International Concern. On February 28, 2020, the WHO raised its assessment of the COVID-19 threat from high to very high at a ~~mixture of top corporate fleets representing the utility, municipality and automotive logistics sectors. The LOIs represent more than 5,000 units.~~

~~We have also had many inquiries from general consumers with respect~~global level due to the availability of the W-15 being sold to consumers. Our current plan is to release the W-15 for availability to consumers if we reach the point where at least 10,000 consumers place a pre-order that is accompanied by a $1,000 deposit.

~~To realize further efficiencies, we intend to assemble the W-15 at our existing 250,000 square foot facility~~continued increase in Union City, Indiana. This plant has the capability to produce more than 60,000 vehicles per year. The battery packs for all Workhorse vehicles will be built in our Loveland, Ohio battery pack plant using Panasonic cells produced in Japan.

~~Post Office Replenishment Program~~

Workhorse, with our partner VT Hackney, is one of five awardees that the United States Postal Service selected to build prototype vehicles for USPS Next Generation Delivery Vehicle (NGDV) project. The Post Office has stated that the number of ~~vehicles~~cases and affected countries, and on March 11, 2020, the WHO characterized COVID-19 as a pandemic.

As of June 30, 2021, our locations and primary suppliers continue to operate. The number of COVID-19 cases amongst our employees decreased significantly during the three and six months ended June 30, 2021 as compared to the fourth quarter of 2020. During the first half of 2021, there has been a trend in many parts of the world of increasing availability and administration of the vaccine against COVID-19, as well as an easing of restrictions on social, business, travel and government activities and functions. However, infection rates and regulation continue to fluctuate, and there continue to be ~~replaced~~global impacts resulting from the pandemic, including increases in ~~the project is approximately 180,000. In September, Workhorse delivered six vehicles for prototype testing under the NGDV Acquisition Program~~costs in ~~compliance~~connection with ~~the terms set forth~~logistics services and supply chains, port congestion, supplier delays and shortfalls in ~~their USPS prototype contract.~~

~~Aviation~~

~~Delivery Drones~~

Our Horsefly Delivery Drone is a custom-designed, purpose-built drone that is fully integrated with our electric trucks. We have a patent pending on this architecture and we believe we are the only company in the world with a working drone/truck system. The Horsefly delivery drone and truck system is designed to work within the FAA Rule 107 that permits the use of commercial drones in U.S. airspace under certain conditions.

UPS conducted a successful real-world test with us in February 2017 and it received worldwide news coverage. The knowledge we have gained in building electric delivery trucks for last-mile delivery has led us to believe that a drone/truck delivery system can have significant cost savings in the parcel delivery ecosphere.

As stated in UPS’s press release issued on February 21, 2017, a reduction of just one mile per driver per day over one year can save UPS up to $50 million. Rural delivery routes are the most expensive to serve due to the time and vehicle expenses required to complete each delivery. In this test, the drone made one delivery while the driver continued down the road to make another. We believe that this truck/drone architecture represents significant cost savings for delivery fleets and that we are first to market with such a system.microchip supply. We continue to work ~~closely with the FAA~~through supplier constraints caused as ~~we strive to bring the system to the point of daily drone deliveries across rural America.~~

~~Manned Multicopter~~

We continue to leverage our knowledge of high-voltage battery packs, electric motor controls, range extending generators and lightweight carbon fiber chassis to design to expand into areas that fit within our corporate mission statement. On June 17^th ~~at the Paris Air show, we launched our multi-copter platform that can carry~~ a pilot and passenger. The product is called SureFly™, and it is meant to be a short haul, vertical takeoff and landing aircraft that is less expensive to buy and operate, and much safer and easier to fly when compared to a conventional helicopter. We believe that the typical application would be agriculture, package delivery and logistics in remote areas, emergency responders, military, and commuters in highly congested larger cities.

~~In light~~result of the ~~robust response to~~COVID-19 outbreak, as well as the ~~launch, we are working closely with~~microchip shortage. For further discussion of the ~~FAA and several~~possible impact of the COVID-19 pandemic on our ~~industry partners to bring~~business, see “Part I – Item 1A. Risk Factors” in our Annual Report on Form 10-K for the SureFly™ solution to market. We expect to test our first manned hover in late 2017. We believe that our range-extended truck experience combined with our Horsefly delivery drone aviation development experience will give us competitive advantages and speed-to-market with such an aircraft. We have targeted 2019 to receive our certification from the FAA and have begun accepting $1,000 deposits from potential customers.

year ended December 31, 2020.

Results of Operations

Our condensed consolidated ~~statement~~statements of operations data ~~for the period presented~~is as follows:

~~Workhorse Group Inc~~

~~Consolidated Statement of Operations~~

~~For the Three and Nine Months Ended September 30, 2017 and 2016~~

~~(Unaudited)~~

Three Months Ended
June 30, Six Months Ended
June 30,
2021 2020 2021 2020
Net sales $ 1,202,876 $ 91,942 $ 1,723,936 $ 176,242
Cost of sales 14,796,130 1,511,360 21,021,429 3,259,335
Gross loss (13,593,254) (1,419,418) (19,297,493) (3,083,093)
Operating expenses
Selling, general and administrative 7,005,537 3,949,081 13,891,367 9,514,868
Research and development 2,123,860 1,616,604 5,987,575 3,518,840
Total operating expenses 9,129,397 5,565,685 19,878,942 13,033,708
Other (loss) income (11,699,666) — (148,305,618) 864,900
Loss from operations (34,422,317) (6,985,103) (187,482,053) (15,251,901)
Interest expense (income), net 10,478,717 124,346,806 (4,441,756) 111,323,317
Loss before benefit for income taxes (44,901,034) (131,331,909) (183,040,297) (126,575,218)
Benefit for income taxes (1,281,947) — (18,914,439) —
Net loss $ (43,619,087) $ (131,331,909) $ (164,125,858) $ (126,575,218)

Net Sales

~~Sales~~

Net sales for the three months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 were ~~$3.3~~$1.2 million and ~~$1.9~~$0.1 million, ~~respectively~~respectively. Net sales for the six months ended June 30, 2021 and 2020 were ~~related to delivery of the production vehicles for UPS.~~$1.7 million and $0.2 million, respectively. The increase in net sales iswas primarily due to ~~the higher rate of delivery requested by UPS.~~

~~Sales for the nine months ended September 30, 2017 and 2016 were $5.3 million and $3.4 million The~~an increase in ~~sales is due~~volume related to our production of the ~~higher rate of~~C-Series electric delivery ~~requested by UPS and the increased production capacity of Workhorse.~~

truck.

Cost of Sales

Cost of sales ~~includes cost of materials, labor and overhead for the vehicles delivered during the period.~~

~~Cost of Sales~~ for the three months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 were ~~$7.6~~$14.8 million and ~~$4.2~~$1.5 million, respectively. ~~Materials and components~~Cost of sales for the ~~manufacturing~~six months ended June 30, 2021 and 2020 were $21.0 million and $3.3 million, respectively. The increase in cost of sales was primarily due to an increase in volume related to our production of the ~~initial units were acquired at low volume pricing.~~

~~Cost of Sales for the nine months ended September 30, 2017~~C-Series electric delivery truck, higher consulting costs, and ~~2016 were $12.9 million~~higher compensation-related costs. The increase is also attributable to inventory write-downs due to work in process and $6.9 million respectively. Materials and components for the manufacturing of the initial units were acquired at low volume pricing. We are in the process of negotiating high volume pricing and credit terms with vendors as production volume is increasing.

finished goods on hand that have a cost higher than their net realizable value.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses ~~consist~~during the three months ended June 30, 2021 and 2020 were $7.0 million and $3.9 million, respectively. The increase in SG&A was primarily due to higher legal and consulting costs of ~~personnel~~approximately $1.5 million, higher compensation-related costs of approximately $0.8 million, and ~~facilities~~higher marketing costs of approximately $0.5 million.

SG&A expenses during the six months ended June 30, 2021 and 2020 were $13.9 million and $9.5 million, respectively. The increase in SG&A was primarily due to higher legal and consulting costs of approximately $2.3 million, higher compensation-related costs of approximately $1.6 million, and higher marketing costs of approximately $0.9 million, offset by a decrease in selling expenses of $1.0 million related to ~~our~~the Hackney customer acquisition payment made in the prior year.

Research and Development Expenses

Research and development ~~including marketing, sales, executive, finance, human resources, information technology and professional, legal and contract services.~~

~~SG&A~~(“R&D”) expenses during the three months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 were ~~$3.3~~$2.1 million and ~~$2.0 million respectively. The increase consisted primarily of employee salaries and benefits, promotional activities and consulting, due to increased activity in the period.~~

SG&A expenses during the nine months ended September 30, 2017 and 2016 were $8.0 million and $4.8 million respectively. The increase consisted primarily of employee salaries and benefits, consulting and investor relations, due to increased activity in the period.

~~Research and Development Expenses~~

~~Research and development (“R&D”) expenses consist primarily of personnel costs for our teams in engineering and research, prototyping expense, and contract and professional services.~~

~~R&D expenses during the three months ended September 30, 2017 and 2016 were $5.1 million and $1.0~~$1.6 million, respectively. The increase in R&D ~~expenses consisted~~is primarily ~~in consulting and materials related~~due to ~~the start~~higher compensation-related costs of ~~the Next Generation Delivery Vehicles project and SureFly™ Octocopter.~~

approximately $0.5 million.

R&D expenses during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 were ~~$14.1~~$6.0 million and ~~$4.2~~$3.5 million, respectively. The increase in R&D ~~expenses consisted~~is primarily ~~in employee salaries~~due to higher compensation-related costs of approximately $1.1 million, higher consulting costs of approximately $0.6 million, and ~~benefits, consulting and materials~~higher prototype component costs of approximately $0.5 million related to the ~~start~~design of the ~~Next Generation Delivery Vehicles project, the construction~~C-Series electric delivery truck and ~~completion~~continued development of the ~~prototypes for the pickup truck, EPA/CARB certification and the SureFly™ Optocopter.~~

~~Interest Expenses~~

~~Our interest expense is incurred primarily from our long-term loans for financing Property, Plant and Equipment.~~

~~Interest expenses~~HorseFly delivery drone.

Other (Loss) Income

Other losses during the three months ended ~~September~~June 30, ~~2017 and 2016~~2021 were ~~$27 thousand and $3 thousand, respectively. Interest expense for 2017 was~~$11.7 million, compared to no losses during the three months ended June 30, 2020. Other losses during the six months ended June 30, 2021 were $148.3 million, compared to other income of $0.9 million during the six months ended June 30, 2020. The losses in the current period were related to the ~~Long-Term loan on~~decrease in fair value of our investment in Lordstown Motor Corp.

Net Interest (Income) Expense

Net interest (income) expense is comprised of the ~~Loveland Headquarters R&D building.~~

~~Interest expenses during~~following:


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Change in fair value of convertible notes and loss on conversion to common stock	$	8,500,000	$	101,343,165	$	(7,000,000)	$	96,206,717
Gain on forgiveness of PPP Term Note	—		—		(1,411,000)		—
Contractual interest expense	1,977,777		1,031,737		3,977,777		1,954,575
Change in fair value of warrant liability and loss on exercise of warrants	—		21,321,690		—		12,176,690
Amortization of discount and debt issuance costs	—		385,031		—		762,615
Other	940		265,183		(8,533)		222,720
Total interest (income) expense, net	$	10,478,717	$	124,346,806	$	(4,441,756)	$	111,323,317

Net interest expense for the ~~nine~~three months ended ~~September~~June 30, ~~2017~~2021 and ~~2016 were $84 thousand~~2020 was $10.5 million and ~~$43 thousand,~~$124.3 million, respectively. The decrease in interest expense was primarily driven by a $92.8 million decrease in expense related to fair value adjustments and losses on conversion of our convertible notes and a $21.3 million decrease in expense related to mark-to-market adjustments for warrants issued to lenders.

Net interest income for the six months ended June 30, 2021 was $4.4 million as compared to $111.3 million of interest expense for the six months ended June 30, 2020. Interest income in the current period is primarily due to $7.0 million of fair value adjustments to our convertible notes and a $1.4 million gain on forgiveness of the PPP Term Note, offset by contractual interest expense of approximately $4.0 million. Interest expense in the prior year period is primarily due to approximately $96.2 million fair value adjustments and losses on conversion of our convertible notes, $12.2 million mark-to-market adjustments for ~~2017 was related~~warrants issued to ~~the Long-Term loan on the Loveland Headquarters R&D building. Interest expense for 2016 was related to the Navistar loan which was paid off during the second quarter of 2016.~~

lenders, and $2.0 million contractual interest expense.

Liquidity and Capital Resources

Cash Requirements

From inception, we have financed our operations primarily through sales of equity ~~securities.~~securities and issuance of debt. We have ~~consumed substantial amounts of~~utilized this capital for R&D, fund designing, building and delivering vehicles to ~~date as we continue our research~~customers and ~~development activities and manufacturing our vehicles.~~

other working capital purposes.

As of ~~September~~June 30, ~~2017,~~2021, we had approximately ~~$9.8~~$156.6 million in cash and cash equivalents, ~~and short-term investments,~~ as compared to approximately ~~$470 thousand~~$241.2 million in cash and cash equivalents and restricted cash held in escrow as of December 31, ~~2016, an increase~~2020, resulting in a decrease of ~~approximately $9.4~~$(84.6) million. The ~~increase was~~decrease is primarily attributable to cash used in operations related to our initial production of the ~~closing of our underwritten public offerings in February~~C-Series electric delivery truck, including inventory build, employee-related costs and ~~September 2017.~~

contract labor.

We believe ~~that~~ our existing capital resources will be sufficient to support our ~~current and~~ projected funding requirements into Q1 2018. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development of our business and research and development activities, including risks and uncertainties that could impact the rate of progress of our development activities, we are unable to estimate with certainty the amounts of increased capital outlays and operating expenditures.

~~Our operations will require significant~~for several years, after which time additional funding ~~for~~will be required. However, if the ~~foreseeable future. Unless~~opportunity arises, we may elect to raise additional financing in 2021.

With the exception of contingent and ~~until~~royalty payments that we ~~are able to generate a sufficient amount of revenue and reduce~~may receive under our ~~costs,~~existing collaborations, we ~~expect to finance future cash needs through public and/or private offerings of equity securities and/or debt financings. We~~ do not currently have any committed future funding. To the extent we raise additional capital by issuing equity securities, our existing stockholders could ~~at that time~~ experience ~~substantial~~ dilution. Any debt financing ~~that~~ we ~~are able to~~can obtain may ~~involve~~include operating covenants that restrict our business. In February 1, 2017, the Company announced the completion of its underwritten public offering of 6,500,000 shares of its common stock at a public offering price of $3.00 per share. In addition, the underwriters exercised an option to purchase an additional 975,000 shares of common stock at the public offering price, less the underwriting discounts and commissions. On June 22, 2017, the Company entered into an at the market issuance sales agreement (the “Cowen Agreement”) with Cowen and Company, LLC (“Cowen”) under which the Company may offer and sell, from time to time at its sole discretion, shares of its Common Stock, having an aggregate offering price of up to $25,000,000 through Cowen as its sales agent. Cowen may sell the Common Stock by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415 of the Securities Act of 1933, as amended, including without limitation sales made by means of ordinary brokers’ transactions on the Nasdaq Global Select Market or otherwise at market prices prevailing at the time of sale, in block transactions, or as otherwise directed by the Company. Cowen will use commercially reasonable efforts to sell the Common Stock from time to time, based upon instructions from the Company (including any price, time or size limits or other customary parameters or conditions the Company may impose). The Company will pay Cowen a commission of 3.0% of the gross sales proceeds of any Common Stock sold through Cowen under the Cowen Agreement, and also has provided Cowen with customary indemnification rights. The Company is not obligated to make any sales of Common Stock under the Agreement. The offering of shares of Common Stock pursuant to the Cowen Agreement will terminate upon the earlier of (i) the sale of all Common Stock subject to the Cowen Agreement or (ii) termination of the Cowen Agreement in accordance with its terms. The shares of Common Stock being offered pursuant to the Cowen Agreement will be offered and sold pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-213100). On June 22, 2017, the Company filed a prospectus supplement relating to the ATM Offering with the Securities and Exchange Commission (the “SEC”). As of September 30, 2017, the Company issued 1,060,783 shares of Common Stock for gross proceeds of $3.5 million under the Cowen Agreement.

On September 14, 2017, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Cowen relating to the public offering and sale (the “Offering”) of 3,749,996 shares of the Company’s common stock, and five year warrants (exercisable beginning on the date of issuance) to purchase up to an aggregate of 2,812,497 shares of the Company’s common stock. Each investor received a warrant to purchase 0.75 shares of the Company’s common stock at an exercise price of $3.80 per share, for each share of common stock purchased.

Pursuant to the Underwriting Agreement, Cowen purchased 3,749,996 shares of the Company’s common stock and accompanying warrants at a price per share of $3.20. The net proceeds to the Company were approximately $10.9 million after deducting underwriting discounts and commissions and offering expenses. The sale of such shares and accompanying warrants closed on September 18, 2017. The warrants contain full ratchet anti-dilution protection upon the issuance of any common stock, securities convertible into common stock or certain other issuances at a price below the then-existing exercise price of the warrants, with certain exceptions.

Our future funding requirements will depend upon many factors, including, but not limited to:

	●	•our ability to acquire or license other technologies ~~or compounds that~~ we ~~may seek to pursue;~~

	●	~~our ability to manage our growth;~~

	●	~~competing technological and market developments;~~

	●	~~the costs and timing of obtaining, enforcing and defending our patent and other intellectual property rights; and~~

	●	~~expenses associated with any unforeseen litigation.~~

~~Insufficient funds~~ may ~~require us~~seek to ~~delay, scale back or eliminate some or all~~pursue;

•our ability to manage our growth;

•competing technological and market developments;

•the costs and timing of obtaining, enforcing and defending our ~~research or development programs, limit our sales activities, limit or cease production or negatively impact our operations.~~

patent and other intellectual property rights; and

•expenses associated with any unforeseen litigation.

For the ~~nine~~three and six months ended ~~September~~June 30, ~~2017,~~2021, we maintained an investment ~~portfolio primarily~~ in a bank money market ~~funds, U. S. treasury bills, government-sponsored enterprise securities, and corporate bonds and commercial paper.~~fund. Cash in excess of immediate requirements is invested with regard to liquidity and capital preservation. Wherever possible, we seek to minimize the potential effects of concentration and degrees of risk. We will continue to monitor the impact of the changes in the conditions of the credit and financial markets to our investment portfolio and assess if future changes in our investment strategy are necessary.

Summary of Cash Flows

Nine Months Ended
September 30,
2017 2016

Net cash used in operating activities $ (28,282,856 ) $ (13,337,682 )
Net cash used in investing activities $ 48,917 $ (148,095 )
Net cash used and provided by financing activities $ 37,604,346 $ 8,857,867

Six Months Ended June 30,
2021 2020
Net cash used in operating activities $ (81,267,644) $ (17,754,179)
Net cash used in investing activities $ (3,281,213) $ (974,115)
Net cash (used in) provided by financing activities $ (69,416) $ 20,057,709

Cash Flows from Operating Activities

Our cash flows from operating activities are affected by our cash investments to support the business in research and development, manufacturing, selling, general and administration. Our operating cash flows are also affected by our working capital needs to support fluctuations in inventory, personnel expenses, accounts payable and other current assets and liabilities.

During the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~September 30, 2016,~~2020, net cash used in operating activities was ~~$28.3~~$81.3 million and ~~$13.3~~$17.8 million, respectively. The ~~decrease in operating cash flows in 2017 as compared to 2016 was mainly due to an~~ increase in ~~operating losses, inventory purchases, and prepaids offset by increases in accounts payable and reductions of accounts receivable.~~

~~Cash Flows from Investing Activities~~

~~Cash flow from investing activities primarily relates to capital expenditures to support our future growth in operations.~~

~~During the nine months ended September 30, 2017 and September 30, 2016,~~ net cash ~~provided by (used in) investing activities~~used in operations was ~~$49 thousand~~primarily attributable to spend related to our initial production of the C-Series electric delivery truck, including inventory build, employee-related costs and $(148) thousand respectively. For the nine months ended in September 30, 2017, we spent on new equipment and software used mainly for R&D and manufacturing activities, offset by leasing of vehicles to customers. For the nine months ended September 30, 2016, we used funds for the purchase of new equipment and software used mainly for R&D and manufacturing activities.

~~Cash Flows from Financing Activities~~

During the nine months ended September 30, 2017 and 2016, net cash provided by financing activities was $37.6 million and $8.9 million, respectively. Cash flows from financing activities during the nine months ended September 30, 2017 consisted primarily of a net of $37.0 million from a stock public offering.

The Company established an at the market facility to complement the above mentioned public offering and may seek to raise additional capital through public or private debt or equity financings in order to fund its operations.

contract labor.

Off-Balance Sheet Arrangements

~~The Company does~~

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on ~~the Company’s~~our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Critical Accounting Policies

~~We consider~~

Our accounting policies ~~involving significant~~are fundamental to understanding management’s discussion and analysis of financial condition and results of operations. Our Unaudited Condensed Consolidated Financial Statements are prepared in conformity with GAAP and follow general practices within the industry in which we operate. The preparation of the financial statements requires management to make certain judgments and assumptions byin determining accounting estimates. Accounting estimates are considered critical if the estimate requires management to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and different estimates reasonably could have been used in the current period, or ~~could~~changes in the accounting estimate are reasonably likely to occur from period to period, that would have a material impact on the ~~carrying value~~presentation of ~~certain assets~~our financial condition, changes in financial condition or ~~on income (loss) to be critical accounting policies. We consider the following to be~~results of operations.

For a discussion of our critical accounting ~~policies: basis~~policies and estimates, see “Critical Accounting Policies and Estimates” included in our Annual Report on Form 10-K for the year ended December 31, 2020, under the caption “Management’s Discussion and Analysis of ~~presentation, revenue recognition,~~Financial Condition and ~~income taxes.~~

Results of Operations.”

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~The primary objective~~

For a discussion of our ~~investment activities is~~quantitative and qualitative disclosures about market risk, see “Quantitative and Qualitative Disclosures About Market Risks” included in our Annual Report on Form 10-K for the year ended December 31, 2020, under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Except as set forth below, there have been no material changes to ~~preserve principal while at~~ the ~~same time maximizing~~information provided in our Annual Report on Form 10-K for the ~~income we receive from our investments without significantly increasing risk. Some~~year ended December 31, 2020.

As of June 30, 2021, the ~~securities~~Company owned approximately 16.5 million shares of Lordstown Motors Corp. (“LMC”) Class A Common Stock (“Investment in ~~which we invest may have market risk. This means that~~LMC”). Our Investment in LMC represents a change in prevailing interest rates may cause the fair value amount of the investment to fluctuate. For example, if we hold a security that was issued with a fixed interest rate at the then-prevailing rate and the prevailing interest rate later rises, the market value amount of our investment will decline. To minimize this risk, we maintain our portfolio of cash equivalents and short-term investmentssignificant asset in a ~~variety~~single public stock, the value of ~~securities, including money~~which depends on its market ~~funds and government and non-government debt securities and the maturities~~price. The market price of each of these instruments is less than one year. In quarter ended September 30, 2017, we maintained an investment portfolio primarily in money market funds. Due to the primarily short-term nature and low interest rate yields of these investments, we believe we dothis asset does not have a ~~material exposure~~very long history, is potentially volatile and has recently experienced a significant decline. Because we are required to ~~interest rate risk~~mark our Investment in LMC to market, our balance sheet and, ~~market risk arising~~therefore, our income statement, will reflect losses or gains as the stock changes in value from ~~our investments. Therefore, no quantitative tabular disclosure is provided.~~

~~We have operated primarily in~~quarter to

quarter, and, at any time the ~~United States. Accordingly, we have not had any significant exposure~~liquidity available from a sale of this asset may be less than the balance sheet reflects, both due to ~~foreign currency rate fluctuations.~~

declines after the balance sheet date and limits on the shares’ public liquidity.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Pursuant to Rules 13a-15(b) and 15-d-15(b) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer of the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. The term “disclosure controls and procedures”, as defined under Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. ~~Based upon~~

Our management, with the ~~evaluation~~participation of our Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures atas of the end of the period covered by this ~~report, the Company’s Chief~~Quarterly Report on Form 10-Q. Based on such evaluation, our Principal Executive Officer and ~~Chief~~Principal Financial Officer have concluded that, as of the ~~Company’s~~end of the covered by this Quarterly Report, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the ~~quarter~~three months ended ~~September~~June 30, ~~2017~~2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

~~Except as set forth below, we~~

We are currently not a party to any material legal or administrative proceedings and are not aware of any pending or threatened material legal or administrative proceedings arising in the ordinary course of business. We mayinvolved from time to time ~~become a party~~in legal proceedings incidental to ~~various legal or administrative proceedings arising in~~ the ~~ordinary course~~conduct of our business. In May 2017, Autokinetics, Inc. (“AK”) filed a complaint against the Company in the Circuit Court for the County of Oakland, State of Michigan (File No. 2017-158748-CB). AK claims Breach of Contract and Unjust Enrichment/Quantum Meruit and is seeking damages in the amount of $2,098,550. In June 2017, the Company filed an Answer as well as a Counterclaim against AK and J. Bruce Emmons, President of AK, for Breach of Contract, Unjust Enrichment, Promissory Estoppel, Conversion and Statutory Conversion. The Company intends to vigorously defend against this action and pursue all available legal remedies. The Company believes it has substantial legal and factual defensesaddition to the ~~plaintiff~~’~~s claims.~~

~~ITEM 1A. RISK FACTORS~~

~~Our results of operations have not resulted in profitability and we may not be able to achieve profitability going forward.~~

We have incurred net losses amounting to $92.9 million for the period from inception (February 20, 2007) through September 30, 2017. We have had net losses in each quarter since our inception. We expect that we will continue to incur net losses for the foreseeable future. We may incur significant losses in the future for several reasons, including the other risks described in this report, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown events. Accordingly, we may not be able to achieve or maintain profitability. Our management is developing plans to alleviate the negative trends and conditions described above and there is no guarantee that such plans will be successfully implemented. There is no assurance that even if we successfully implement our business plan, that we will be able to curtail our losses. If we incur additional significant operating losses, our stock price may decline, perhaps significantly.

~~We have yet to achieve positive cash flow and, given our projected funding needs, our ability to generate positive cash flow is uncertain.~~

We have had negative cash flow from operating activities of $28.3 million and $13.3 million for the nine months ended September 30, 2017 and 2016, respectively. We anticipate that we will continue to have negative cash flow from operating and investing activities for the foreseeable future as we expect to incur increased research and development, sales and marketing, and general and administrative expenses and make significant capital expendituresmaterial legal proceedings disclosed in our efforts to increase sales and commence operations at our Union City facility. Our business also will at times require significant amounts of working capital to support our growth, particularly as we acquire inventory to support our anticipated increase in production. An inability to generate positive cash flowAnnual Report on Form 10-K for the foreseeable future may adversely affect our ability to raise needed capital for our business on reasonable terms, diminish supplier or customer willingness to enter into transactions with us, and have other adverse effects that may decrease our long-term viability. There can be no assurance we will achieve positive cash flow in the foreseeable future.

We need access to additional financing in 2018 and beyond, which may not be available to us on acceptable terms or at all. If we cannot access additional financing when we need it and on acceptable terms, our business may fail.

Our business plan to design, produce, sell and service commercial electric vehicles through our Union City facility will require substantial continued capital investment. Our research and development activities will also require substantial continued investment. For the year ended December 31, ~~2016,~~2020 and our ~~independent registered public accounting firm issued a report~~Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, the material legal proceedings which arose, or in which there were material developments, during the three months ended June 30, 2021 are discussed below.

As previously disclosed in our ~~2016 financial statements that contained an explanatory paragraph stating that~~Quarterly Report on Form 10-Q for the ~~lack~~quarter ended March 31, 2021, on March 8, 2021, Sam Farrar, individually and on behalf of sales, negative working capital and stockholders’ deficit, raise substantial doubt about our ability to continue as a going concern. For example, our existing capital resources, will be insufficient to fund our operations beyond the endother similarly situated purchasers of the first quarter of 2018. Accordingly, we will need additional financing. If we are not able to obtain additional financing and/or substantially increase revenue from sales, we will be unable to continue asCompany’s securities, filed a going concern. As a result, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our consolidated financial statements, and investors will likely lose a substantial part or all of their investment. We cannot be certain that additional financing will be available to us on favorable terms when required, or at all, particularly given we do not now have a committed credit facility with any government or financial institution. Further, if there remains doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding on acceptable terms or at all. If we cannot obtain additional financing when we need it and on terms acceptable to us, we will not be able to continue as a going concern.

The development of our business in the near future is contingent upon the implementation of orders from UPS and other key customers for the purchase of E-GENs and if we are unable to perform under these orders, our business may fail.

~~On June 4, 2014,~~putative class action complaint against the Company, entered into a Vehicle Purchase Agreement with United Parcel Service Inc. (“UPS”) which outlined the relationship by which the Company would sell vehicles to UPS. To date, we have received orders to purchase 343 E-GENs from UPS. We have entered into various purchase orders with UPS relating to the delivery of the vehicles ordered. Currently, the schedule agreed to with UPS requires that we deliver specified numbers of vehicles per month. However, these deadlines are expected to evolve as the individual UPS operations personnel from the seven states are involved in the scheduling. There is no guarantee that the Company will be able to perform under these ordersDuane Hughes and if it does perform, that UPS will purchase additional vehicles from the Company. Also, there is no assurance that UPS will not terminate its agreement with the Company pursuant to the termination provisions therein. Further, if the Company is not able to raise the required capital to purchase required parts and pay certain vendors, the Company may not be able to comply with UPS’s deadlines. Accordingly, despite the receipt of the orders from UPS, there is no assurance, due to the Company’s financial constraints and status as a development stage company, that the Company will be able to deliver such vehicles or that it will receive additional orders whether from UPS or other potential customers.

~~If we are unable to perform under our orders with UPS, the Company business will be significantly negatively impacted.~~

~~Our limited operating history makes it difficult for us to evaluate our future business prospects and make decisions based on those estimates of our future performance~~.

We have basically been a research and development company since beginning operations in February 2007. We have a limited operating history and have generated limited revenue. As we move more toward a manufacturing environment, it is difficult, if not impossible, to forecast our future results based upon our historical data. Because of the uncertainties related to our lack of historical operations, we may be hindered in our ability to anticipate and timely adapt to increases or decreases in revenues or expenses. If we make poor budgetary decisions as a result of unreliable historical data, we could be less profitable or incur losses, which may result in a decline in our stock price.

~~We offer no financing on our vehicles. As such, our business is dependent on cash sales, which may adversely affect our growth prospects.~~

While most of our current customers are well-established companies with significant purchasing power, many of our potential smaller and medium-sized customers may need to rely on credit or leasing arrangements to gain access to our vehicles. Unlike some of our competitors who provide credit or leasing services for the purchase of their vehicles, we do not provide, and currently do not have commercial arrangements with a third party that provides, such financial services. We believe the current limited availability of credit or leasing solutions for our vehicles could adversely affect our revenues and market share in the commercial electric vehicle market.

Our business, prospects, financial condition and operating results will be adversely affected if we cannot reduce and adequately control the costs and expenses associated with operating our business, including our material and production costs.

We incur significant costs and expenses related to procuring the materials, components and services required to develop and produce our electric vehicles. We have secured supply agreements for our critical components including our batteries. However, these are dependent on volume to ensure that they are available at a competitive price. Thus, our current cost projections are considerably higher than the projected revenue stream that such vehicles will produce. As a result, we are continually working on initiatives to reduce our cost structure so that we may effectively compete. If we do not properly manage our costs and expenses our net losses will continue which will negatively impact our stock price.

~~Increases in costs, disruption of supply or shortage of lithium-ion cells could harm our business.~~

We may experience increases in the cost or a sustained interruption in the supply or shortage of lithium-ion cells. Any such increase, supply interruption or shortage could materially and negatively impact our business, prospects, financial condition and operating results. The prices for these lithium-ion cells can fluctuate depending on market conditions and global demand for these materials and could adversely affect our business and operating results. We are exposed to multiple risks relating to lithium-ion cells including:

	●	~~the inability or unwillingness of current battery manufacturers to build or operate battery cell manufacturing plants to supply the numbers of lithium-ion cells we may require going forward;~~

	●	~~disruption in the supply of cells due to quality issues or recalls by battery cell manufacturers;~~

	●	~~an increase in the cost of raw materials used in the cells; and~~

	●	~~fluctuations in the value of the Japanese yen against the U.S. dollar in the event our purchasers of lithium-ion cells are denominated in Japanese yen.~~

Our business is dependent on the continued supply of battery cells for the battery packs used in our vehicles. While we believe several sources of the battery cells are available for such battery cells, we have fully qualified only Panasonic for the supply of the cells used in such battery packs and have very limited flexibility in changing cell suppliers. Any disruption in the supply of battery cells could disrupt production of our vehicles until such time as a different supplier is fully qualified. Furthermore, fluctuations or shortages in petroleum, tariff or trade issues and other economic or tax conditions may cause us to experience significant increases in freight charges. Substantial increases in the prices for the battery cells or prices charged to us, would increase our operating costs, and could reduce our margins if we cannot recoup the increased costs through increased vehicle prices. Any attempts to increase vehicle prices in response to increased costs in our battery cells could result in cancellations of vehicle orders and therefore materially and adversely affect our brand, image, business, prospects and operating results.

The demand for commercial electric vehicles depends, in part, on the continuation of current trends resulting from dependence on fossil fuels. Extended periods of low diesel or other petroleum-based fuel prices could adversely affect demand for our vehicles, which would adversely affect our business, prospects, financial condition and operating results.

We believe that much of the present and projected demand for commercial electric vehicles results from concerns about volatility in the cost of petroleum-based fuel, the dependency of the United States on oil from unstable or hostile countries, government regulations and economic incentives promoting fuel efficiency and alternative forms of energy, as well as the belief that climate change results in part from the burning of fossil fuels. If the cost of petroleum-based fuel decreased significantly, the outlook for the long-term supply of oil to the United States improved, the government eliminated or modified its regulations or economic incentives related to fuel efficiency and alternative forms of energy, or if there is a change in the perception that the burning of fossil fuels negatively impacts the environment, the demand for commercial electric vehicles could be reduced, and our business and revenue may be harmed.

Diesel and other petroleum-based fuel prices have been extremely volatile, and we believe this continuing volatility will persist. Lower diesel or other petroleum-based fuel prices over extended periods of time may lower the perception in government and the private sector that cheaper, more readily available energy alternatives should be developed and produced. If diesel or other petroleum-based fuel prices remain at deflated levels for extended periods of time, the demand for commercial electric vehicles may decrease, which would have an adverse effect on our business, prospects, financial condition and operating results.

Our future growth is dependent upon the willingness of operators of commercial vehicle fleets to adopt electric vehicles and on our ability to produce, sell and service vehicles that meet their needs. This often depends upon the cost for an operator adopting electric vehicle technology as compared to the cost of traditional internal combustion technology. When the price of oil is low, as it recently has been, it is difficult to convince commercial fleet operations to change to more expensive electric vehicles.

Our growth is dependent upon the adoption of electric vehicles by operators of commercial vehicle fleets and on our ability to produce, sell and service vehicles that meet their needs. The entry of commercial electric vehicles into the medium-duty commercial vehicle market is a relatively new development, particularlySteve Schrader in the United States District Court for the Central District of California (Case 2:21-cv-02072) claiming violations of Sections 10(b) and ~~is characterized by rapidly changing technologies and evolving government regulation, industry standards and customer views~~20(a) of the ~~merits~~Securities Exchange Act of ~~using electric vehicles in their businesses. This process has been slow as without including the impact~~1934 and Rule 10b-5 promulgated thereunder. On March 11, 2021, John Kinney, individually and on behalf of ~~government or~~ other subsidies and incentives, the purchase prices for our commercial electric vehicles currently is higher than the purchase prices for diesel-fueled vehicles. Our growth has also been negatively impacted by the relatively low price of oil over the last few years.

If the market for commercial electric vehicles does not develop as we expect or develops more slowly than we expect, our business, prospects, financial condition and operating results will be adversely affected.

~~As part of our sales efforts, we must educate fleet managers as to the economical savings we believe they will benefit from during the life~~similarly situated purchasers of the ~~vehicle. As such, we believe that operators of commercial vehicle fleets should consider~~Company’s securities, filed a number of factors when deciding whether to purchase our commercial electric vehicles (or commercial electric vehicles generally) or vehicles powered by internal combustion engines, particularly diesel-fueled or natural gas-fueled vehicles. We believe these factors include:

	●	the difference in the initial purchase prices of commercial electric vehicles and vehicles with comparable GVWs powered by internal combustion engines, both including and excluding the impact of government and other subsidies and incentives designed to promote the purchase of electric vehicles;

	●	~~the total cost of ownership of the vehicle over its expected life, which includes the initial purchase price and ongoing operating and maintenance costs;~~

	●	~~the availability and terms of financing options for purchases of vehicles and, for commercial electric vehicles, financing options for battery systems;~~

	●	~~the availability of tax and other governmental incentives to purchase and operate electric vehicles and future regulations requiring increased use of nonpolluting vehicles;~~

	●	~~government regulations and economic incentives promoting fuel efficiency and alternate forms of energy;~~

	●	~~fuel prices, including volatility in the cost of diesel;~~

	●	~~the cost and availability of other alternatives to diesel fueled vehicles, such as vehicles powered by natural gas;~~

	●	~~corporate sustainability initiatives;~~

	●	~~commercial electric vehicle quality, performance and safety (particularly with respect to lithium-ion battery packs);~~

	●	~~the quality and availability of service for the vehicle, including the availability of replacement parts;~~

	●	~~the limited range over which commercial electric vehicles may be driven on a single battery charge;~~

	●	~~access to charging stations and related infrastructure costs, and standardization of electric vehicle charging systems;~~

	●	~~electric grid capacity and reliability; and~~

	●	~~macroeconomic factors.~~

If, in weighing these factors, operators of commercial vehicle fleets determine that there is not a compelling business justification for purchasing commercial electric vehicles, particularly those that we produce and sell, then the market for commercial electric vehicles may not develop as we expect or may develop more slowly than we expect, which would adversely affect our business, prospects, financial condition and operating results.

If our customers are unable to efficiently and effectively integrate our electric vehicles into their existing commercial fleets our sales may suffer and our business, prospects, financial condition and operating results may be adversely affected.

Our sales strategy involves a comprehensive plan for the pilot and roll-out of our electric vehicles, as well as the ongoing replacement of existing commercial vehicles with our electric vehicles, that is tailored to the individual needs of our customers. If we are unable to develop and execute fleet integration strategies or fleet management support services that meet our customers’ unique circumstances with minimal disruption to their businesses, our customers may not realize the economic benefits they expect from our electric vehicles. If this were to occur, our customers may not order additional vehicles from us, which could adversely affect our business, prospects, financial condition and operating results.

We currently do not have long-term supply contracts with guaranteed pricing which exposes us to fluctuations in component, materials and equipment prices. Substantial increases in these prices would increase our operating costs and could adversely affect our business, prospects, financial condition and operating results.

Because we currently do not have long-term supply contracts with guaranteed pricing, we are subject to fluctuations in the prices of the raw materials, parts and components and equipment we use in the production of our vehicles. Substantial increases in the prices for such raw materials, components and equipment would increase our operating costs and could reduce our margins if we cannot recoup the increased costs through increased vehicle prices. Any attempts to increase the announced or expected prices of our vehicles in response to increased costs could be viewed negatively by our customers and could adversely affect our business, prospects, financial condition and operating results.

If we are unable to scale our operations at our Union City facility in an expedited manner from our limited low volume production to high volume production, our business, prospects, financial condition and operating results could be adversely affected.

We are currently assembling our orders at our Union City facility which is acceptable for our existing orders. To satisfy increased demand, we will need to quickly scale operations in our Union City facility as well as scale our supply chain including access to batteries. Our business, prospects, financial condition and operating results could be adversely affected if we experience disruptions in our supply chain, if we cannot obtain materials of sufficient quality at reasonable prices or if we are unable to scale our Union City facility.

Failure to successfully integrate the Workhorse® brand, logo, intellectual property, patents and assembly plant in Union City, Indiana into our operations could adversely affect our business and results of operations.

As part of our strategy to become an OEM, in March 2013, we acquired Workhorse and the Workhorse Assets including the Workhorse ® brand, logo, intellectual property, patents and assembly plant in Union City, Indiana. The Workhorse acquisition may expose us to operational challenges and risks, including the diversion of management’s attention from our existing business, the failure to retain key Workhorse dealers and our ability to commence operations at the plant in Union City, Indiana. Our ability to sustain our growth and maintain our competitive position may be affected by our ability to successfully integrate the Workhorse Assets.

~~We depend upon key personnel and need additional personnel. The loss of key personnel or the inability to attract additional personnel may adversely affect our business and results of operations.~~

~~Our success depends on the continuing services of our CEO, Stephen Burns and top management. On May 19, 2017, Mr. Burns and~~substantively identical putative class action complaint against the Company, entered into an Executive Retention Agreement whereby Mr. Burns was retained as Chief Executive Officer in consideration of an annual salary of $325,000. Further, the Company entered Executive Retention Agreements with Duane Hughes ~~as Chief Operating Officer/President, Paul Gaitan as Chief Financial Officer~~ and Julio Rodriguez as Chief Information Officer. The loss of any of these individuals could have a material and adverse effect on our business operations. Additionally, the success of our operations will largely depend upon our ability to successfully attract and maintain competent and qualified key management personnel. As with any company with limited resources, there can be no guarantee that we will be able to attract such individuals or that the presence of such individuals will necessarily translate into profitability for our company. Our inability to attract and retain key personnel may materially and adversely affect our business operations. Any failure by our management to effectively anticipate, implement, and manage the changes required to sustain our growth would have a material adverse effect on our business, financial condition, and results of operations.

We face competition. A few of our competitors have greater financial or other resources, longer operating histories and greater name recognition than we do and one or more of these competitors could use their greater resources and/or name recognition to gain market share at our expense or could make it very difficult for us to establish market share.

Companies currently competing in the fleet logistics market offering alternative fuel medium-duty trucks include Ford Motor Company and Freightliner. Ford and Freightliner are currently selling alternative fuel fleet vehicles including hybrids. In the electric medium duty truck marketSteve Schrader in the United States ~~we compete with a few other manufacturers, including Electric Vehicles International~~District Court for the Central District of California (Case 2:21-cv-02207) also claiming violations of Sections 10(b) and ~~Smith Electric Vehicles. Ford~~20(a) of the Securities Exchange Act of 1934 and ~~Freightliner have more significant financial resources, established market positions, long-standing relationships with customers~~Rule 10b-5 promulgated thereunder. On May 18, 2021, the Court consolidated the two cases and ~~dealers,~~appointed Timothy M. Weis as lead plaintiff pursuant to the Private Securities Litigation Reform Act of 1995. On July 16, 2021, lead plaintiff filed an Amended Complaint. The Amended Complaint is now brought against the Company, Duane Hughes, Steve Schrader, Robert Willison and ~~who have more significant name recognition, technical, marketing, sales, financial and other resources than we do. Although we believe~~Gregory Ackerson, on behalf of purchasers of the Company’s securities from March 10, 2020 through May 10, 2021. It alleges that ~~Horsefly™, our unmanned aerial system (UAS), is unique~~the defendants violated the federal securities laws by intentionally or recklessly making material misrepresentations and/or omissions regarding the Company’s participation in the ~~marketplace~~bidding process to manufacture the new fleet of United States Postal Service (“USPS”) next generation delivery vehicles, the prospect of the USPS awarding the contract to Workhorse given alleged deficiencies in ~~that it currently does not have any competitors when it comes~~Workhorse’s proposal, the Company’s manufacturing abilities generally and the Company’s nonbinding “backlog” in its vehicles. Lead plaintiff seeks certification of a class and monetary damages in an indeterminate amount. The Company believes the Amended Complaint is without merit and intends to vigorously pursue all legal avenues to fully defend itself. The Company’s response to the Amended Complaint is due on or before September 3, 2021.

As previously disclosed in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, on April 16, 2021, Romario St. Clair, derivatively on behalf of the Company, filed a UAS that works in combination with a truck, there are better financed competitors in this emerging industry, including Google and Amazon. While we are seeking to partner with existing delivery companies to improve their efficienciesstockholder derivative complaint in the ~~last mile~~Eighth Judicial District Court of ~~delivery, our competitors are seeking~~the State of Nevada in and for Clark County (Case No. A-21-833050-B) for breach of fiduciary duty and unjust enrichment against Duane Hughes, Steve Schrader, Stephen Fleming, Robert Willison, Anthony Furey, H. Benjamin Samuels, Raymond J. Chess, Harry DeMott, Gerald B. Budde, Pamela S. Mader, Michael L. Clark and Jacqueline A. Dedo. In this action, the plaintiff alleges that the defendants breached their fiduciary duties by allowing or causing the Company to ~~redefine~~violate the delivery model using drones from a central location requiring extended flight patterns. Our competitors’ new aerial delivery model would essentially eliminate traditional package delivery companies. Our model is focused on coupling our delivery drone with delivery trucks supplementingfederal securities laws as alleged in the ~~existing model~~Amended Complaint discussed above and ~~providing shorter term flight patterns. Google~~by selling Company stock and ~~Amazon have more significant financial resources, established market positions, long-standing relationships with customers, more significant name recognition and a larger scope~~receiving other compensation while allegedly in possession of ~~resources including technical, marketing and sales than we do. The resources available~~material non-public information about the prospect of the USPS awarding the contract to our competitors to develop new products and introduce them into the marketplace exceed the resources currently available to us. As a result, our competitors may be able to compete more aggressively and sustain that competition over a longer period that we can. This intense competitive environment may require us to make changes in our products, pricing, licensing, services, distribution, or marketing to develop a market position. Each of these competitors has the potential to capture market share in our target markets which could have an ~~adverse effect on our position in our industry and on our business and operating results.~~

~~If we are unable to keep up with advances in~~ electric vehicle ~~technology, we may suffer a decline~~manufacturer given that electrifying the USPS’s entire fleet allegedly would be impractical and expensive. The plaintiff seeks damages and disgorgement in ~~our competitive position.~~

~~There are companies~~an indeterminate amount. Several nearly identical derivative complaints have been filed: (1) on May 19, 2021, Caruso v. Hughes et al. (Case No. 2:21-cv-04202) was filed in the ~~electric vehicle industry~~Central District of California; (2) on May 24, 2021, Kistenmacher v. Hughes et al. (Case No. 2:21-cv-04294) was filed in the Central District of California; (3) on May 27, 2021, Brown v. Hughes et al. (Case No. 2:21-cv-04412) was filed in the Central District of California; and (4) on June 24, 2021 Everson v. Hughes et al. (Case No. A-21-836888-B) was filed in the Eighth Judicial District Court of the State of Nevada in and for Clark County. On June 21, 2021, the Court ordered that ~~have developed or are developing vehicles and technologies that compete or will compete with our vehicles. We cannot assure that our competitors will not~~the three cases filed in the Central District of California be able to duplicate our technology or provide products and services similar to ours more efficiently. If for any reason we are unable to keep pace with changes in electric vehicle technology, particularly battery technology, our competitive position may be adversely affected. We plan to upgrade or adapt our vehicles and introduce new models to continue to provide electric vehicles that incorporate the latest technology. However, there is no assurance that our research and development efforts will keep pace with those of our competitors.

~~Our electric vehicles compete for market share with vehicles powered by other vehicle technologies that may prove to be more attractive than ours.~~

Our target market currently is serviced by manufacturers with existing customers and suppliers using proven and widely accepted fuel technologies. Additionally, our competitors are working on developing technologies that may be introduced in our target market. If any of these alternative technology vehicles can provide lower fuel costs, greater efficiencies, greater reliability or otherwise benefit from other factors resulting in an overall lower total cost of ownership, this may negatively affect the commercial success of our vehicles or make our vehicles uncompetitive or obsolete.

~~We currently have a limited number of customers, with whom we do not have long-term agreements, and expect that a significant portion of our future sales will be from a limited number of customers~~consolidated and the ~~loss~~parties file a proposed scheduling order within sixty days. Although these claims purport to seek recovery on behalf of ~~any of these high-volume customers could materially harm our business.~~

~~A significant portion of our projected future revenue, if any, is generated from a limited number of vehicle customers. Additionally, much of our business model is focused on building relationships~~the Company, the Company will incur certain expenses due to indemnification and advancement obligations with large customers. Currently we have no contracts with customers that include long-term commitments or minimum volumes that ensure future sales of vehicles. As such, a customer may take actions that affect us for reasons that we cannot anticipate or control, such as reasons relatedrespect to the ~~customer’s financial condition, changes in~~defendants. The Company understands that defendants believe this action is without merit and intends to support them as they pursue all legal avenues to defend themselves fully.

On June 16, 2021, the ~~customer’s business strategy or operations or as the result of the perceived performance or cost-effectiveness of our vehicles. The loss of or~~Company filed a ~~reduction in sales or anticipated sales to our most significant customers could have an adverse effect on our business, prospects, financial condition and operating results.~~

~~Changes in the market for electric vehicles could cause our products to become obsolete or lose popularity.~~

The modern electric vehicle industry is in its infancy and has experienced substantial change in the last few years. To date, demand for and interest in electric vehicles has been slower than forecasted by industry experts. As a result, growth in the electric vehicle industry depends on many factors, including, but not limited to:

	●	~~continued development of product technology, especially batteries~~

	●	~~the environmental consciousness of customers~~

	●	~~the ability of electric vehicles to successfully compete with vehicles powered by internal combustion engines~~

	●	~~limitation of widespread electricity shortages; and~~

	●	~~whether future regulation and legislation requiring increased use of non-polluting vehicles is enacted~~

We cannot assume that growth in the electric vehicle industry will continue. Our business may suffer if the electric vehicle industry does not grow or grows more slowly than it has in recent years or if we are unable to maintain the pace of industry demands.

The results of the 2016 United States presidential and congressional elections may create regulatory uncertainty for the alternative energy sector and may materially harm our business, financial condition and operating results.

~~Donald Trump’s victory in the U.S. presidential election, as well as the Republican Party maintaining control of both the House of Representatives and Senate of~~bid protest against the United States in the congressional election, may create regulatory uncertainty in the alternative energy sector. During the election campaign, President Trump made comments suggesting that he was not supportive of various clean energy programs and initiatives. It remains unclear what specifically President Trump would or would not do with respect to these programs and initiatives, and what support he would have for any potential changes to such legislative programs and initiatives in the Unites States Congress, even if both the House of Representatives and Senate are controlled by the Republican Party. If President Trump and/or the United States ~~Congress take action or publicly speak out about~~Court of Federal Claims (Case No. 21-cv-1484C) in connection with the ~~need~~USPS award of the contract for its Next Generation Delivery Vehicle to ~~eliminate or further reduce legislation, regulations~~Oshkosh Defense, LLC (“Oshkosh”) claiming that the USPS failed to conduct meaningful discussions with the Company pertaining to its alleged proposal deficiencies, the USPS unequally, arbitrarily and ~~incentives supporting alternative energy, such actions may result~~prejudicially evaluated the proposals and the USPS’s arbitrary, capricious, and unreasonable evaluation of the Company’s proposal breached an implied-in-fact contract with the Company to consider its proposal fairly. The Company requested an entry of judgment in favor of the Company, an entry of a ~~decrease in demand for alternative energy in~~declaratory judgment that the award to Oshkosh was unlawful and improper and an injunction directing the award be terminated, and directing the USPS to reevaluate the proposals and to conduct a new best value determination. On July 6, 2021, the United States and ~~may materially harm our business, financial condition and operating results.~~

The unavailability, reduction, elimination or adverse application of government subsidies, incentives and regulations could have an adverse effect on our business, prospects, financial condition and operating results.

~~We believe~~Oshkosh, as Defendant-Intervenor, filed a Motion to Dismiss requesting that ~~currently,~~ the availability of government subsidies and incentives including those available in New York, California and Chicago is an important factor considered by our customers when purchasing our vehicles, and that our growth depends in part on the availability and amounts of these subsidies and incentives. Any reduction, elimination or discriminatory application of government subsidies and incentives because of budgetary challenges, policy changes, the reduced need for such subsidies and incentivesCompany’s complaint be dismissed with prejudice due to the ~~perceived success~~Company’s alleged failure to exhaust USPS’s mandatory administrative dispute resolution

process. On July 20, 2021, the Company filed an Opposition to the Motion to Dismiss claiming that the USPS process is outside of ~~electric vehicles or other reasons may result~~the congressional authorization and the pursuit of the USPS’ dispute resolution process would have been futile.

ITEM 1A. RISK FACTORS

For a detailed discussion of risk factors affecting us, see “Part I – Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020. There have been no material changes in the ~~diminished price competitiveness of the alternative fuel vehicle industry.~~

current period regarding our risk factors.

~~We may be unable to keep up with changes in electric vehicle technology and, as a result, may suffer a decline in our competitive position.~~

Our current products are designed for use with, and are dependent upon, existing electric vehicle technology. As technologies change, we plan to upgrade or adapt our products to continue to provide products with the latest technology. However, our products may become obsolete or our research and development efforts may not be sufficient to adapt to changes in or to create the necessary technology. Thus, our potential inability to adapt and develop the necessary technology may harm our competitive position.

~~The failure of certain key suppliers to provide us with components could have a severe and negative impact upon our business.~~

We have secured supply agreements for our critical components including our batteries. However, these are dependent on volume to ensure that they are available at a competitive price. Further, we rely on a small group of suppliers to provide us with components for our products. If these suppliers become unwilling or unable to provide components or if we are unable to meet certain volume requirements in our existing supply agreements, there are a limited number of alternative suppliers who could provide them. Changes in business conditions, wars, governmental changes, and other factors beyond our control or which we do not presently anticipate could affect our ability to receive components from our suppliers. Further, it could be difficult to find replacement components if our current suppliers fail to provide the parts needed for these products. A failure by our major suppliers to provide these components could severely restrict our ability to manufacture our products and prevent us from fulfilling customer orders in a timely fashion.

~~Product liability or other claims could have a material adverse effect on our business.~~

The risk of product liability claims, product recalls, and associated adverse publicity is inherent in the manufacturing, marketing, and sale of electrical vehicles. Although we have product liability insurance for our consumer and commercial products, that insurance may be inadequate to cover all potential product claims. We also carry liability insurance on our products. Any product recall or lawsuit seeking significant monetary damages either in excess of our coverage, or outside of our coverage, may have a material adverse effect on our business and financial condition. We may not be able to secure additional product liability insurance coverage on acceptable terms or at reasonable costs when needed. A successful product liability claim against us could require us to pay a substantial monetary award. Moreover, a product recall could generate substantial negative publicity about our products and business and inhibit or prevent commercialization of other future product candidates. We cannot provide assurance that such claims and/or recalls will not be made in the future.

~~Regulatory requirements may have a negative impact upon our business.~~

While our vehicles are subject to substantial regulation under federal, state, and local laws, we believe that our vehicles are or will be materially in compliance with all applicable laws. However, to the extent the laws change, or if we introduce new vehicles in the future, some or all of our vehicles may not comply with applicable federal, state, or local laws. Further, certain federal, state, and local laws and industrial standards currently regulate electrical and electronics equipment. Although standards for electric vehicles are not yet generally available or accepted as industry standards, our products may become subject to federal, state, and local regulation in the future. Compliance with these regulations could be burdensome, time consuming, and expensive.

Our products are subject to environmental and safety compliance with various federal and state regulations, including regulations promulgated by the EPA, NHTSA, and various state boards, and compliance certification is required for each new model year. The cost of these compliance activities and the delays and risks associated with obtaining approval can be substantial. The risks, delays, and expenses incurred in connection with such compliance could be substantial.

~~Our success may be dependent on protecting our intellectual property rights.~~

We rely on trade secret protections to protect our proprietary technology as well as several registered patents and one patent application. Our patents relate to the vehicle chassis assembly, vehicle header and drive module and manifold for electric motor drive assembly. Our existing patent application relates to the onboard generator drive system for electric vehicles. Our success will, in part, depend on our ability to obtain additional trademarks and patents. We are working on obtaining patents and trademarks registered with the United States Patent and Trademark Office but have not finalized any as of this date. Although we have entered into confidentiality agreements with our employees and consultants, we cannot be certain that others will not gain access to these trade secrets. Others may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets.

~~Our business may be adversely affected by union activities.~~

Although none of our employees are currently represented by a labor union, it is common throughout the automotive industry for many employees at automotive companies to belong to a union, which can result in higher employee costs and increased risk of work stoppages. Our employees may join or seek recognition to form a labor union, or we may be required to become a union signatory. Our production facility in Union City, Indiana was purchased from Navistar. Prior employees of Navistar were union members and our future work force at this facility may be inclined to vote in favor of forming a labor union. Furthermore, we are directly or indirectly dependent upon companies with unionized work forces, such as parts suppliers and trucking and freight companies, and work stoppages or strikes organized by such unions could have a material adverse impact on our business, financial condition or operating results. If a work stoppage occurs, it could delay the manufacture and sale of our trucks and have a material adverse effect on our business, prospects, operating results or financial condition. The mere fact that our labor force could be unionized may harm our reputation in the eyes of some investors and thereby negatively affect our stock price. Consequently, the unionization of our labor force could negatively impact our company’s health.

~~We may be exposed to liability for infringing upon the intellectual property rights of other companies.~~

Our success will, in part, depend on our ability to operate without infringing on the proprietary rights of others. Although we have conducted searches and are not aware of any patents and trademarks which our products or their use might infringe, we cannot be certain that infringement has not or will not occur. We could incur substantial costs, in addition to the great amount of time lost, in defending any patent or trademark infringement suits or in asserting any patent or trademark rights, in a suit with another party.

Our electric vehicles make use of lithium-ion battery cells, which, if not appropriately managed and controlled, have occasionally been observed to catch fire or vent smoke and flames. If such events occur in our electric vehicles, we could face liability for damage or injury, adverse publicity and a potential safety recall, any of which would adversely affect our business, prospects, financial condition and operating results.

The battery packs in our electric vehicles use lithium-ion cells, which have been used for years in laptop computers and cell phones. On occasion, if not appropriately managed and controlled, lithium-ion cells can rapidly release the energy they contain by venting smoke and flames in a manner that can ignite nearby materials. Highly publicized incidents of laptop computers and cell phones bursting into flames have focused consumer attention on the safety of these cells. These events also have raised questions about the suitability of these lithium-ion cells for automotive applications. There can be no assurance that a field failure of our battery packs will not occur, which would damage the vehicle or lead to personal injury or death and may subject us to lawsuits. Furthermore, there is some risk of electrocution if individuals who attempt to repair battery packs on our vehicles do not follow applicable maintenance and repair protocols. Any such damage or injury would likely lead to adverse publicity and potentially a safety recall. Any such adverse publicity could adversely affect our business, prospects, financial condition and operating results.

Our facilities could be damaged or adversely affected as a result of disasters or other unpredictable events. Any prolonged disruption in the operations of our facility would adversely affect our business, prospects, financial condition and operating results.

We engineer and assemble our electric vehicles in a facility in Loveland, Ohio and we intend to locate the assembly function to our facility in Union City. Any prolonged disruption in the operations of our facility, whether due to technical, information systems, communication networks, accidents, weather conditions or other natural disaster, or otherwise, whether short or long-term, would adversely affect our business, prospects, financial condition and operating results

~~Risks Related to Owning Our Common Stock~~

~~If we fail to continue to meet the listing standards of NASDAQ, our common stock may be delisted, which could have a material adverse effect on the liquidity of our common stock.~~

Our common stock is currently listed on the Nasdaq Capital Market. The NASDAQ Stock Market LLC has requirements that a company must meet in order to remain listed on NASDAQ. In particular, NASDAQ rules require us to maintain a minimum bid price of $1.00 per share of our common stock. If the closing bid price of our common stock were to fall below $1.00 per share for 30 consecutive trading days or we do not meet other listing requirements, we would fail to be in compliance with NASDAQ’s listing standards. There can be no assurance that we will continue to meet the minimum bid price requirement, or any other requirement in the future. If we fail to meet the minimum bid price requirement, The NASDAQ Stock Market LLC may initiate the delisting process with a notification letter. If we were to receive such a notification, we would be afforded a grace period of 180 calendar days to regain compliance with the minimum bid price requirement. In order to regain compliance, shares of our common stock would need to maintain a minimum closing bid price of at least $1.00 per share for a minimum of 10 consecutive trading days. In addition, we may be unable to meet other applicable NASDAQ listing requirements, including maintaining minimum levels of stockholders’ equity or market values of our common stock in which case, our common stock could be delisted. If our common stock were to be delisted, the liquidity of our common stock would be adversely affected and the market price of our common stock could decrease.

~~The trading of our shares of common has been relatively thin and there is no assurance that a liquid market for our shares of common stock will develop.~~

Our common stock has traded on the Nasdaq Capital Market, under the symbol “WKHS”, since January 2016. Since that date, our common stock has been relatively thinly traded. There can be no assurance that we will be able to successfully develop a liquid market for our common shares. The stock market in general, and early stage public companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of such companies. If we are unable to develop a market for our common shares, you may not be able to sell your common shares at prices you consider to be fair or at times that are convenient for you, or at all.

~~Our stock price and trading volume may be volatile, which could result in substantial losses for our stockholders.~~

The equity trading markets may experience periods of volatility, which could result in highly variable and unpredictable pricing of equity securities. The market price of our common stock could change in ways that may or may not be related to our business, our industry or our operating performance and financial condition. In addition, the trading volume in our common stock has been low and may fluctuate and cause significant price variations to occur. We have experienced significant volatility in the price of our stock. In addition, the stock markets in general can experience considerable price and volume fluctuations.

~~We have not paid dividends in the past and have no immediate plans to pay dividends.~~

We plan to reinvest all of our earnings, to the extent we have earnings, in order to develop our products, deliver on our orders and cover operating costs and to otherwise become and remain competitive. We do not plan to pay any cash dividends with respect to our securities in the foreseeable future. We cannot assure you that we would, at any time, generate sufficient surplus cash that would be available for distribution to the holders of our common stock as a dividend. Therefore, you should not expect to receive cash dividends on our common stock.

~~Shares eligible for future sale may adversely affect the market for our common stock.~~

Of the 41,126,934 shares of our common stock outstanding as of the date hereof, approximately 25.6 million shares are held by “non-affiliates” and are freely tradable without restriction pursuant to Rule 144. In addition, our Registration Statement on Form S-3 for purposes of registering the resale of 1,314,967 shares of common stock. Any substantial sale of our common stock pursuant to Rule 144 or pursuant to any resale prospectus may have a material adverse effect on the market price of our common stock.

~~Shareholders may experience future dilution as a result of future equity offerings.~~

In order to raise additional capital, we may in the future offer additional shares of our common stock or other securities convertible into or exchangeable for our common stock at prices that may not be the same as the price per share in our prior offerings. We may sell shares or other securities in any future offering at a price per share that is lower than the price per share paid by historical investors, which would result in those newly issued shares being dilutive. In addition, investors purchasing shares or other securities in the future could have rights superior to existing stockholders, which could impair the value of existing shareholders. The price per share at which we sell additional shares of our common stock, or securities convertible or exchangeable into common stock, in future transactions may be higher or lower than the price per share paid by our historical investors.

~~Our charter documents and Nevada law may inhibit a takeover that stockholders consider favorable.~~

Provisions of our certificate of incorporation and bylaws and applicable provisions of Nevada law may delay or discourage transactions involving an actual or potential change in control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best interests. The provisions in our certificate of incorporation and bylaws:

	●	~~limit who may call stockholder meetings;~~

	●	~~do not provide for cumulative voting rights; and~~

	●	~~provide that all vacancies may be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum.~~

~~There are limitations on director/officer liability.~~

As permitted by Nevada law, our certificate of incorporation limits the liability of our directors for monetary damages for breach of a director’s fiduciary duty except for liability in certain instances. As a result of our charter provision and Nevada law, shareholders may have limited rights to recover against directors for breach of fiduciary duty. In addition, our certificate of incorporation provides that we shall indemnify our directors and officers to the fullest extent permitted by law.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the nine months ended September 30, 2017, warrant holders exercised stock purchase warrants to receive an aggregate of 362 thousand shares of common stock in consideration of an aggregate of $634 thousand in cash consideration.

The Company claims an exemption from the registration requirements of the Securities Act of 1933 (the “Securities Act”) for the issuance of the above securities pursuant to Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated under the Securities Act.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

On ~~April 27, 2017,~~August 4, 2021, Stephen Fleming, Vice President and General Counsel, and Anthony Furey, Vice President, Finance, each notified the Company ~~entered into a Services Partner Agreement (the “Ryder Agreement”) with Ryder Truck Rental, Inc. (“Ryder”). The Ryder Agreement provides that Ryder shall serve~~of their intention to depart the Company. Also, as the primary distributor, except with respect to certain exclusive accounts, in the United States, Mexico and Canada. During the fourth quarter of every year commencing in the fourth quarter of 2018, Ryder and the Company will mutually establish sales goals for each type of vehicle for the following year as well as standards relating to parts availability, service responsiveness and other key performance indicators. Ryder shall also serve as the sole and exclusive provider of certain repair services and the sole and exclusive distributor of certain vehicle parts in the United States, Canada and Mexico. The Company has agreed to provide a warranty for each vehicle and part for varying time period and mileage. For all repair services performed by Ryderpreviously disclosed on the Company’s ~~vehicles during the warranty period, excluding physical damage repairs resulting from, but not limited to, collision, driver behavior, fire or act of God,~~Current Report on Form 8-K filed July 29, 2021 (the “Form 8-K”), the Company ~~will reimburse Ryder for such services. The term~~and Duane Hughes mutually agreed that Mr. Hughes would no longer continue as the Chief Executive Officer, President and a member of the ~~Ryder Agreement is through December 31, 2027 unless terminated sooner. On the fifth anniversary~~Board of Directors of the ~~Ryder Agreement, if there are any material changes~~Company. The Company and Mr. Hughes have now agreed to the terms of his departure. Mr. Hughes will remain with the Company in ~~the relationship or the external market that have~~ a ~~direct impact~~transitional role through September 30, 2021, at a rate of $15,000 per month, in addition such other terms disclosed on the material terms of the Ryder Agreement, the parties may seek to renegotiate the affected terms of the Ryder Agreement. In the event that the parties do not reach a mutual agreement within 90 days of the commencement of the renegotiation, either party may terminate the Ryder Agreement with 30 days prior written notice to the other party or decide to continue under the current terms for the remainder of the term.

~~On May 2, 2017, the Company unveiled its W-15 plug-in, battery-electric range-extended prototype pickup truck at the Advanced Clean Transportation Exhibition (ACT Expo) in Long Beach, California.~~

Form 8-K.

ITEM 6. EXHIBITS

~~Exhibit No.~~	~~Description~~
~~3.1~~Exhibit No.		~~Certificate of Designation for Series A Preferred Stock (1)~~Description
~~3.2~~10.1		~~Certificate of Change (2)~~
~~3.3~~	~~Certificate of Correction (2)~~
~~3.4~~	~~Articles of Merger (3)~~
~~3.5~~	~~Certificate of Correction (Articles of Merger) (3)~~
~~3.6~~	~~Certificate of Amendment to the Certificate of Incorporation (4)~~
~~3.7~~	~~Certificate of Incorporation (5)~~
~~3.8~~	~~Articles of Merger~~Employment Agreement between ~~AMP Holding Inc.~~John Graber and Workhorse Group Inc. ~~(16)~~dated April 20, 2021 (1)
~~3.9~~10.2		~~Certificate of Change filed December 9, 2015 (20)~~
~~3.10~~	~~Certificate of Amendment to the Certificate of Incorporation dated August 8, 2017 (33)~~
~~4.1~~	~~Stock Option to acquire 500,000 shares of common stock issued to James Taylor dated May 25, 2011 (6)~~
~~4.2~~	~~Common Stock Purchase Warrant to acquire 500,000 shares of common stock issued to James Taylor dated May 25, 2011 (6)~~
~~4.3~~	~~Stock Option to acquire 500,000 shares of common stock issued to Stephen Burns dated May 25, 2011 (6)~~
~~4.4~~	~~Common Stock Purchase Warrant to acquire 500,000 shares of common stock issued to Stephen Burns dated May 25, 2011 (6)~~
~~4.5~~	~~Conversion Letter~~Employment Agreement bybetween Ryan Gaul and ~~between Stephen Burns and AMP Holding Inc. (7)~~
~~4.6~~	~~Form of Warrant by and between AMP Holding Inc. and the January 2013 Accredited Investor (8)~~
~~4.7~~	~~Common Stock Purchase Warrant issued to Stephen Baksa (9)~~
~~4.8~~	~~2014 Incentive Stock Plan (11)~~
~~4.9~~	~~Form of Common Stock Purchase Agreement entered between AMP Holding Inc and the December 2014 Investors (31)~~
~~4.10~~	~~Form of Common Stock Purchase Warrant issued to the December 2014 Investors (31)~~
~~4.11~~	~~Intentionally Left Blank~~
~~4.12~~	~~Form of Subscription Agreement by and between~~ Workhorse Group Inc. ~~and the 2015 Accredited Investors (17)~~dated April 22, 2021 (2)
~~4.13~~31.1*		~~Form of Securities Purchase Agreement entered between Workhorse Group Inc. and the November 2015 Investors (18)~~
~~4.14~~	~~Form of 6% Convertible Promissory Note issued to the November 2015 Investors (18)~~
~~4.15~~	~~Form of Stock Purchase Warrant issued to the November 2015 Investors (18)~~
~~4.16~~	~~Form of Securities Purchase Agreement entered between Workhorse Group Inc. and the Convertible Note Investor(19)~~
~~4.17~~	~~Form of 6% Convertible Promissory Note issued to the Investors (19)~~
~~4.18~~	~~Form of Stock Purchase Warrant issued to the Investors (19)~~
~~4.19~~	~~Stock Option Agreement by and between Workhorse Group Inc. and Gerald Budde dated December 17, 2015 (21)~~
~~4.20~~	~~Stock Option Agreement by and between Workhorse Group Inc. and H. Benjamin Samuels dated December 17, 2015 (21)~~
~~4.21~~	~~Stock Option Agreement by and between Workhorse Group Inc. and Harry DeMott dated September 16, 2016 (24)~~
~~4.22~~	~~Intentionally left blank.~~
~~4.23~~	~~Securities Purchase Agreement entered between Workhorse Group Inc. and Joseph T. Lukens dated January 10, 2017 (26)~~
~~4.24~~	~~6% Convertible Debenture issued to Joseph T. Lukens dated January 10, 2017 (26)~~
~~4.25~~	~~Form of Warrant – September 2017 (35)~~
~~10.1~~	~~Share Exchange Agreement dated as of December 28, 2009 by and among Advanced Mechanical Products, Inc., the shareholders of Advanced Mechanical Products, Inc. and Title Starts Online, Inc. (1)~~
~~10.2~~	~~Employment Agreement by and between AMP Holding Inc. and Stephen S. Burns dated December 8, 2010 (12)~~
~~10.3~~	~~Letter Agreement by and between AMP Holding Inc. and Martin J. Rucidlo dated August 24, 2012 (13)~~
~~10.4~~	~~Asset Purchase Agreement by and between Workhorse Custom Chassis, LLC, as Seller, and AMP Trucks Inc., as Buyer dated as of March 4, 2013 (10)~~
~~10.5~~	~~Amendment No. 1 to the Asset Purchase Agreement by and between Workhorse Custom Chassis, LLC, as Seller, and AMP Trucks Inc., as Buyer dated as of March 13, 2013 (10)~~
~~10.6~~	~~Employment Agreement between AMP Holding Inc. and Julio C. Rodriguez dated August 15, 2013 (14)~~

~~Exhibit No.~~	~~Description~~
~~10.7~~	~~Director Agreement by and between AMP Holding Inc. and Raymond Chess dated October 24, 2013 (15)~~
~~10.8~~	~~Director Agreement by and between Workhorse Group Inc. and Gerald Budde dated December 17, 2015 (21)~~
~~10.9~~	~~Director Agreement by and between Workhorse Group Inc. and Benjamin Samuels dated December 17, 2015 (21)~~
~~10.10~~	~~Director Agreement by and between Workhorse Group Inc. and Harry DeMott dated September 15, 2016 (24)~~
~~10.11~~	~~Form of Warrant Exercise Agreement (25)~~
~~10.12~~	~~Conversion Agreement between Jospeh T. Lukens and the Company dated January 27, 2017 (27)~~
~~10.13~~	~~Services Partner Agreement between Workhorse Group Inc. and Ryder Truck Rental, Inc. dated April 27, 2017 (29)~~
~~10.14~~	~~Executive Retention Agreement by and between Workhorse Group Inc. and Stephen S. Burns dated May 19, 2017 (30)~~
~~10.15~~	~~Executive Retention Agreement by and between Workhorse Group Inc. and Duane Hughes dated May 19, 2017 (30)~~
~~10.16~~	~~Executive Retention Agreement by and between Workhorse Group Inc. and Julio Rodriguez dated May 19, 2017 (30)~~
~~10.17~~	~~Sales Agreement, dated June 22, 2017, by and between Workhorse Group Inc. and Cowen and Company, LLC (32)~~
~~10.18~~	~~Executive Retention Agreement by and between Workhorse Group Inc. and Paul Gaitan dated August 9, 2017 (34~~)
~~10.19~~	~~Letter Agreement by and between Workhorse Group Inc. and Julio Rodriguez dated August 9, 2017(34)~~
~~10.20~~	~~Form of Indemnification Agreement (30)~~
~~10.21~~	~~Form of Employee Invention Assignment, Confidentiality, Non-Compete and Non-Solicit Agreement (30)~~
~~21.1~~	~~List of Subsidiaries (28)~~
~~31.1~~	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002~~2002.
~~31.2~~31.2*		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002~~2002.
~~32.1~~32.1*		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
~~32.2~~32.2*		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
~~99.1~~101.INS		~~Nominating and Corporate Governance Committee Charter adopted by the Board of Directors of Workhorse Group Inc. on December 17, 2015 (33)~~
~~99.2~~	~~Compensation Committee Charter adopted by the Board of Directors of Workhorse Group Inc. on December 17, 2015 (33)~~
~~99.3~~	~~Audit Committee Charter adopted by the Board of Directors of Workhorse Group Inc. on December 17, 2015 (33)~~
~~EX-101.INS~~	Inline XBRL INSTANCE DOCUMENT
~~EX-101.SCH~~101.SCH		Inline XBRL ~~TAXONOMY EXTENSION SCHEMA DOCUMENT~~Taxonomy Extension Schema Document
~~EX-101.CAL~~101.CAL		Inline XBRL ~~TAXONOMY EXTENSION CALCULATION LINKBASE~~Taxonomy Extension Calculation Linkbase Document
~~EX-101.DEF~~101.DEF		Inline XBRL ~~TAXONOMY EXTENSION DEFINITION LINKBASE~~Taxonomy Extension Definition Linkbase Document
~~EX-101.LAB~~101.LAB		Inline XBRL ~~TAXONOMY EXTENSION LABELS LINKBASE~~Taxonomy Extension Labels Linkbase Document
~~EX-101.PRE~~101.PRE		Inline XBRL ~~TAXONOMY EXTENSION PRESENTATION LINKBASE~~Taxonomy Extension Presentation Linkbase Document

104

Inline XBRL Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

~~(1)~~	~~Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 4, 2010.~~
~~(2)~~	~~Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on May 25, 2010.~~
~~(3)~~	~~Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on May 25, 2010.~~
~~(4)~~	~~Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 10, 2010.~~
~~(5)~~	~~Incorporated by referenced to the Form SB-2 Registration Statement filed with the Securities and Exchange Commission on February 4, 2008.~~
~~(6)~~	~~Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on June 1, 2011.~~
~~(7)~~	~~Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 11, 2012.~~
~~(8)~~	~~Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on February 5, 2013.~~
~~(9)~~	~~Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on February 28, 2013.~~
~~(10)~~	~~Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 13, 2013.~~
~~(11)~~	~~Incorporated by reference to the Form S-8 Current Report filed with the Securities and Exchange Commission on January 17, 2014.~~
~~(12)~~	~~Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 13, 2010.~~
~~(13)~~	~~Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 30, 2012.~~
~~(14)~~	~~Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 16, 2013.~~
~~(15)~~	~~Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 30, 2013.~~
~~(16)~~	~~Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 16, 2015.~~
~~(17)~~	~~Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 10, 2015.~~
~~(18)~~	~~Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 12, 2015.~~
~~(19)~~	~~Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 12, 2015.~~
~~(20)~~	~~Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 10, 2015.~~
~~(21)~~	~~Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 21, 2015.~~
~~(22)~~	~~Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 30, 2016.~~
~~(23)~~	~~Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 8, 2016.~~
~~(24)~~	~~Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 9, 2016.~~
~~(25)~~	~~Incorporated by reference to the Form S-3/A Registration Statement filed with the Securities and Exchange Commission on December 12, 2016.~~
~~(26)~~	~~Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 12, 2017.~~
~~(27)~~	~~Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on February 1, 2017.~~
~~(28)~~	~~Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on November 14, 2016.~~
~~(29)~~	~~Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on May 3, 2017.~~
~~(30)~~	~~Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on May 19, 2017.~~
~~(31)~~	~~Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on December 11, 2014.~~
~~(32)~~	~~Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on June 22, 2017.~~
~~(33)~~	~~Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on August 9, 2017.~~
~~(34)~~	~~Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 11, 2017.~~
~~(35)~~	~~Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 14, 2017.~~

*Filed herewith.

(1)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 21, 2021.

(2)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 26, 2021.

SIGNATURES

Pursuant to the requirements of ~~Section 13 or 15(d) of~~ the Securities ~~and~~ Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned ~~hereunto~~thereunto duly authorized.


		WORKHORSE GROUP INC.

Dated: ~~November 7, 2017~~August 9, 2021		By:	/s/ ~~Stephen S. Burns~~Richard Dauch
			Name: ~~Stephen S. Burns~~
	Richard Dauch Title: Chief Executive Officer (Principal Executive Officer)

~~Dated: November 7, 2017~~	~~By:~~	~~/s/ Paul Gaitan~~
Dated: August 9, 2021			By:	~~Name: Paul Gaitan~~/s/ Steve Schrader
				Name: Steve Schrader Title: Chief Financial Officer
		(Principal Financial ~~and~~Officer)


Dated: August 9, 2021	By:	/s/ Gregory T. Ackerson
		Name: Gregory T. Ackerson Title: Corporate Controller (Principal Accounting Officer)

~~Nevada~~	~~26-1394771~~
Nevada		26-1394771
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


Large accelerated filer	☐☒	Accelerated filer	☒☐
Non-accelerated filer	☐ ~~(Do not check if a smaller reporting company)~~	Smaller reporting company	☐
		Emerging growth company	☐


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	September 30, 2017			December 31, 2016
Assets

Current assets:
Cash and cash equivalents	$	9,839,977		$	469,570
Accounts receivable		225,000			628,700
Lease receivable current		57,060			98,400
Inventory		7,468,333			2,464,835
Prepaid expenses and deposits		1,901,350			255,163
		19,491,720			3,916,668

Property, plant and equipment, net		5,673,044			6,002,631
Lease receivable long-term		227,341			320,494

	$	25,392,105		$	10,239,793

Liabilities and Stockholders’ Equity (Deficit)

Current liabilities:
Accounts payable	$	10,111,256		$	3,923,758
Accounts payable, related parties		146,854			101,339
Shareholder advances		7,000			229,772
Current portion of long-term debt		61,484			79,521
		10,326,594			4,334,390

Long-term debt		2,037,118			2,088,429
Stockholders' equity (deficit):
Series A preferred stock, par value of $.001 per share 75,000,000 shares authorized, 0 shares issued and outstanding at September 30, 2017 and December 31, 2016		-			-
Common stock, par value of $.001 per share 100,000,000 shares authorized, 41,126,934 shares issued and outstanding at September 30, 2017 and 27,578,864 shares issued and outstanding at December 31, 2016		41,126			27,579
Additional paid-in capital		105,848,374			66,862,608
Accumulated deficit		(92,861,107	)		(63,073,213	)
		13,028,393			3,816,974

	$	25,392,105		$	10,239,793

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016

Sales	$	3,285,000		$	1,906,000		$	5,333,037		$	3,376,600

Cost of Sales		7,558,082			4,173,364			12,866,095			6,932,416
Gross loss		(4,273,082	)		(2,267,364	)		(7,533,058	)		(3,555,816	)

Operating Expenses
Selling, general and administrative		3,283,196			1,968,260			8,031,368			4,755,642
Research and development		5,084,419			1,024,470			14,139,074			4,224,208
Total operating expenses		8,367,615			2,992,730			22,170,442			8,979,850

Interest expense, net		26,891			2,765			84,394			43,035

Net loss	$	(12,667,588	)	$	(5,262,859	)	$	(29,787,894	)	$	(12,578,701	)

Basic and diluted loss per share	$	(0.35	)	$	(0.25	)	$	(0.83	)	$	(0.61	)

Weighted average number of common shares outstanding		35,930,125			20,665,480			35,930,125			20,665,480

	2017			2016

Cash flows from operating activities:
Net loss	$	(29,787,894	)	$	(12,578,701	)
Adjustments to reconcile net loss from operations to cash used by operations:
Depreciation		415,163			286,316
Stock based compensation		1,076,120			853,609
Write down of inventory		-			78,917
Accounts receivable		403,700			(536,600	)
Inventory		(5,003,498	)		(3,568,972	)
Prepaid expenses and deposits		(1,646,187	)		733,469
Accounts payable		6,187,498			1,737,918
Accounts payable, related parties		72,242			(343,638	)

Net cash used by operations		(28,282,856	)		(13,337,682	)

Cash flows from investing activities:
Capital expenditures		(85,576	)		(148,095	)
Proceeds from lease receivable		134,493			-

Net cash provided by (used in) investing activities		48,917			(148,095	)

Cash flows from financing activities:
Payments on long-term debt		(69,348	)		-
Conversion of note payable		-			(2,722,500	)
Shareholder advances, net of repayments		7,000			1,309,073
Issuance of common and preferred stock		37,032,831			-
Exercise of warrants and options		633,863			10,271,294

Net cash provided by financing activities		37,604,346			8,857,867

Change in cash and cash equivalents		9,370,407			(4,627,910	)

Cash at the beginning of the period		469,570			7,677,163
Cash at the end of the period		9,839,977			3,049,253

2017	$	18,069
2018	$	57,060
2019	$	57,060
2020	$	57,060
2021	$	57,060
Thereafter	$	38,092
	$	284,401

	Approximate net operating loss ($ millions)		Carryover to be used against taxable income generated through year

	3.6		2030
	6.7		2031
	3.9		2032
	4.7		2033
	6.1		2034
	9		2035
	18.7		2036
	28.7		2037

	September 30, 2017			December 31, 2016
Land		700,000			700,000
Buildings		5,900,000			5,900,000
Leasehold Improvements		19,225			19,225
Software		86,050			57,587
Equipment		829,742			808,512
Vehicles and prototypes		98,788			62,905
		7,633,805			7,548,229
Less accumulated depreciation		(1,960,761	)		(1,545,598	)
		5,673,044			6,002,631

	September 30, 2017		December 31, 2016

Secured mortgage payable to Bank for the purchase of the 100 Commerce Drive Building due in monthly installments of $11,900.		1,748,602		1,767,950
Note payable, former building owner interest payment only due in monthly installments of $1,604 interest at 5.5%. A balloon payment of $350 thousand plus unpaid interest due August 2018.		350,000		350,000
Note payable to the City of Loveland paid off in May 2017		-		50,000
		2,098,602		2,167,950
Less current portion		61,484		79,521
Long term debt		2,037,118		2,088,429

	2018			358,067
	2019			33,607
	2020			35,858
	2021			38,260
	2022			44,345
	Thereafter			1,526,981
				2,037,118


~~(Class)~~				~~(Outstanding at September 30, 2017)~~

				Outstanding Stock Options
	Options Available for Grant			Number of Options			Weighted Average Exercise Price per Option		Weighted Average Grant Date Fair Value per Option		Weighted Average Remaining Exercise Term in Months
Balance December 31, 2015		757,471			1,980,434		$	2.21	$	1.46		49
Additional stock reserved		500,000			-		$	-	$	-		-
Granted		(794,500	)		794,500		$	6.38	$	2.82		58
Exercised		-			(138,113	)	$	1.79	$	0.49		-
Forfeited		-			-		$	-	$	-		-
Expired		492,500			(492,500	)	$	3.83	$	1.65		-
Balance December 31, 2016		955,471			2,144,321		$	2.46	$	1.53		43
Additional stock reserved		944,529			-		$	-	$	-		-
Granted		(1,900,000	)		1,900,000		$	5.01	$	1.11		72
Exercised		-			(137,419	)	$	2.11	$	1.00		-
Forfeited		-			-		$	-	$	-		-
Expired		-			-		$	-	$	-		-
Balance September 30, 2017		0			3,906,902		$	3.17	$	1.84		43

				Outstanding Stock Options
	Options Available for Grant			Number of Options			Weighted Average Exercise Price per Option		Weighted Average Grant Date Fair Value per Option		Weighted Average Remaining Exercise Term in Months
Balance December 31, 2015		99,303			306,773		$	0.36	$	1.01		41
Granted		(9,000	)		9,000		$	4.99	$	0.44		52
Exercised		-			(138,312	)	$	0.34	$	0.81		-
Balance December 31, 2016		90,303			177,461		$	0.49	$	1.05		37
Exercised		-			(5,000	)	$	1.50	$	0.83		-
Balance September 30, 2017		90,303			172,461		$	0.57	$	1.11		32

			Outstanding Warrants
	Warrants Available for Grant		Number of Warrants			Weighted Average Exercise Price per Warrant		Weighted Average Grant Date Fair Value per Warrant		Weighted Average Remaining Exercise Term in Months
Balance December 31, 2015		210,227		306,823		$	2.79	$	1.26		9
Exercised		-		(60,160	)	$	2.69	$	0.43		-
Expired		-		(87,458	)	$	6.00	$	2.70		-
Balance December 31, 2016		210,227		159,205		$	2.56	$	1.16		17
Balance September 30, 2017		210,227		159,205		$	1.38	$	0.68		21

			Outstanding Warrants
	Warrants Available for Grant		Number of Warrants			Weighted Average Exercise Price per Warrant		Weighted Average Grant Date Fair Value per Warrant		Weighted Average Remaining Exercise Term in Months
Balance December 31, 2015		348,925		338,925		$	20.00	$	1.02		4
Expired		-		(150,000	)		20.00		0.15		-
Balance December 31, 2016		348,925		188,925		$	20.00	$	1.02		4
Balance September 30, 2017		348,925		188,925		$	20.00	$	1.30		4


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net sales	$	1,202,876	$	91,942	$	1,723,936	$	176,242

Cost of sales	14,796,130		1,511,360		21,021,429		3,259,335
Gross loss	(13,593,254)		(1,419,418)		(19,297,493)		(3,083,093)

Operating expenses
Selling, general and administrative	7,005,537		3,949,081		13,891,367		9,514,868
Research and development	2,123,860		1,616,604		5,987,575		3,518,840
Total operating expenses	9,129,397		5,565,685		19,878,942		13,033,708

Other (loss) income	(11,699,666)		—		(148,305,618)		864,900

Loss from operations	(34,422,317)		(6,985,103)		(187,482,053)		(15,251,901)

Interest expense (income), net	10,478,717		124,346,806		(4,441,756)		111,323,317

Loss before benefit for income taxes	(44,901,034)		(131,331,909)		(183,040,297)		(126,575,218)
Benefit for income taxes	(1,281,947)		—		(18,914,439)		—

Net loss	$	(43,619,087)	$	(131,331,909)	$	(164,125,858)	$	(126,575,218)