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Document and Entity Information - USD ($)
12 Months Ended
Dec. 31, 2018
Mar. 18, 2019
Jun. 30, 2018
Document and Entity Information [Abstract]      
Entity Registrant Name Workhorse Group Inc.    
Entity Central Index Key 0001425287    
Trading Symbol WKHS    
Amendment Flag false    
Current Fiscal Year End Date --12-31    
Document Type 10-K    
Document Period End Date Dec. 31, 2018    
Document Fiscal Year Focus 2018    
Document Fiscal Period Focus FY    
Entity Well-known Seasoned Issuer No    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Filer Category Accelerated Filer    
Entity Shell Company false    
Entity Ex Transition Period false    
Entity Small Business false    
Entity Emerging Growth Company false    
Entity Public Float     $ 64,864,154
Entity Common Stock, Shares Outstanding   61,496,990  
Consolidated Balance Sheets - USD ($)
Dec. 31, 2018
Dec. 31, 2017
Current assets:    
Cash and cash equivalents $ 1,512,750 $ 4,069,477
Accounts receivable, less allowance for doubtful accounts of $0 at December 31, 2018 and 2017 1,013,423
Lease receivable current 48,271 45,300
Inventory 2,533,616 4,621,942
Prepaid expenses and deposits 2,274,595 946,134
Current assets, Total 6,369,232 10,696,276
Property, plant and equipment, net 5,237,451 5,596,013
Lease receivable long-term 198,090 212,004
Assets, Total 11,804,773 16,504,293
Current liabilities:    
Accounts payable 4,340,463 5,657,771
Accrued liabilities 3,946,386 284,115
Warranty liability 7,058,769 142,560
Warrant liability 1,822,819
Customer deposits 406,000 54,405
Duke financing obligation 1,340,700
Current portion of long-term debt 381,497
Current liabilities, other than notes payable 18,915,137 6,520,348
Principal amount of notes payable 5,750,000
Less unamortized discount and debt issuance costs 987,500
Notes payable less unamortized discount and debt issuance costs 4,762,500
Long-term debt 8,312,079 1,709,881
Stockholders' equity (deficit):    
Series A preferred stock, par value of $.001 per share 75,000,000 shares authorized, 0 shares issued and outstanding at December 31, 2018 and December 31, 2017
Common stock, par value of $.001 per share 100,000,000 shares authorized, 58,270,934 shares issued and outstanding at December 31, 2018 and 41,529,181 shares issued and outstanding at December 31, 2017 58,271 41,529
Additional paid-in capital 126,076,782 107,760,036
Accumulated deficit (141,557,496) (104,290,001)
Stockholders' equity (deficit), Total (15,422,443) 3,511,564
Liabilities and Stockholders' Equity (Deficit), Total $ 11,804,773 $ 16,504,293
Consolidated Balance Sheets (Parenthetical) - USD ($)
Dec. 31, 2018
Dec. 31, 2017
Statement of Financial Position [Abstract]    
Allowance for doubtful accounts $ 0 $ 0
Series A preferred stock, par value $ 0.001 $ 0.001
Series A preferred stock, shares authorized 75,000,000 75,000,000
Series A preferred stock, shares issued 0 0
Series A preferred stock, shares outstanding 0 0
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 58,270,934 41,529,181
Common stock, shares outstanding 58,270,934 41,529,181
Consolidated Statements of Operations - USD ($)
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Income Statement [Abstract]    
Net sales $ 763,173 $ 10,038,460
Cost of sales 7,981,413 24,399,363
Warranty expense 7,972,152 117,500
Gross loss (15,190,392) (14,478,403)
Operating expenses    
Selling, general and administrative 11,485,482 8,820,211
Research and development 7,391,693 17,737,737
Total operating expenses 18,877,175 26,557,948
Interest expense, net 2,434,749 180,437
Net loss (36,502,316) (41,216,788)
Deemed dividend - September 2017 Warrants 765,179
Net loss attributable to common stockholders $ (37,267,495) $ (41,216,788)
Net loss attributable to common stockholders per share - basic and diluted $ (0.74) $ (1.06)
Weighted average number of common shares outstanding 50,377,909 38,755,796
Consolidated Statement of Stockholders' Equity (Deficit) - USD ($)
Common Stock
Series A Preferred Stock
Additional Paid-in Capital
Accumulated Deficit
Total
Balance at Dec. 31, 2016 $ 27,579 $ 66,862,608 $ (63,073,213) $ 3,816,974
Balance shares at Dec. 31, 2016 27,578,864      
Issuance of common stock $ 12,967 37,029,501 37,042,468
Issuance of common stock, shares 12,966,712      
Stock options and warrants exercised $ 581 906,598 907,179
Stock options and warrants exercised, shares 581,358      
Issuance of Common Stock in exchange for future services $ 130 493,870 494,000
Issuance of Common Stock in exchange for future services, shares 130,000      
Conversion of accounts payable $ 272 1,034,267 1,034,539
Conversion of accounts payable, shares 272,247      
Share based compensation 1,433,192 1,433,192
Net loss from operations   (41,216,788) (41,216,788)
Ending Balance at Dec. 31, 2017 $ 41,529 107,760,036 (104,290,001) 3,511,564
Ending Balance, shares at Dec. 31, 2017 41,529,181      
Issuance of common stock $ 14,614 16,105,698 16,120,312
Issuance of common stock, shares 14,614,500      
Stock options and warrants exercised $ 45 90,020 90,065
Stock options and warrants exercised, shares 44,643      
Exchange offer - 2017 Warrants - deemed dividend     765,179 (765,179)
Exchange offer - 2017 Warrants $ 1,969 (1,969)
Exchange offer - 2017 Warrants, shares 1,968,736      
Conversion of accounts payable $ 114 298,236 298,350
Conversion of accounts payable, shares 113,874      
Share based compensation 1,059,582 1,059,582
Net loss from operations       (36,502,316) (36,502,316)
Ending Balance at Dec. 31, 2018 $ 58,271 $ 126,076,782 $ (141,557,496) $ (15,422,443)
Ending Balance, shares at Dec. 31, 2018 58,270,934      
Consolidated Statements of Cash Flows - USD ($)
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Cash flows from operating activities:    
Net loss $ (36,502,316) $ (41,216,788)
Adjustments to reconcile net loss from operations to cash used by operations:    
Depreciation 348,339 549,973
Amortized discount and debt issuance costs on Senior Secured Notes 987,500
Amortization of Arosa Loan issuance cost 3,610,589
Change in fair value of common stock warrant liability (2,683,470)
Stock based compensation 1,059,582 1,433,192
Write down of inventory 2,488,100
Loss on sale of asset 28,645
Effects of changes in operating assets and liabilities:    
Accounts receivable 1,024,366 (223,133)
Inventory (399,774) (2,157,107)
Prepaid expenses and deposits (1,328,461) (196,971)
Accounts payable and accrued liabilities 2,399,877 3,140,313
Warranty 6,916,209
Accounts payable, related parties (54,914) (46,425)
Customer deposits 351,595 54,405
Net cash used by operations (21,754,133) (38,662,541)
Cash flows from investing activities:    
Capital expenditures (23,222) (143,355)
Proceeds from sale of fixed assets 4,800
Net cash used by investing activities (18,422) (143,355)
Cash flows from financing activities:    
Proceeds from notes payable 4,762,500
Payments on notes payable (5,750,000)
Proceeds from Duke financing arrangement 1,340,700
Proceeds from advances   26,732
Proceeds from long-term debt 17,800,000
Payments on long-term debt (9,891,378) (76,572)
Loan issue costs (792,221)
Shareholder advances, net of repayments
Issuance of common stock 16,418,662 37,042,468
Exercise of warrants and options 90,065 650,675
Net cash provided by financing activities 19,215,828 42,405,803
Change in cash and cash equivalents (2,556,727) 3,599,907
Cash at the beginning of the period 4,069,477 469,570
Cash at the end of the period $ 1,512,750 $ 4,069,477
Consolidated Statements of Cash Flows (Parenthetical) - USD ($)
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Supplemental disclosure of non-cash activities:    
Conversion of accounts payable $ 298,350 $ 1,034,539
Additional paid-in capital 298,236  
Conversion of shareholders advances into common stock   256,504
Common stock issued in exchange of consulting services   494,000
Common stock 114  
Cash paid for interest 1,128,470 $ 104,621
Marathon    
Supplemental disclosure of non-cash activities:    
Warrants to purchase common stock 965,747  
Arosa    
Supplemental disclosure of non-cash activities:    
Warrants to purchase common stock $ 3,540,542  
Summary of Business and Significant Accounting Principles
12 Months Ended
Dec. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING PRINCIPLES
1. SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING PRINCIPLES

 

Thefollowing accounting principles and practices are set forth to facilitate the understanding of data presented in the condensedconsolidated financial statements:

 

Natureof operations and principles of consolidation

 

Workhorse Group Inc. and its predecessor companies(“Workhorse”, the “Company”, “we”, “us” or “our”) is a technology companyfocused on providing sustainable and cost-effective solutions to the commercial transportation sector. As an American manufacturer,we design and build high performance battery-electric vehicles and aircraft that make movement of people and goods more efficientand less harmful to the environment. As part of our solution, we also develop cloud-based, real-time telematics performance monitoringsystems that enable fleet operators to optimize energy and route efficiency. Although we operate as a single unit through our subsidiaries,we approach our development through two divisions, Automotive and Aviation. We are currently focused on our core competency ofbringing the N-GEN electric cargo van to market and fulfilling our existing backlog of orders. We are also exploring other opportunitiesin monetizing our intellectual property which could include a sale, license or other arrangement of assets that are outside ofour core focus.

 

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

 

Basis of presentation

 

The financial statements have been prepared on a goingconcern 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. Our existing capitalresources will be insufficient to fund our operations through the first half of 2019. Unless and until we are able to generatea sufficient amount of revenue, reduce our costs and/or enter a strategic relationship, we expect to finance future cash needsthrough public and/or private offerings of equity securities and /or debt financings. If we are not able to obtain additional financingand/or substantially increase revenue from sales, we will be unable to continue as a going concern. These conditions raise substantialdoubt about the ability of the Company to continue as a going concern.

 

Inview 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 carryout its future operations. The financial statements do not include any adjustments to the amount and classification of assetsand liabilities that may be necessary, should the Company not continue as a going concern.

 

TheCompany has continued to raise capital.  Management believes the proceeds from these offerings, future offerings, andthe Company’s anticipated revenue, provides an opportunity to continue as a going concern.  If additional fundingis required, the Company plans to obtain working capital from either debt or equity financing from the sale of common, preferredstock, and/or convertible debentures. Obtaining such working capital is not assured. The Company is currently in a productionramp up mode and placing greater emphasis on manufacturing capability.

 

Thepreparation of financial statements in conformity with generally accepted accounting principles requires management to make estimatesand assumptions that affect the amounts reported in the financial statements and accompanying notes.  Actual resultscould differ from these estimates.

 

Certainreclassifications were made to the prior year financial statements to conform to the current year presentation. These reclassificationshad no effect on previously reported results of operation or stockholders’ equity.

 

Financialinstruments

 

Thecarrying amounts of financial instruments including cash, inventory, accounts payable and short-term debt approximate fair valuebecause of the relatively short maturity of these instruments.

 

Accountsreceivable

 

Accountsreceivable consist of collectible amounts for products and services rendered. The Company carries its accounts receivable at invoiceamount less an allowance for doubtful accounts. On a periodic basis, the Company evaluates its accounts receivable and establishesan allowance for doubtful accounts based on a history of past write-offs and collections and current credit conditions. The Companygenerally does not require collateral for accounts receivable. Sales to our top two customers totaled 0% and 33% for the yearended December 31, 2018 and 98% and 0% for the year ended December 31, 2017.

 

LeaseReceivable

 

TheCompany’s leasing activities consist of the leasing of trucks which are classified as direct financing leases.  Revenueis recognized at the inception of the lease.  The leases have a term of eight years.  Future payments to be receivedon the leases are as follows:

 

2019  $48,271 
2020   41,375 
2021   41,375 
2022   41,375 
2023   41,375 
Thereafter   32,590 
   $246,361 

 

Inventory

 

Inventory is stated at the lower of cost or net realizablevalue. Manufactured inventories are valued at standard cost, and consist of raw materials, work in process and finished goods.

 

Property,plant and equipment, net

 

Property,plant and equipment, net is stated at cost less accumulated depreciation.  Major renewals and improvements are capitalizedwhile replacements, maintenance and repairs, which do not improve or extend the lives of the respective assets, are expensed.When property, plant and equipment is retired or otherwise disposed of, a gain or loss is realized for the difference betweenthe net book value of the asset and the proceeds realized thereon. Depreciation is calculated using the straight-line method,based upon the following estimated useful lives:

 

Buildings:   15 - 39 years 
Leasehold improvements:   7 years 
Software:   3- 6 years 
Equipment:   5years 
Vehicles and prototypes:   3- 5 years 

 

Commonstock

 

OnApril 22, 2010, the directors of the Company approved a forward stock split of the common stock of the Company on a 14:1 basis.  OnMay 12, 2010, the stockholders of the Company voted to approve the amendment of the certificate of incorporation resulting ina decrease of the number of shares of common stock.   Management filed the certificate of amendment decreasing the authorizedshares of common stock with the State of Nevada on September 8, 2010. On February 11, 2015, the Company filed a certificate ofamendment to its articles of incorporation to increase the authorized shares of common stock to 50,000,000.

 

OnDecember 9, 2015, the Company filed a Certificate of Amendment to its Certificate of Incorporation to implement a one-for-tenreverse split of the Corporation’s issued and outstanding common stock (the “Reverse Stock Split”), as authorizedby the stockholders 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 stock were combinedinto one newly issued share of common stock. No fractional shares were issued in connection with the Reverse Stock Split. Totalcash payments made by the Company to stockholders in lieu of fractional shares was not material.

 

OnAugust 7, 2017, the shareholders of the Company voted to increase the authorized shares of common stock to 100,000,000 and theCertificate of Amendment amending the Articles of Incorporation was filed with the State of Nevada on August 8, 2018.

 

Allreferences in the financial statements and MD&A to number of common shares, price per share and weighted average shares ofcommon stock have been adjusted to reflect the Reverse Stock Split on a retroactive basis for all prior periods presented, unlessotherwise noted, including reclassifying an amount equal to the reduction in par value of common stock to additional paid in capital.

 

Thecapital stock of the Company is as follows:

 

PreferredStock - The Company has authorized 75,000,000 shares of preferred stock with a par value of $.001 per share. These sharesmay be issued in series with such rights and preferences as may be determined by the Board of Directors. There are no sharesof preferred stock outstanding.

 

CommonStock - The Company has authorized 100,000,000 shares of common stock with a par value of $0.001 per share as of December 31,2018.

 

Incometaxes

 

As no taxable income has occurred from the date ofthis merger to December 31, 2018 cumulative deferred tax assets of approximately $29.6 million are fully reserved, and noprovision or liability for federal or state income taxes has been included in the financial statements. Carryover amountsare:

 

Approximate net operating loss
($ millions)
  Carryover to be used against taxable
income generated through year
     
4.0   2030
6.7   2031
3.9   2032
4.6   2033
6.0   2034
8.9   2035
17.9   2036
38.5   2037
23.5   Indefinite

 

Researchand development costs

 

The Company expenses research and developmentcosts as they are incurred. Research and Development costs were approximately $7.4 million and $17.7 million for the yearsended December 31, 2018 and 2017, respectively, consisting primarily of personnel costs for our teams in engineering and research,prototyping expense, and contract and professional services.

 

Basicand diluted loss per share

 

Basicloss per share is computed by dividing net loss available to common shareholders (numerator) by the weighted average number ofshares outstanding (denominator) during the period.  For all periods, all of the Company’s common stock equivalentswere excluded from the calculation of diluted loss per common share because they were anti-dilutive, due to the Company’snet losses.

 

Stockbased compensation

 

The Company accounts for its stock-based compensationin accordance with “Share-Based Payments” (codified in FASB ASC Topic 718 and 505). The Company recognizesin its consolidated statement of operations the grant-date fair value of stock options and warrants issued to employees and non-employeesover the option or warrant’s vesting period.  The fair value is estimated on the date of grant using a Black-Scholesvaluation model that uses assumptions concerning expected volatility, expected term, and the expected risk-free rate of return.  Forthe awards granted, the expected volatility was estimated by management as 50% based on results from other public companies inour industry.  The expected term of the awards granted was assumed to be the contract life of 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 onmarket yields in effect on the date of each grant for United States Treasury debt securities with a maturity equal to the expectedterm of the award.

 

Subsequentevents

 

The company has evaluated subsequent events for potential recognition and disclosures through the date theconsolidated financial statements were filed.

Inventory
12 Months Ended
Dec. 31, 2018
Inventory Disclosure [Abstract]  
INVENTORY
2. INVENTORY

 

Asof December 31, 2018, and 2017, inventory consisted of the following:

 

   2018   2017 
Raw materials  $4,319,637   $3,205,618 
Work in process   702,079    1,416,324 
Finished goods   -    - 
    5,021,716    - 
Less: Inventory reserve   2,488,100    - 
   $2,533,616   $4,621,942 

 

Duringthe year ended December 31, 2018, the Company recorded an inventory reserve of approximately $2.5 million. The increase in reserverelated to the Company’s strategic switch from the legacy E-GEN/E-100 platform to our N-GEN platform, which occurred inthe fourth quarter of 2018. Certain raw materials and work in process were unique to the E-GEN/E-100 vehicles and cannot currentlybe repurposed. As such, the company recorded a reserve related to these items.

Revenue
12 Months Ended
Dec. 31, 2018
Revenue Recognition and Deferred Revenue [Abstract]  
REVENUE
3.REVENUE

 

Changein Accounting Principle

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606)”. The guidance in this ASU affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). This guidance requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services.

 

Beginning in January 2018, the Company adopted the provisions of ASU 2014-09 Topic 606 under the modified retrospective method, which requires a cumulative effect adjustment to the opening balance of retained earnings on the date of adoption. This approach was applied to contracts not completed as of December 31, 2017. No significant change to revenue recognition, as previously recognized, was identified. At date of adoption, there was no adjustment to retained earnings related to the adoption of ASU 2014-09. At date of adoption, there was no significant change to our past revenue recognition practices and therefore no adjustment to the opening balance of retained earnings was required.

 

RevenueRecognition

 

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 term in nature.

 

Revenues related to repair and maintenance servicesare recognized over time as services are provided. Payment for used vehicles, services, and merchandise are typically receivedat the point when control transfers to the customer or in accordance with payment terms customary to the business.

 

AccountsReceivable

 

Credit is extended based upon an evaluation of the customer’s financial condition. Accounts receivable are stated at their estimated net realizable value. The allowance for doubtful accounts is based on an analysis of customer accounts and our historical experience with accounts receivable write-offs.

 

The Company has elected the following practicalexpedients allowed under ASU 2014-09:

 

  Performance obligations are satisfied within one year from a given reporting date, consequently we omit disclosure of the transaction price apportioned to remaining performance obligations on open orders

 

Disaggregation of Revenue

 

Our revenues related to the following types of business wereas follows for the periods ended December 31:

 

   Year Ended
December 31,
 
   2018   2017 
         
Automotive  $498,000   $10,038,460 
Aviation   -    - 
Other   265,173    - 
Total revenues  $763,173   $10,038,460 

 

Automotive Revenue – consists of salesof any of our E-GEN or E-100 platforms. We recognize revenue when control transfers upon shipment to customers in accordance withthe new revenue standard as a sale.

 

Aviation – consists of sales of our SureFlymulticopter. No sales have been recorded to date. We would recognize revenue when control transfers upon shipment to customersin accordance with the new revenue standard as a sale.

 

Other – consists of our former DeliveryService Protocol program, grant-related research work and non-warranty after-sales vehicle services. There were no significantchanges to the timing or amount of revenue recognition as a result of our adoption of the new revenue standard.

Property, Plant and Equipment, Net
12 Months Ended
Dec. 31, 2018
Property, Plant and Equipment [Abstract]  
PROPERTY, PLANT AND EQUIPMENT, NET
4. PROPERTY, PLANT AND EQUIPMENT, NET

 

Property, Plant and Equipment as of December31, 2018 and 2017 consists of the following:

 

   2018   2017 
Land  $700,000   $700,000 
Buildings   5,900,000    5,900,000 
Leasehold Improvements   19,236    19,225 
Software   102,367    86,050 
Equipment   836,646    829,742 
Vehicles and prototypes   86,679    156,567 
    7,644,928    7,691,584 
Less accumulated depreciation   (2,407,477)   (2,095,571)
   $5,237,451   $5,596,013 
Long-Term Debt
12 Months Ended
Dec. 31, 2018
Debt Disclosure [Abstract]  
LONG-TERM DEBT
5. LONG-TERM DEBT

 

Long-term debt as of December 31, 2018 and2017 consists of the following:

 

   December 31,
2018
   December 31,
2017
 
Marathon Tranche I Loan, due December 31, 2021, interest only quarterly payments, variable interest rate of 10.4% as of December 31, 2018 (discount is based on warrant valuation of approximately 9.7%)  $10,000,000   $- 
Marathon Credit Agreement unamortized discount and issuance costs   (1,687,921)   - 
Net Marathon Credit Agreement   8,312,079      
Senior Secured Notes, due July 6, 2018 (discount is based on imputed interest rate of 26%)   -    5,750,000 
Less: unamortized discount and debt issuance costs on Senior Secured Notes   -    (987,500)
Net Senior Secured Notes   -    4,762,500 
Secured mortgage payable, due November 2026, to Bank for 100 Commerce Drive building, interest rate 6.5%, due in monthly installments of $11,951, inclusive of principal and interest   -    1,741,378 
Note payable, former building owner interest payment only due in monthly installments of $1,604 interest at 5.5%. A balloon payment of $350,000 plus unpaid interest due August 2018.   -    350,000 
    8,312,079    6,853,878 
Less current portion   -    5,143,997 
Long-term debt  $8,312,079   $1,709,881 

 

Aggregatematurities of long-term debt are as follows:

 

2019   - 
2020   1,000,000 
2021   9,000,000 
2022   - 
2023   - 
Thereafter   - 
    10,000,000 

 

On December 26, 2017, as part of its initial effortsto spin-off Surefly Inc., the Company entered into a Securities Purchase Agreement with several existing institutional investors(the "Spin-Off Investors") pursuant to which the Company issued original issue discount Senior Secured Notes in theaggregate principal amount of $5,750,000 in consideration of gross proceeds of $5,000,000 paid by the Spin-Off Investors. The loanwas convertible into Surefly Inc. equity upon achieving the spin-off. On June 28, 2018, the Company entered into an amendment agreementwith the Spin-Off Investors. The amendment agreement provided that the Senior Secured Notes were amended to provide a maturitydate of July 6, 2018. Upon the closing of the Loan Agreement with Arosa Capital Management LP ("Arosa"), the Companypaid off the Senior Secured Notes.

 

Amortizationexpense recorded as interest related to the debt issuance costs and unamortized discounts for the Senior Secured Notes was $987,500for the year ended December 31, 2018.

 

On June 7, 2018, the Company received a short-termloan in the aggregate principal amount of $550,000 from Stephen S. Burns, H. Benjamin Samuels, Gerald Budde and Ray Chess, eachan executive officer and/or director of the Company (collectively, the "Related Parties"). The Company used the netproceeds from the transaction for general business and working capital purposes. To evidence the loans, the Company issued theRelated Parties promissory notes (the "Related Parties Notes") in the aggregate principal amount of $550,000. The RelatedParties Notes were unsecured obligations of the Company and were not convertible into equity securities of the Company. Principaland interest under the Related Parties Notes was due and payable December 6, 2018, however, in the event that the Company raisedin excess of $10,000,000 in equity financing, then the Company would use part of its proceeds to pay off the Related Parties Notes.Under no circumstance were the Related Parties Notes be paid off on or prior to the 91st day following the maturity date of theSenior Secured Notes issued by the Company on December 27, 2017. Interest accrued on the Related Parties Notes at the rate of 12.0%per annum. The Related Parties Notes contained terms and events of default customary for similar transactions.

 

OnJuly 6, 2018, the Company received a short-term loan in the aggregate principal amount of $500,000 from accredited investors (collectively,the "Loan Parties"), which included Mr. Samuels, a director of the Company. To evidence the loans, we issued the LoanParties promissory notes (the "Loan Parties Notes") in the aggregate principal amount of $500,000. The Loan PartiesNotes were unsecured obligations of the Company and were not convertible into equity securities of our company. Principal andinterest under the Loan Parties Notes was due and payable January 5, 2019, however, in the event that the Company raised in excessof $10,000,000 in equity or debt financing, the Company would use a portion of the proceeds to pay off the Loan Parties Notes.Interest accrues on the Loan Parties Notes at the rate of 12.0% per annum. The Loan Parties Notes contained terms and events ofdefault customary for similar transactions.

 

TheRelated Parties Notes and Loan Parties Notes were paid off following the closing of the August 2018 public offering.

 

OnJuly 6, 2018, the Company, as borrower, entered into a Loan Agreement with a fund managed by Arosa, as lender, providing for aterm loan (the "Arosa Loan") in the principal amount of $6,100,000 (the "Loan Agreement"). The maturitydate of the Arosa Loan was July 6, 2019 (the "Maturity Date"). The interest rate for the Arosa Loan was 8% per annumpayable in quarterly installments and commenced on October 6, 2018. The Company could prepay the Arosa Loan at any time upon threedays written notice.

 

TheCompany used the proceeds from the Arosa Loan to satisfy the Senior Secured Loans and a loan in the amount of $350,000 payableto the former owner of the Company's facility based in Loveland, Ohio.

 

The Loan Agreement required the Company to pay Arosa'sexpenses including attorney fees. The Loan Agreement also required the Company to make certain representations and warranties andother agreements that are customary in loan agreements of this type and also included covenants to raise $10,000,000 in equityprior to September 30, 2018 and to consummate a sale of Surefly, Inc., the Company's indirect wholly-owned subsidiary resultingin cash proceeds of no less than $20,000,000. The Loan Agreement also contained customary events of default, including non-payment ofprincipal or interest, violations of covenants, bankruptcy and material judgments. The Company's subsidiaries and Arosa alsoentered into a Guarantee and Collateral Agreement and Intellectual Property Security Agreement providing that the Company'sobligations to Arosa were secured by substantially all of the Company's assets. In addition, the Company was required toappoint to the Board of Directors a person designated in writing by Arosa for a period of no less than 12 months.

 

In accordance with the Loan Agreement, the Companyissued Arosa a warrant to purchase 5,000,358 shares of common stock of the Company at an exercise price of $2.00 per share exercisablein cash only for a period of five years. While the Arosa Loan remained outstanding, the Company was be required to issue additionalwarrants to purchase common stock to Arosa equal to 10% of any additional issuance excluding issuances under an approved stockplan. The additional warrants to purchase common stock have an exercise price equal to the lesser of $2.00 or a 5% premium to theprice utilized in such financing. Pursuant to the warrant, Arosa may not exercise such warrant if such exercise would result inArosa beneficially owning in excess of 9.99% of the Company's then issued and outstanding common stock. On August 2, 2018,after conducting additional due diligence on the Company's available collateral base, Arosa agreed to enter into the FirstAmendment to the Loan Agreement with the Company pursuant to which an additional $1,700,000 was loaned to the Company for workingcapital purposes and general corporate purposes. In addition, various covenants were added or amended including, but not limitedto, requiring the Company to satisfy its Mortgage on its Loveland, Ohio facility no later than October 1, 2018, which we paid offin August 2018 with a payment of $1.85 million.

 

The Company determined that the Arosa Loan and relatedwarrants were freestanding instruments issued together and therefore should be accounted for separately. The Company determinedthe warrants did not qualify for equity classification and therefore has applied liability treatment to the instruments. The valueof the warrants on the date of the Arosa Loan was determined to be $3,540,542, which was determined using the Black-Scholes methodand was recorded as a liability with the offset being recorded as a debt discount, which will be amortized into interest expenseover the life of the loan. The liability for the warrants, as well as any future warrant issuances, will be marked to marked quarterlyin accordance with liability accounting.

 

OnAugust 14, 2018, in accordance with the Loan Agreement, we issued a warrant to acquire 1,143,200 shares of common stock at anexercise price of $1.21 warrants to Arosa following the closing of our public offering on August 13, 2018 and the related over-allotmenton August 14, 2018. On October 1, 2018, we issued a warrant to acquire 108,768 shares of common stock at an exercise price of$1.60 warrants to Arosa due to our At The Market ("ATM") offerings that occurred during the third quarter of 2018.

 

OnDecember 31, 2018, the Company entered into a Credit Agreement (the "Credit Agreement"), among the Company, as borrower,Marathon Asset Management, LP, on behalf of certain entities it manages, as lenders (collectively, with their permitted successorsand assignees, the "Lenders"), and Wilmington Trust, National Association, as the agent ("Wilmington"). The Credit Agreement provided the Company with a $10 million tranche of term loans (the "Tranche One Loans")which may not be re-borrowed following repayment and (ii) a $25 million tranche of term loans which may be re-borrowed followingrepayment (the "Tranche Two Loans" together with the Tranche One Loans, the "Loans"). The Company usedthe proceeds for the Tranche One Loans (x) to pay off a loan provided by Arosa in the principal amount of $7.8 million plus interestand (y) for working capital purposes. Draws from the Tranche Two Loans will be used in connection with vehicle production andare subject to the Company's receipt of purchase orders.

 

In connection with the extinguishmentof the Arosa loan, a loss on extinguishment of approximately $2.2 million was recognized and is recorded within interest expensein the accompanying statement of operations for the year ended December 31, 2018.

 

TheCompany's ability to borrow amounts under the Credit Agreement is conditioned upon its compliance with specified covenants,including certain reporting covenants and financial covenants that, in addition to other items, require the Company to maintain(i) minimum liquidity of at least $4 million at all times on or after March 31, 2019, (ii) a maximum total leverage ratio (ratioof total debt borrowed by the Company to EBITDA for the four consecutive fiscal quarters most recently ended, subject to certainadjustments set forth in the Credit Agreement) not to exceed 4.50:1.00 on the last day of the quarter ended September 30, 2019,which total leverage ratio is adjusted for subsequent quarters as set forth in the Credit Agreement and (iii) a maximum debt servicecoverage ratio (ratio of EBITDA (for the four consecutive fiscal quarters most recently ended, subject to certain adjustmentsset forth in the Credit Agreement) to interest expense and payments for operating leases) not to exceed 1.25:1.00 on the lastday of the quarter ended September 30, 2019, which debt service coverage ratio is adjusted for subsequent quarters as set forthin the Credit Agreement. In the event the Company breaches the total leverage ratio or the debt service coverage ratio covenants,the Company may cure such breach by raising capital through the sale of equity, which capital will be added on a dollar-for-dollarbasis to the calculation of EBITDA for purposes of such test period to determine compliance with the financial covenant. In eachconsecutive four fiscal quarter period, equity cures can only be made for two fiscal quarters, and only four equity cures areallowed during the term of the Credit Agreement. The capital raised in connection with such equity cure must be used to repaythe Loans.

 

In addition, the Credit Agreement contains customaryrepresentations and warranties and customary affirmative and negative covenants, including, among others, restrictions on the Company'sability to dispose of property, enter into mergers, acquisitions or other business combination transactions, incur additional indebtedness,grant liens, pay dividends and make certain other restricted payments.

 

TheTranche One Loans, and both the drawn and undrawn portions of the Tranche Two Loan, will bear interest at a rate per annum (basedon a year of 360 days) equal to LIBOR (as defined in the Credit Agreement) plus 7.625%, which interest is payable quarterlycommencing March 5, 2019.

 

TheCredit Agreement contains customary events of default, including for non-payment, misrepresentation, breach of covenants, defaultsunder other material indebtedness, material adverse change, bankruptcy, change of control and material judgments.

 

The Loans mature on the third anniversary of the closingdate. The Company is required to repay a portion of the Tranche One Loans with $500,000 installment payments on each of June 30,2020, December 31, 2020 and June 30, 2021. Upon the occurrence and during the continuance of an event of default, the Lenders maydeclare all outstanding amounts thereunder immediately due and payable and may terminate commitments to make any additional advancesunder the Tranche Two Loans. The Tranche Two Loans are required to be prepaid in an amount equal to the payments received fromthe subject purchase orders. The Company is also obligated to repay the Loans with a specified percentage of the net cash proceedsthe Company receives in connection with certain dispositions of assets, casualty events, incurrences of debt and any issuancesof capital stock (other than issuances of capital stock during the first 9 months after closing). The Company is required to prepaythe Loans utilizing 100% of the net proceeds from any casualty event or the issuance or incurrence of debt and 50% of the net proceedsfrom any disposition. If the Company receives net cash proceeds from the issuance of capital stock after the nine-month anniversaryof the closing date, the Company is required to prepay the Loans utilizing 35% of the net cash proceeds from such issuance. Withlimited exceptions, if the Company prepays any portion of the Tranche One Loans or the Tranche Two Loans (with the concomitanttermination of the portion of the commitments under the Tranche Two Loans that is repaid) during the 12 months following the closingdate, it is required to pay 100% of the interest that would have been due on such prepaid Loans if the prepaid amounts had beenoutstanding for a period of 12 months after the date of prepayment. If such prepayment occurs during the period beginning afterthe 12-month anniversary of the closing date and continuing through the 18-month anniversary of the closing date, the Company isrequired to pay 50% of the interest that would have been due on such prepaid Loans for the 12-month period following the date ofsuch prepayment on a prorated basis.

 

TheCompany, the Company's subsidiaries and Wilmington, as agent for the Lenders, entered into a Security Agreement, a PledgeAgreement and a Guarantee, among other loan documents, providing that the Company's obligations to the Lenders are securedby a first priority security interest in substantially all of the Company's and its subsidiaries' tangible and intangibleassets including the Company's real property located in Loveland, Ohio and Union City, Indiana.

 

Forso long as the Credit Agreement is in effect, the Lenders holding a majority of the Loans and unused commitments for the TrancheTwo Loan will be entitled to have one representative acceptable to the Company attend all meetings of the Company's boardof directors (and any committees thereof), in a non-voting observer capacity, and such representative will receive copies of allnotices, minutes, consents and other materials the Company provides to its directors in connection with such meeting. The Companymay exclude such representative from access to any of such materials or meetings or portions thereof if it believes that any suchmaterial or portion thereof is a trade secret or similar confidential information or such exclusion is necessary to preserve theattorney-client privilege.

 

Inaccordance with the Credit Agreement, the Company issued each Lender a Common Stock Purchase Warrant to purchase, in the aggregate,8,053,390 shares of common stock of the Company at an exercise price of $1.25 per share exercisable in cash only for a periodof three years and then for cash or cashless thereafter (collectively, the "Initial Warrants"). Until the later ofthe repayment of all obligations owed to the Lenders or two years from the closing date, the Company will be required to issueadditional Common Stock Purchase Warrants (the "Additional Warrants") to the Lenders equal to 10%, in the aggregate,of any additional issuance, subject to certain exceptions, on substantially the same terms and conditions of the Initial Warrants,except that (i) the applicable expiration date thereof shall be five years from the issuance date of the applicable warrant, (ii)the initial exercise price shall be a price equal to the price per share of common stock used in the relevant issuance multipliedby 110% and (iii) the holder shall be entitled to exercise the warrant on a cashless exercise at any time the warrant is exercisable.

 

TheCompany determined that the Marathon Credit Agreement and related warrants were freestanding instruments issued together and thereforeshould be accounted for separately. We determined the warrants did not qualify for equity classification and therefore have appliedliability treatment to the instruments. The value of the warrants on the date of the Marathon Credit Agreement was determinedto be $965,747, which was determined using the Black-Scholes method and was recorded as a liability with the offset being recordedas a debt discount, which will be amortized into interest expense over the life of the loan. The liability for the warrants, aswell as any future warrant issuances, will be marked to marked quarterly in accordance with liability accounting.

 

Asa condition to the closing of the Credit Agreement, the Company entered into a Registration Rights Agreement with the Lenders(the "Registration Rights Agreement"). Pursuant to the Registration Rights Agreement, the Company is required, notlater than 90 days following the execution of the Credit Agreement, to file a shelf registration statement on Form S-3 with theSEC with respect to the resale of the shares of common stock issuable upon exercise of the Initial Warrants or any AdditionalWarrant, if any (the "Warrant Shares"). The Company is required to use its reasonable best efforts to have such registrationstatement declared effective as soon as reasonably practicable but in no event no later than 180 days after the closing date ofthe Credit Agreement. The Company is required to keep such shares registered for as long as they are deemed Registrable Securities(as defined in the Registration Rights Agreement). In addition, any holder of Registrable Securities (as defined in the RegistrationRights Agreement) will have the right, subject to certain limitations, to request an underwritten takedown of any Warrant Shares.Any holder of Registrable Securities (as defined in the Registration Rights Agreement) will have the right, on up to four occasions,to demand that the Company file a registration statement with the SEC with respect to the resale of the Warrant Shares, subjectto certain limitations. In addition, any holder of Registrable Securities (as defined in the Registration Rights Agreement) isentitled to unlimited piggyback registration rights with respect to the registration of any equity securities of the Company,subject to certain limitations. These registration rights are subject to customary conditions and limitations regarding cutbacksand indemnification, among others. Subject to certain exceptions, the Company is generally required to bear all expenses of suchregistration, other than underwriting discounts and commissions and certain travel expenses.

 

TheCompany, at closing, paid a fee equal to 1.0% of the Tranche One Loans and the commitment for the Tranche Two Loans. Upon thefirst drawing of any Tranche Two Loans, the Company is required to pay another fee equal to 1.0% of the Tranche One Loans andthe commitment for the Tranche Two Loans.

 

In connection with entry into the Credit Agreement,the Company agreed to pay Cowen & Company, LLC a cash fee equal to 2% of the gross proceeds received from the Lenders on theearlier of the next capital raise or March 31, 2019.

 

Theclosing costs associated with the Marathon Credit Agreement were allocated based on proportional value to Tranche 1, Tranche 2and the Marathon Warrants. Costs of $722,174 allocated to Tranche 1 were recorded as a debt discount; costs of $1,830,435 allocatedto Tranche 2 were recorded as a prepaid asset and will be amortized over the expected life of the loan; and costs of $69,744 allocatedto the Marathon Warrants were expensed in the year ended December 31, 2018.

 

OnDecember 31, 2018, concurrently with the closing of the Credit Agreement and the initial borrowing of the Tranche One Loans, theCompany utilized a portion of the proceeds from the Tranche One Loans to repay in full all outstanding amounts under the Company'sexisting Loan Agreement, dated July 6, 2018, as amended to date, by and among the Company, and Arosa, as lender (the "ExistingLoan Agreement") and terminated all commitments by Arosa to extend further credit thereunder and all guarantees and securityinterests granted by the Company to Arosa in connection therewith.  Pursuant to the Existing Loan Agreement, the Companyissued Arosa a Warrant to purchase 894,821 shares of common stock exercisable at $1.25 per share. As the full amount of all outstandingamounts under the Company's Existing Loan Agreement have been repaid in full, the Company is no longer required to issueadditional warrants to Arosa going forward.

 

Principal amounts:  At December 31,
2018
 
Principal  $10,000,000 
Unamortized debt discount and issuance costs (1)   (1,687,921)
Net debt carrying amount  $8,312,079 
Carrying amount of warrant the liability component (2)  $965,747 

 

  (1) Includes the unamortized portion of the initial warrant liability of $965,747 and issuance costs of $722,174.

 

  (2) Includes marked to market liability of initial Marathon warrant liability.
Duke Financing Obligation
12 Months Ended
Dec. 31, 2018
Duke Financing Obligation [Abstract]  
DUKE FINANCING OBLIGATION
6. DUKE FINANCING OBLIGATION

 

OnNovember 28, 2018, the Company entered into a Sales Agreement with Duke Energy One, Inc., a wholly-owned subsidiary of Duke EnergyCorporation (NYSE: DUK) ("Duke"), pursuant to which the Company sold Duke 615,000 battery cells (the "615,000Cells") in consideration of $1,340,700.  Workhorse will continue to use the cells in the near term for the deliveryof trucks to UPS and DHL.  Until May 1, 2019, the Company has the right and option to require Duke to sell the 615,000 Cellsback to the Company and Duke has the right and option to require the Company to purchase the 615,000 Cells at price equal to theprice the 615,000 Cells were sold.

 

OnNovember 28, 2018, in consideration for consenting to the Company selling the Cells to Duke, which served as collateral for Arosathe Loan Agreement, the Company entered into a Limited Consent, Waiver and Release with Arosa pursuant to which the Company issuedArosa 2,000,000 shares of common stock and restruck the exercise price of warrants previously issued to Arosa to $1.25 per share. In addition, while the Arosa Loan remains outstanding, the exercise price of the Arosa Warrants will be restruck to equal theprice of any equity issued by the Company, including the issuance of any common stock purchase warrants or other derivative convertiblesecurities, if the issuing price of such securities is less than $1.25.

 

TheDuke transactions was accounted for as a financing obligation and as such, the company has recorded a $1,340,700 liability relatedto the transaction.

Income Taxes
12 Months Ended
Dec. 31, 2018
Income Tax Disclosure [Abstract]  
INCOME TAXES
7.INCOME TAXES

 

For the years ended December 31, 2018 and 2017, the Companyhas taxable losses primarily due to operations and thus has no current tax expense recorded. The Company has recorded a full valuationallowance on its deferred tax assets and thus, for the years ended December 31, 2018 and 2017 there is no deferred tax expenserecorded.

 

The U.S. components of loss before income taxes and a reconciliationof the statutory federal income tax with the provision for income taxes follow:

 

    2018    2017 
           
Current Federal   -    - 
Current State & Local   -    - 
    Total Current   -    - 
           
Deferred Federal   -    - 
Deferred State & Local   -    - 
    Total Deferred   -    - 
           
Total   -    - 

 

   12/31/2018  12/31/2017
       
Federal tax benefit at statutory rates  21.0%  35.0%
State and local tax at statutory rate  0.8%  0.6%
Mark-to-Market Adjustment on Stock Warrants  1.5%  0.0%
Other permanent differences and credits  0.0%  (0.1)%
Change in valuation allowance  (23.3)%  (35.5)%
       
Total tax expense  0.0%  0.0%

 

Deferred income taxes reflect the net tax effectsof temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amountsused for income tax purposes. When realization of the deferred tax asset is more likely than not to occur, the benefit relatedto the deductible temporary differences attributable to operations is recognized as a reduction of income tax expense. Valuationallowances are provided against deferred tax assets when, based on all available evidence, it is considered more likely than notthat some portion or all of the recorded deferred tax assets will not be realized in future periods. The Company cannot be certainthat future taxable income will be sufficient to realize its deferred tax assets, and accordingly a full valuation allowance hasbeen provided on its deferred tax assets. The Company continues to maintain the underlying tax benefits to offset future taxableincome and to monitor the need for a valuation allowance based on the profitability of its future operations. The valuation allowanceincreased by approximately $8.5 million and $8.6 million, during the years ended December 31, 2018 and 2017, respectively. Significantcomponents of the Company’s deferred tax assets and liabilities are as follows:

 

   2018   2017 
Deferred Tax Assets:        
Accrued Expenses & Reserves  $850,857   $308,116 
Warranty Allowance   1,539,765    31,097 
Non-Qualified Stock Options   1,034,261    796,999 
Fixed Assets   183,917    170,072 
Disallowed Interest Expense   1,118,212    - 
Net Operating Losses   24,818,785    19,729,451 
Total Deferred Tax Assets   29,545,797    21,035,735 
Valuation Allowance   (29,545,797)   (21,035,735)
Total Deferred Tax Assets, net of valuation allowance  $-   $- 

 

At December 31, 2018 and 2017, the Company has approximately$90.6 million, of federal net operating loss (“NOL”) carry-forwards which expire through 2037. Additionally, at December31, 2018 the Company has approximately $23.5 million of federal NOLs that carry-forward indefinitely. Additionally, at December31, 2018 and 2017, the Company has approximately $0.9 million and $0.7 million, respectively, of state and local NOLs carry-forwardswhich expire through 2038. The NOL carry-forwards may be limited in certain circumstances, including ownership changes.

 

Underthe provisions of the Internal Revenue Code, the net operating loss and tax credit carry-forwards are subject to review and possibleadjustment by the Internal Revenue Service and state tax authorities. Net operating loss and tax credit carryforwards may becomesubject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholdersover a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code, respectively, aswell as similar state provisions. This could limit the amount of tax attributes that can be utilized annually to offset futuretaxable income or tax liabilities. The amount of the annual limitation is determined based on the value of the Company immediatelyprior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. The Company hasnot yet analyzed whether it has experienced an ownership change for this purpose to determine if any of the net operating lossesto date have a limitation on future deductibility.

 

Tabular Reconciliation of unrecognized taxbenefits

 

    2018     2017  
             
Unrecognized tax benefits - January 1   1,163,282     $ 1,163,182  
Gross increases - tax positions in prior period     -       -  
Gross decreases - tax positions in prior period     -       -  
Gross increases - tax positions in current period     -       100  
Settlement     -       -  
Lapse of statute of limitations     -       -  
Unrecognized tax benefits - December 31   $ 1,163,282     $ 1,163,282  

 

TheCompany will recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2018,and 2017, due to the Company’s continued losses, no amounts of interest and penalties have been recognized in the Company’sconsolidated statements of operations. If the unrecognized tax benefits were reversed, a deferred tax asset and correspondingvaluation allowance would be recorded, and thus the reversal would have no impact on the effective rate.

 

TheCompany files income tax returns in the U.S. federal jurisdiction, various state jurisdictions and local jurisdictions. Generally,the Company’s 2015 through 2017 tax years remain open and subject to examination by federal, state and local taxing authorities.However, federal, state, and local net operating losses from 2009 through 2017 are subject to review by taxing authorities inthe year utilized.

 

On December 22, 2017, the President of the UnitedStates signed into law the Tax Cuts and Jobs Act. This legislation makes significant change in U.S. tax law including a reductionin the corporate tax rates to 21% starting in 2018. The legislation reduced the U.S. corporate tax rate from the current rate of35% to 21% for tax years beginning after December 31, 2017. As a result of the enacted law, the Company was required to revaluedeferred tax assets and liabilities existing as of December 31, 2017 from the 35% federal rate in effect through the end of 2017,to the new 21% rate. As a result of the change in law, the company recorded a $13.5 million reduction in the deferred tax assetand corresponding valuation allowance.

Stock Based Compensation
12 Months Ended
Dec. 31, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
STOCK BASED COMPENSATION
8. STOCK BASED COMPENSATION

 

Optionsto directors, officers, consultants and employees

 

TheCompany maintains, as adopted by the board of directors, the 2017 Stock Incentive Plan, the 2016 Stock Incentive Plan, the 2014Stock Incentive Plan, the 2014 Stock Compensation Plan, 2013 Incentive Stock Plan, the 2012 Incentive Stock Plan, the 2011 IncentiveStock Plan and the 2010 Stock Incentive Plan (the “Plans”) providing for the issuance of options to employees, officers,directors or consultants of the Company. Non-qualified stock options granted under the plans may only be granted with an exerciseprice equal to the fair market value of the Company’s common stock on the date of grant.  Awards under the plansmay be either vested or unvested options. The 2017 Stock Incentive Plan authorized 5,000,000 shares with vesting in sixteen equalquarterly tranches.

 

Inaddition to the Plans, the Company has granted, on various dates, stock options to directors, officers, consultants and employeesto purchase common stock of the Company. The terms, exercise prices and vesting of these awards vary. 

 

Thefollowing table summarizes option activity for directors, officers, consultants 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, 2016   1,045,774    2,321,782   $2.31   $1.49    43 
Additional stock reserved   5,000,000    -    -    -    - 
Granted   (1,900,000)   1,900,000    5,01    3.41    72 
Exercised   -    (74,109)   1.13    0.95    - 
Forfeited   -    (296,302)   -    -    - 
Expired   -    -    -    -    - 
Balance December 31, 2017   4,145,774    3,851,371    3.11    1.84    43 
Additional stock reserved   -    -    -    -    - 
Granted   (340,000)   340,000    1.18    0.54    56 
Exercised   -    (52,500)   1.24    0.68    - 
Forfeited   -    -   -    -    - 
Expired   -    (271,250)   3.22    1.58    - 
Balance December 31, 2018   3,805,774    3,867,621   $4.05   $1.84    64 

 

TheCompany recorded approximately $1.1 million and $1.4 million of compensation expense for stock options to directors, officers,consultants and employees for the years ended December 31, 2018 and 2017, respectively. As of December 31, 2018, unrecognizedcompensation expense of $2.4 million is related to non-vested options granted to directors, officers, consultants and employeeswhich is anticipated to be recognized over the next 60 months, commensurate with the vesting schedules.

 

Warrants

 

Inaddition to the stock options above and the stock warrants associated with the Arosa Loan and Marathon Credit Facility previouslydiscussed, the Company has outstanding warrants with certain Accredited Investors. There are 2,618,307 of these warrants outstanding,which were issued in November 2015 with a five-year life and an exercise price of $5.28. These warrants were initially accountedfor as equity instruments and as such, no amounts have been recorded as compensation expense or mark to market adjustment forthe years ended December 31, 2018 and December 31, 2017.

 

The Company recorded no compensation expense for stockwarrants to the placement agent and consultants for the years ended December 31, 2018 and 2017, respectively. There is no unrecognizedcompensation expense for the placement agent warrants because they are fully vested at date of grant.

Recent Pronouncements
12 Months Ended
Dec. 31, 2018
Accounting Changes and Error Corrections [Abstract]  
RECENT PRONOUNCEMENTS
9. RECENT PRONOUNCEMENTS

 

AccountingGuidance Adopted in 2017

 

EffectiveSeptember 30, 2017, we early-adopted FASB ASU 2017-11, “Earnings per Share (Topic 260); Distinguishing Liabilities fromEquity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down RoundFeatures. Part I of ASU 2017-11 simplifies the accounting for certain financial instruments with down round features, a provisionin an equity-linked financial instrument (or embedded feature) that provides a downward adjustment of the current exercise pricebased on the price of future equity offerings. Previous accounting guidance created cost and complexity for organizations thatissue financial instruments with down round features by requiring, on an ongoing basis, fair value measurement of the entire instrumentor conversion option. The new standard requires companies to disregard the down round feature when assessing whether the instrumentis indexed to its own stock, for purposes of determining liability of equity classification. Companies that provide earnings pershare (“EPS”) data will adjust their diluted EPS calculation for the effect of the feature when triggered (i.e., whenthe exercise price of the related equity-linked financial instrument is adjusted downward because of the down round feature) andwill also recognize the effect of the trigger within equity. We applied this guidance on a prospective basis. The primary impactof adoption is that equity-linked financial instruments are less likely to be liability classified than prior to the adoptionof this standard. The adoption of the new standard resulted in warrants issued in September 2017 not being classified as liabilitiesin our Consolidated Financial Statements.

 

AccountingGuidance Adopted in 2018

 

EffectiveJanuary 1, 2018, we adopted FASB ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligationsand Licensing, and affects the guidance in ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU No. 2016-10clarifies the following two aspects of Topic 606: evaluating whether promised goods and services are separately identifiable anddetermining whether an entity’s promise to grant a license provides a customer with either a right to use the entity’sintellectual property, which is satisfied at a point in time, or a right to access the entity’s intellectual property, whichis satisfied over time. The Company adopted ASU No. 2016-10, using the modified retrospective approach, which did not have a materialimpact on the Company’s condensed consolidated financial statements. Additional information is available in Note 4, “Revenue.”

 

EffectiveJanuary 1, 2018, we adopted FASB ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations(Reporting Revenue Gross versus Net), and affects the guidance in ASU No. 2014-09, “Revenue from Contracts with Customers(Topic 606)”. When another party is involved in providing goods or services to a customer, ASU No. 2014-09 requires an entityto 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 inASU No. 2016-08 are intended to improve the operability and understandability of the implementation guidance in ASU No. 2014-09on principal versus agent considerations by offering additional guidance to be considered in making the determination. The Companyadopted ASU No. 2016-08, using the modified retrospective approach, which did not have a material impact on the Company’scondensed consolidated financial statements. Additional information is available in Note 4, “Revenue.

 

AccountingGuidance Not Yet Adopted

 

InFebruary 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires a lessee to recognize in the statement of financialposition a liability to make lease payments (“the lease liability”) and a right-of-use asset representing its rightto use the underlying asset for the lease term, initially measured at the present value of the lease payments. When measuringassets and liabilities arising from a lease, the lessee should include payments to be made in optional periods only if the lesseeis reasonably certain, as defined, to exercise an option to the lease or not to exercise an option to terminate the lease. Optionalpayments to purchase the underlying asset should be included if the lessee is reasonably certain it will exercise the purchaseoption. Most variable lease payments should be excluded except for those that depend on an index or a rate or are in substancefixed payments. A lessee shall classify a lease as a finance lease if it meets any of five listed criteria: 1) The lease transfersownership of the underlying asset to the lessee by the end of the lease term. 2) The lease grants the lessee an option to purchasethe underlying asset that the lessee is reasonably certain to exercise. 3) The lease term is for the major part of the remainingeconomic life of the underlying asset. 4) The present value of the sum of the lease payments and any residual value guaranteedby the lessee equals or exceeds substantially all of the fair value of the underlying asset. 5) The underlying asset is of sucha 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 amortizationof the right-of-use asset. Amortization of the right-of-use asset shall be on a straight-line basis, unless another basis is morerepresentative 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 asingle lease cost on a straight-line basis over the lease term. For leases with a term of 12 months or less, a lessee is permittedto make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lesseemakes 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 publicbusiness entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018. Earlyapplication is permitted. The Company does not expect the adoption of the new guidance to have a material impact on the consolidatedfinancial statements.

Related Parties
12 Months Ended
Dec. 31, 2018
Related Party Transactions [Abstract]  
RELATED PARTIES
11. RELATED PARTIES 

 

TheCompany obtains its business and casualty insurance through Assured Partners LP, which one of our directors, Gerald Budde, is theCFO of the Eastern Region. Mr. Budde did not oversee the transaction as the transaction was not in his region nor was he paid anyportion of the brokerage fee. Assured Partners LP received revenue of approximately $79 thousand on insurance policies totalingapproximately $658 thousand in premiums in 2018.

Subsequent Events
12 Months Ended
Dec. 31, 2018
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS
12.

SUBSEQUENT EVENTS 

 

Thecompany has evaluated subsequent events for potential recognition and disclosures through the date the consolidated financial statementswere filed.

 

Subscription Agreement

 

CommencingFebruary 11, 2019, the “Company entered into and closed Subscription Agreements with accredited investors (the “February2019 Accredited Investors”) pursuant to which the February 2019 Accredited Investors purchased 1,499,684 shares of the Company’scommon stock for a purchase price of $1,365,000. If, prior to the six month anniversary, the Company issues shares of its commonstock for a purchase price per share less than the purchase price paid by the February 2019 Accredited Investors subject to standardcarve-outs (a “Down Round”), the Company will issue additional shares of common stock (for no additional consideration)to the February 2019 Accredited Investors such that the effective purchase price per share is equal to the purchase price pershare paid in the Down Round. Benjamin Samuels and Gerald Budde, directors of the Company, acquired 841,928 and 26,310 sharesof common stock, respectively, as part of this offering, provided, however, their per share purchase was $0.9501, which was abovethe closing price the date prior to close and they did not receive the Down Round protection.

Quarterly Financial Data (Unaudited)
12 Months Ended
Dec. 31, 2018
Quarterly Financial Information Disclosure [Abstract]  
QUARTERLY FINANCIAL DATA (UNAUDITED)
13. QUARTERLY FINANCIAL DATA (UNAUDITED) 

 

   Sales   Gross Loss   Net Loss   Basic and diluted loss per share 
2018                
First Quarter  $560,229   $(1,154,141)  $(6,417,806)  $(0.16)
Second Quarter   170,684    (1,485,221)   (6,909,297)   (0.18)
Third Quarter   10,997    (1,465,825)   (5,485,553)   (0.12)
Fourth Quarter   21,263    (11,085,205)   (17,689,660)   (0.28)
2017                    
First Quarter   1,570,037    (2,742,051)   (7,920,606)   (0.24)
Second Quarter   252,000    (743,925)   (9,178,700)   (0.26)
Third Quarter   3,066,000    (4,492,082)   (12,412,088)   (0.35)
Fourth Quarter   5,150,423    (6,500,345)   (11,705,394)   (0.32)
Summary of Business and Significant Accounting Principles (Policies)
12 Months Ended
Dec. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Nature of operations and principles of consolidation

Natureof operations and principles of consolidation

 

Workhorse Group Inc. and its predecessor companies(“Workhorse”, the “Company”, “we”, “us” or “our”) is a technology companyfocused on providing sustainable and cost-effective solutions to the commercial transportation sector. As an American manufacturer,we design and build high performance battery-electric vehicles and aircraft that make movement of people and goods more efficientand less harmful to the environment. As part of our solution, we also develop cloud-based, real-time telematics performance monitoringsystems that enable fleet operators to optimize energy and route efficiency. Although we operate as a single unit through our subsidiaries,we approach our development through two divisions, Automotive and Aviation. We are currently focused on our core competency ofbringing the N-GEN electric cargo van to market and fulfilling our existing backlog of orders. We are also exploring other opportunitiesin monetizing our intellectual property which could include a sale, license or other arrangement of assets that are outside ofour core focus.

 

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

Basis of presentation

Basis of presentation

 

The financial statements have been prepared on a goingconcern 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. Our existing capitalresources will be insufficient to fund our operations through the first half of 2019. Unless and until we are able to generatea sufficient amount of revenue, reduce our costs and/or enter a strategic relationship, we expect to finance future cash needsthrough public and/or private offerings of equity securities and /or debt financings. If we are not able to obtain additional financingand/or substantially increase revenue from sales, we will be unable to continue as a going concern. These conditions raise substantialdoubt about the ability of the Company to continue as a going concern.

 

Inview 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 carryout its future operations. The financial statements do not include any adjustments to the amount and classification of assetsand liabilities that may be necessary, should the Company not continue as a going concern.

  

TheCompany has continued to raise capital.  Management believes the proceeds from these offerings, future offerings, andthe Company’s anticipated revenue, provides an opportunity to continue as a going concern.  If additional fundingis required, the Company plans to obtain working capital from either debt or equity financing from the sale of common, preferredstock, and/or convertible debentures. Obtaining such working capital is not assured. The Company is currently in a productionramp up mode and placing greater emphasis on manufacturing capability.

 

Thepreparation of financial statements in conformity with generally accepted accounting principles requires management to make estimatesand assumptions that affect the amounts reported in the financial statements and accompanying notes.  Actual resultscould differ from these estimates.

 

Certainreclassifications were made to the prior year financial statements to conform to the current year presentation. These reclassificationshad no effect on previously reported results of operation or stockholders’ equity.

Financial instruments

Financialinstruments

 

Thecarrying amounts of financial instruments including cash, inventory, accounts payable and short-term debt approximate fair valuebecause of the relatively short maturity of these instruments.

Accounts receivable

Accountsreceivable

 

Accountsreceivable consist of collectible amounts for products and services rendered. The Company carries its accounts receivable at invoiceamount less an allowance for doubtful accounts. On a periodic basis, the Company evaluates its accounts receivable and establishesan allowance for doubtful accounts based on a history of past write-offs and collections and current credit conditions. The Companygenerally does not require collateral for accounts receivable. Sales to our top two customers totaled 0% and 33% for the yearended December 31, 2018 and 98% and 0% for the year ended December 31, 2017.

Lease Receivable

LeaseReceivable

 

TheCompany’s leasing activities consist of the leasing of trucks which are classified as direct financing leases.  Revenueis recognized at the inception of the lease.  The leases have a term of eight years.  Future payments to be receivedon the leases are as follows:

 

2019  $48,271 
2020   41,375 
2021   41,375 
2022   41,375 
2023   41,375 
Thereafter   32,590 
   $246,361 
Inventory

Inventory

 

Inventory is stated at the lower of cost or net realizablevalue. Manufactured inventories are valued at standard cost, and consist of raw materials, work in process and finished goods.

Property, plant and equipment, net

Property,plant and equipment, net

 

Property,plant and equipment, net is stated at cost less accumulated depreciation.  Major renewals and improvements are capitalizedwhile replacements, maintenance and repairs, which do not improve or extend the lives of the respective assets, are expensed.When property, plant and equipment is retired or otherwise disposed of, a gain or loss is realized for the difference betweenthe net book value of the asset and the proceeds realized thereon. Depreciation is calculated using the straight-line method,based upon the following estimated useful lives:

 

Buildings:   15 - 39 years 
Leasehold improvements:   7 years 
Software:   3- 6 years 
Equipment:   5years 
Vehicles and prototypes:   3- 5 years 
Common stock

Commonstock

 

OnApril 22, 2010, the directors of the Company approved a forward stock split of the common stock of the Company on a 14:1 basis.  OnMay 12, 2010, the stockholders of the Company voted to approve the amendment of the certificate of incorporation resulting ina decrease of the number of shares of common stock.   Management filed the certificate of amendment decreasing the authorizedshares of common stock with the State of Nevada on September 8, 2010. On February 11, 2015, the Company filed a certificate ofamendment to its articles of incorporation to increase the authorized shares of common stock to 50,000,000.

 

OnDecember 9, 2015, the Company filed a Certificate of Amendment to its Certificate of Incorporation to implement a one-for-tenreverse split of the Corporation’s issued and outstanding common stock (the “Reverse Stock Split”), as authorizedby the stockholders 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 stock were combinedinto one newly issued share of common stock. No fractional shares were issued in connection with the Reverse Stock Split. Totalcash payments made by the Company to stockholders in lieu of fractional shares was not material.

 

OnAugust 7, 2017, the shareholders of the Company voted to increase the authorized shares of common stock to 100,000,000 and theCertificate of Amendment amending the Articles of Incorporation was filed with the State of Nevada on August 8, 2018.

 

Allreferences in the financial statements and MD&A to number of common shares, price per share and weighted average shares ofcommon stock have been adjusted to reflect the Reverse Stock Split on a retroactive basis for all prior periods presented, unlessotherwise noted, including reclassifying an amount equal to the reduction in par value of common stock to additional paid in capital.

 

Thecapital stock of the Company is as follows:

 

PreferredStock - The Company has authorized 75,000,000 shares of preferred stock with a par value of $.001 per share. These sharesmay be issued in series with such rights and preferences as may be determined by the Board of Directors. There are no sharesof preferred stock outstanding.

 

CommonStock - The Company has authorized 100,000,000 shares of common stock with a par value of $0.001 per share as of December 31,2018.

Income taxes

Incometaxes

 

As no taxable income has occurred from the date ofthis merger to December 31, 2018 cumulative deferred tax assets of approximately $29.6 million are fully reserved, and noprovision or liability for federal or state income taxes has been included in the financial statements. Carryover amountsare:

 

Approximate net operating loss
($ millions)
  Carryover to be used against taxable
income generated through year
     
4.0   2030
6.7   2031
3.9   2032
4.6   2033
6.0   2034
8.9   2035
17.9   2036
38.5   2037
23.5   Indefinite
Research and development costs

Researchand development costs

 

TheCompany expenses research and development costs as they are incurred. Research and Development costs were approximately $7.4 millionand $18.1 million for the years ended December 31, 2018 and 2017, respectively, consisting primarily of personnel costs forour teams in engineering and research, prototyping expense, and contract and professional services.

Basic and diluted loss per share

Basicand diluted loss per share

 

Basicloss per share is computed by dividing net loss available to common shareholders (numerator) by the weighted average number ofshares outstanding (denominator) during the period.  For all periods, all of the Company’s common stock equivalentswere excluded from the calculation of diluted loss per common share because they were anti-dilutive, due to the Company’snet losses.

Stock based compensation

Stockbased compensation

 

The Company accounts for its stock-based compensationin accordance with “Share-Based Payments” (codified in FASB ASC Topic 718 and 505). The Company recognizesin its consolidated statement of operations the grant-date fair value of stock options and warrants issued to employees and non-employeesover the option or warrant’s vesting period.  The fair value is estimated on the date of grant using a Black-Scholesvaluation model that uses assumptions concerning expected volatility, expected term, and the expected risk-free rate of return.  Forthe awards granted, the expected volatility was estimated by management as 50% based on results from other public companies inour industry.  The expected term of the awards granted was assumed to be the contract life of 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 onmarket yields in effect on the date of each grant for United States Treasury debt securities with a maturity equal to the expectedterm of the award.

Subsequent events

Subsequentevents

 

The company has evaluated subsequent events for potential recognition and disclosures through the date theconsolidated financial statements were filed.

Summary of Business and Significant Accounting Principles (Tables)
12 Months Ended
Dec. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Schedule of future lease receivable
2019  $48,271 
2020   41,375 
2021   41,375 
2022   41,375 
2023   41,375 
Thereafter   32,590 
   $246,361 
Schedule of estimated useful lives of property, plant and equipment
Buildings:   15 - 39 years 
Leasehold improvements:   7 years 
Software:   3- 6 years 
Equipment:   5years 
Vehicles and prototypes:   3- 5 years 
Schedule of income taxes
Approximate net operating loss
($ millions)
  Carryover to be used against taxable
income generated through year
     
4.0   2030
6.7   2031
3.9   2032
4.6   2033
6.0   2034
8.9   2035
17.9   2036
38.5   2037
23.5   Indefinite
Inventory (Tables)
12 Months Ended
Dec. 31, 2018
Inventory Disclosure [Abstract]  
Schedule of inventory
   2018   2017 
Raw materials  $4,319,637   $3,205,618 
Work in process   702,079    1,416,324 
Finished goods   -    - 
    5,021,716    - 
Less: Inventory reserve   2,488,100    - 
   $2,533,616   $4,621,942 
Revenue (Tables)
12 Months Ended
Dec. 31, 2018
Revenue Recognition and Deferred Revenue [Abstract]  
Schedule of disaggregation of revenue
   Year Ended
December 31,
 
   2018   2017 
         
Automotive  $498,000   $10,038,460 
Aviation   -    - 
Other   265,173    - 
Total revenues  $763,173   $10,038,460 
Property, Plant and Equipment, Net (Tables)
12 Months Ended
Dec. 31, 2018
Property, Plant and Equipment [Abstract]  
Schedule of property, plant and equipment
   2018   2017 
Land  $700,000   $700,000 
Buildings   5,900,000    5,900,000 
Leasehold Improvements   19,236    19,225 
Software   102,367    86,050 
Equipment   836,646    829,742 
Vehicles and prototypes   86,679    156,567 
    7,644,928    7,691,584 
Less accumulated depreciation   (2,407,477)   (2,095,571)
   $5,237,451   $5,596,013 
Long-Term Debt (Tables)
12 Months Ended
Dec. 31, 2018
Debt Disclosure [Abstract]  
Schedule of long-term debt
   December 31,
2018
   December 31,
2017
 
Marathon Tranche I Loan, due December 31, 2021, interest only quarterly payments, variable interest rate of 10.4% as of December 31, 2018 (discount is based on warrant valuation of approximately 9.7%)  $10,000,000   $- 
Marathon Credit Agreement unamortized discount and issuance costs   (1,687,921)   - 
Net Marathon Credit Agreement   8,312,079      
Senior Secured Notes, due July 6, 2018 (discount is based on imputed interest rate of 26%)   -    5,750,000 
Less: unamortized discount and debt issuance costs on Senior Secured Notes   -    (987,500)
Net Senior Secured Notes   -    4,762,500 
Secured mortgage payable, due November 2026, to Bank for 100 Commerce Drive building, interest rate 6.5%, due in monthly installments of $11,951, inclusive of principal and interest   -    1,741,378 
Note payable, former building owner interest payment only due in monthly installments of $1,604 interest at 5.5%. A balloon payment of $350,000 plus unpaid interest due August 2018.   -    350,000 
    8,312,079    6,853,878 
Less current portion   -    5,143,997 
Long-term debt  $8,312,079   $1,709,881 
Schedule of aggregate maturities of long-term debt
2019   - 
2020   1,000,000 
2021   9,000,000 
2022   - 
2023   - 
Thereafter   - 
    10,000,000 
Schedule of issue additional warrants

Principal amounts:  At December 31,
2018
 
Principal  $10,000,000 
Unamortized debt discount and issuance costs (1)   (1,687,921)
Net debt carrying amount  $8,312,079 
Carrying amount of warrant the liability component (2)  $965,747 

 

  (1) Includes the unamortized portion of the initial warrant liability of $965,747 and issuance costs of $722,174.

 

  (2) Includes marked to market liability of initial Marathon warrant liability.
Income Taxes (Tables)
12 Months Ended
Dec. 31, 2018
Income Tax Disclosure [Abstract]  
Schedule of components of loss before income taxes
   2018    2017 
           
Current Federal   -    - 
Current State & Local   -    - 
    Total Current   -    - 
           
Deferred Federal   -    - 
Deferred State & Local   -    - 
    Total Deferred   -    - 
           
Total   -    -
Schedule of reconciliation of the statutory federal income tax
  12/31/2018  12/31/2017
       
Federal tax benefit at statutory rates  21.0%  35.0%
State and local tax at statutory rate  0.8%  0.6%
Mark-to-Market Adjustment on Stock Warrants  1.5%  0.0%
Other permanent differences and credits  0.0%  (0.1)%
Change in valuation allowance  (23.3)%  (35.5)%
       
Total tax expense  0.0%  0.0%
Schedule of deferred tax assets and liabilities
   2018   2017 
Deferred Tax Assets:        
Accrued Expenses & Reserves  $850,857   $308,116 
Warranty Allowance   1,539,765    31,097 
Non-Qualified Stock Options   1,034,261    796,999 
Fixed Assets   183,917    170,072 
Disallowed Interest Expense   1,118,212    - 
Net Operating Losses   24,818,785    19,729,451 
Total Deferred Tax Assets   29,545,797    21,035,735 
Valuation Allowance   (29,545,797)   (21,035,735)
Total Deferred Tax Assets, net of valuation allowance  $-   $- 
Schedule of reconciliation of unrecognized tax benefits
  2018     2017  
             
Unrecognized tax benefits - January 1   1,163,282     $ 1,163,182  
Gross increases - tax positions in prior period     -       -  
Gross decreases - tax positions in prior period     -       -  
Gross increases - tax positions in current period     -       100  
Settlement     -       -  
Lapse of statute of limitations     -       -  
Unrecognized tax benefits - December 31   $ 1,163,282     $ 1,163,282  
Stock Based Compensation (Tables)
12 Months Ended
Dec. 31, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Schedule of summarizes of option activity
       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, 2016   1,045,774    2,321,782   $2.31   $1.49    43 
Additional stock reserved   5,000,000    -    -    -    - 
Granted   (1,900,000)   1,900,000    5,01    3.41    72 
Exercised   -    (74,109)   1.13    0.95    - 
Forfeited   -    (296,302)   -    -    - 
Expired   -    -    -    -    - 
Balance December 31, 2017   4,145,774    3,851,371    3.11    1.84    43 
Additional stock reserved   -    -    -    -    - 
Granted   (340,000)   340,000    1.18    0.54    56 
Exercised   -    (52,500)   1.24    0.68    - 
Forfeited   -    -   -    -    - 
Expired   -    (271,250)   3.22    1.58    - 
Balance December 31, 2018   3,805,774    3,867,621   $4.05   $1.84    64 
Quarterly Financial Data (Unaudited) (Tables)
12 Months Ended
Dec. 31, 2018
Quarterly Financial Information Disclosure [Abstract]  
Schedule of quarterly financial data
   Sales   Gross Loss   Net Loss   Basic and diluted loss per share 
2018                
First Quarter  $560,229   $(1,154,141)  $(6,417,806)  $(0.16)
Second Quarter   170,684    (1,485,221)   (6,909,297)   (0.18)
Third Quarter   10,997    (1,465,825)   (5,485,553)   (0.12)
Fourth Quarter   21,263    (11,085,205)   (17,689,660)   (0.28)
2017                    
First Quarter   1,570,037    (2,742,051)   (7,920,606)   (0.24)
Second Quarter   252,000    (743,925)   (9,178,700)   (0.26)
Third Quarter   3,066,000    (4,492,082)   (12,412,088)   (0.35)
Fourth Quarter   5,150,423    (6,500,345)   (11,705,394)   (0.32)
Summary of Business and Significant Accounting Principles (Details)
Dec. 31, 2018
USD ($)
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
2019 $ 48,271
2020 41,375
2021 41,375
2022 41,375
2023 41,375
Thereafter 32,590
Total lease receivable $ 246,361
Summary of Business and Significant Accounting Principles (Details1)
12 Months Ended
Dec. 31, 2018
Buildings [Member] | Minimum [Member]  
Property, Plant and Equipment [Line Items]  
Estimated useful lives 15 years
Buildings [Member] | Maximum [Member]  
Property, Plant and Equipment [Line Items]  
Estimated useful lives 39 years
Leasehold improvements [Member]  
Property, Plant and Equipment [Line Items]  
Estimated useful lives 7 years
Software [Member] | Minimum [Member]  
Property, Plant and Equipment [Line Items]  
Estimated useful lives 3 years
Software [Member] | Maximum [Member]  
Property, Plant and Equipment [Line Items]  
Estimated useful lives 6 years
Equipment [Member]  
Property, Plant and Equipment [Line Items]  
Estimated useful lives 5 years
Vehicles and prototypes [Member] | Minimum [Member]  
Property, Plant and Equipment [Line Items]  
Estimated useful lives 3 years
Vehicles and prototypes [Member] | Maximum [Member]  
Property, Plant and Equipment [Line Items]  
Estimated useful lives 5 years
Summary of Business and Significant Accounting Principles (Details 2)
Dec. 31, 2018
USD ($)
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Net operating losses available for 2030 $ 4,000,000
Net operating losses available for 2031 6,700,000
Net operating losses available for 2032 3,900,000
Net operating losses available for 2033 4,600,000
Net operating losses available for 2034 6,000,000
Net operating losses available for 2035 8,900,000
Net operating losses available for 2036 17,900,000
Net operating losses available for 2037 38,500,000
Net operating losses available for Indefinite $ 23,500,000
Summary of Business and Significant Accounting Principles (Details Textual)
1 Months Ended 12 Months Ended
Apr. 22, 2010
Dec. 31, 2018
USD ($)
Customer
$ / shares
shares
Dec. 31, 2017
USD ($)
Customer
$ / shares
shares
Aug. 07, 2017
shares
Feb. 11, 2015
shares
Summary of Business and Significant Accounting Principles (Textual)          
Leases receivable, term   8 years      
Forward stock split 14:1        
Number of authorized shares of common stock   100,000,000 100,000,000    
Common stock, par value | $ / shares   $ 0.001 $ 0.001    
Preferred stock, par value | $ / shares   $ 0.001 $ 0.001    
Number of authorized shares of preferred stock   75,000,000 75,000,000    
Cumulative deferred tax assets | $   $ 29,600,000      
Research and development | $   $ 7,391,693 $ 17,737,737    
Expected volatility rate of stock   50.00%      
Common Stock [Member]          
Summary of Business and Significant Accounting Principles (Textual)          
Number of authorized shares of common stock         50,000,000
Shareholders [Member]          
Summary of Business and Significant Accounting Principles (Textual)          
Number of authorized shares of common stock       100,000,000  
Net sales [Member] | One Customer [Member]          
Summary of Business and Significant Accounting Principles (Textual)          
Concentration risk, percentage   0.00% 98.00%    
Number of customers | Customer   2 2    
Net sales [Member] | Two Customers [Member]          
Summary of Business and Significant Accounting Principles (Textual)          
Concentration risk, percentage   33.00% 0.00%    
Number of customers | Customer   2 2    
Inventory (Details) - USD ($)
Dec. 31, 2018
Dec. 31, 2017
Components of inventories    
Raw Materials $ 4,319,637 $ 3,205,618
Work in Process 702,079 1,416,324
Finished Goods
Inventory Gross 5,021,716  
Less: Inventory reserve 2,488,100
Inventory, Total $ 2,533,616 $ 4,621,942
Inventory (Details Textual) - USD ($)
Dec. 31, 2018
Dec. 31, 2017
Inventory Disclosure [Abstract]    
Inventory reserve $ 2,488,100
Revenue (Details) - USD ($)
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Total revenues $ 763,173 $ 10,038,460
Automotive [Member]    
Total revenues 498,000 10,038,460
Aviation [Member]    
Total revenues
Other [Member]    
Total revenues $ 265,173
Property, Plant and Equipment, Net (Details) - USD ($)
Dec. 31, 2018
Dec. 31, 2017
Property, plant and equipment, gross $ 7,644,928 $ 7,691,584
Less accumulated depreciation (2,407,477) (2,095,571)
Property, plant and equipment, net 5,237,451 5,596,013
Land [Member]    
Property, plant and equipment, gross 700,000 700,000
Buildings [Member]    
Property, plant and equipment, gross 5,900,000 5,900,000
Leasehold Improvements [Member]    
Property, plant and equipment, gross 19,236 19,225
Software [Member]    
Property, plant and equipment, gross 102,367 86,050
Equipment [Member]    
Property, plant and equipment, gross 836,646 829,742
Vehicles and prototypes [Member]    
Property, plant and equipment, gross $ 86,679 $ 156,567
Long-Term Debt (Details) - USD ($)
Dec. 31, 2018
Dec. 31, 2017
Debt Instrument [Line Items]    
Less: unamortized discount and debt issuance costs on Senior Secured Notes $ (987,500)
Net Senior Secured Notes 5,750,000
Long term debt 8,312,079 6,853,878
Less current portion 5,143,997
Long-term debt 8,312,079 1,709,881
Marathon Tranche I Loan [Member]    
Debt Instrument [Line Items]    
Marathon Tranche I Loan, due December 31, 2021, interest only quarterly payments, variable interest rate of 10.4% as of December 31, 2018 (discount is based on warrant valuation of approximately 9.7%) 10,000,000  
Marathon Credit Agreement unamortized discount and issuance costs (1,687,921)  
Long term debt 8,312,079  
Secured mortgage payable [Member]    
Debt Instrument [Line Items]    
Long term debt 1,741,378
Note Payable, Former Building Owner [Member]    
Debt Instrument [Line Items]    
Long term debt   350,000
Senior Secured Notes [Member]    
Debt Instrument [Line Items]    
Senior Secured Notes, due July 6, 2018 (discount is based on imputed interest rate of 26%)   5,750,000
Less: unamortized discount and debt issuance costs on Senior Secured Notes (987,500)
Net Senior Secured Notes $ 4,762,500
Long-Term Debt (Details 1)
Dec. 31, 2018
USD ($)
Long-term Debt  
2019
2020 1,000,000
2021 9,000,000
2022
2023
Thereafter
Aggregate maturities of long-term debt $ 10,000,000
Long-Term Debt (Details 2) - USD ($)
Dec. 31, 2018
Dec. 31, 2017
Principal amounts:    
Principal $ 10,000,000  
Unamortized debt discount and issuance costs (1,687,921) [1] $ (4,762,500)
Net debt carrying amount 8,312,079 $ 6,853,878
Carrying amount of the liability component [2] $ 965,747  
[1] Includes the unamortized portion of the initial warrant liability of $965,747 and issuance costs of $722,174.
[2] Includes marked to market liability of initial Marathon warrant liability.
Long-Term Debt (Details Textual)
1 Months Ended 12 Months Ended
Jul. 06, 2018
USD ($)
$ / shares
shares
Jun. 07, 2018
USD ($)
Aug. 02, 2018
USD ($)
Dec. 26, 2017
USD ($)
Dec. 31, 2018
USD ($)
Customer
$ / shares
shares
Dec. 31, 2017
USD ($)
Oct. 01, 2018
$ / shares
shares
Aug. 14, 2018
$ / shares
shares
Long-Term Debt (Textual)                
Aggregate principal amount         $ 10,000,000      
Amortization expense         $ 3,610,589    
Related parties notes, description         Assured Partners LP received revenue of approximately $79 thousand on insurance policies totaling approximately $658 thousand in premiums in 2018.       
Issuance costs         $ 70,047      
Credit agreement, description         In addition to other items, require the Company to maintain (i) minimum liquidity of at least $4 million at all times on or after March 31, 2019, (ii) a maximum total leverage ratio (ratio of total debt borrowed by the Company to EBITDA for the four consecutive fiscal quarters most recently ended, subject to certain adjustments set forth in the Credit Agreement) not to exceed 4.50:1.00 on the last day of the quarter ended September 30, 2019, which total leverage ratio is adjusted for subsequent quarters as set forth in the Credit Agreement and (iii) a maximum debt service coverage ratio (ratio of EBITDA (for the four consecutive fiscal quarters most recently ended, subject to certain adjustments set forth in the Credit Agreement) to interest expense and payments for operating leases) not to exceed 1.25:1.00