Ladies and gentlemen, greetings, and welcome to Workhorse Group's First Quarter 2018 Investor Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Workhorse President and Chief Operating Officer, Mr. Duane Hughes. Thank you. Mr. Hughes, you may begin.

Thank you, and good afternoon, everyone. We appreciate you for taking the time to join us for our call. After the market closed, we issued a press release and filed our Form 10-Q with our results for the first quarter ended March 31, 2018. Copies of both documents are available in the Investor Relations section of our website. In a few moments, our CFO, Paul Gaitan, will provide a brief update on our financials. And then Paul will turn the call over to Steve Burns, our CEO, who will provide an update on our business, touch on some of our operational highlights from the quarter as well as discuss some of our recent progress. But before we begin, I want to call your attention to our safe harbor provision for forward-looking statements that is posted on our website and is part of our year-end update. The safe harbor provision identifies risk factors that may cause actual results to differ materially from the content of our forward-looking statements. Our 2017 Form 10-K and other periodic filings on file with the SEC provide further detail about the risk factors relating to our business. And with that, I would like to turn the call over to our CFO, Paul Gaitan. Paul?

Thank you, Duane. As we indicated in our last call, we are focused on the preparation for launching our higher volume N-GEN and W-15 platforms in the third and fourth quarters of 2018 with an emphasis to improve upon our ongoing operations and income statement. In Q1, we shipped 5 units with another 110 and growing in our current backlog. Sales for the first quarter of 2018 were recorded at $560,000, down from $1.6 million in the same period of 2017. This was also a drop from our record performance in Q4 2017, where we demonstrated our improved production capability. The net loss in the first quarter of 2018 was also down compared to Q1 2017, from a loss of $7.9 million or $0.31 per basic and diluted share to $6.4 million loss or $0.16 per basic and diluted share. This is due primarily to more favorable gross profit. Now before I turn the call over to Steve, I'd like to take a minute to address a few 2017 items. First, as you may have seen from the Form 8-K that we filed today, we recently encountered 2 issues in our reported full year 2017 consolidated financial statements and have made the determination that they should be restated. We found that the accrued liabilities account on the December 31, 2017, consolidated balance sheet was actually over accrued by $700,000, which was caused by applying an improper and higher rate of allowance to the number of vehicles that had been sold during the effective period. In addition, we had an in-transit shipment of inventory that was not properly recognized on our balance sheet and caused our expense to be overstated. We now have additional internal controls in place to assure that those items will not occur again. Coinciding with the 8-K filing, we have filed the 10-K/A with the SEC reflecting these corrections. We did not have any reason to believe that there are further issues beyond those just discussed. Second, we also recently announced the financing agreement, which I will elaborate on briefly here. At the end of April, we announced the closing of a private placement of 531,066 shares of the company's common stock at an average price of $2.72 for gross proceeds of $1.44 million. The private placement was led by existing investors and insiders, including Workhorse Chief Executive Officer and Director, Steve Burns; as well as H. Benjamin Samuels and Gerald Budde, who are also Directors of the company. This is a tremendous vote of confidence by Workhorse stakeholders. This additional capital is intended to strengthen our balance sheet to allow us to continue the pursuit of our near-term company objectives. For additional information regarding the restatement and private placement agreement, please reference their respective Form 8-Ks, all of which have been filed with the SEC. Now I'll turn it over to Steve. Steve?

Thanks, Paul, and good afternoon to everyone who is joining us on the call today. This afternoon, we issued a press release as well as filed our Form 10-Q with the SEC, both of which discuss in detail the results of our operations from the quarter. I recommend going through those materials to get more color on some of the information we'll be discussing today. For the purpose of this afternoon's call, I plan to provide commentary on our substantial achievements through the first quarter and beyond. I will also discuss some of the key operational highlights since our last call about two months ago, broken down into our various vehicle and aircraft segments. And now I'll provide a brief outlook before we turn it over to questions. It is clear 2018 is about evolution for Workhorse, including the first quarter. The evolution begins with our transition towards the next-generation N-GEN electric delivery van platform and the W-15 electric pickup truck. The N-GEN has been operating for the last few weeks on real-world routes 7 days a week in the San Francisco Bay area. The N-GEN chassis is also designed to be used with the W-15 electric pickup truck. This approach provides us with scalability and reduced costs as we move towards high-volume production. And as if that's not enough, Workhorse has made undeniable progress with the SureFly, perhaps the first-ever FAA experimental-approved vertical take-off and landing aircraft that has flown with a pilot. And even more, the real-world HorseFly drone deliveries that are happening on a daily basis here in Americas currently. It is without a doubt that Workhorse is executing on some of America's first, not to mention most innovative technologies. I truly believe this will change the way the world works. We made a clear decision to…

[Operator Instructions] Your first question comes from Thomas Boyes with Cowen and Company. Please state your question.

Couple of quick ones for me. How should we think about the operating expense for the company over the next several quarters? I know it's been higher just because of the R&D and getting the prototyping done and then on the legal expense side, just getting the SureFly's spin-off set. Absent those items, what, kind of, will be a better run rate do you think for that over the next couple of quarters?

Paul, you want to take that one?

We try to flex our SG&A and R&D with the funds available. And at the same time, we realize that we have to -- make sure we don't get too far behind the curve. So for instance, some of the SG&A staffing that we've added to make things a little more robust for us in the finance area and in our compliance support are absolutely key for us if we're going to have a delivery vehicle platform that's good for all 50 states and meeting all of the regulatory issues. At the same time, on the SG&A side, as we grow larger, our operations are going to become more and more complex. We spoke about our ERP coming online. That came up a little over a year ago. And since then, we've implemented our inventory and purchasing modules and manufacturing modules. So those are all the things that you really need to have to be a larger company, targeting where we're at, where we're talking and set up hundreds of units, thousands of units a year.

One of the other things too, is just discussing the W-15 pickup truck. Looking at the bill of materials for that vehicle, is there anything that you could identify as the biggest component there that you have headroom for improvements as far as cost reduction? Or is it really getting to that gross margin breakeven or gross margin positive stance really just completely made on volume scale?

So it was kind of a dual effort that got the product gross part -- gross margin for us -- gross margin positive. Engineering, the cost down, best we could, given all the learnings from the 3 million miles we've done. And then coupled with, in the end, you've got to have some volume, which is why we just made the conscious decision not to build in orders of 50 and a 100 at a time. Just you can't get there. So the combination too, we're very proud of the engineering effort. And it's a supplier - the supply chain is critical. They have to work with you both on product. And they have to believe you're going to have volume in order to -- for them to tool up. So it's an orchestrated dance. It's a tough dance, but that's, that's the most exciting part. We are -- to have clarity on your supply chain, your engineering, your regulatory, your assembly plant, all the things that go into this, have that all teed up and that's we are singularly focused on getting to volume.

And then just one last one for me. Given that the N-GEN is now out in the wild in San Francisco, kind of, being used, what are really the gating factors for the pickup truck? The punch list of things that you need to be taking down in order to see that kind of hit that same mark?

Yes, the reason the N-GEN came out first, it's although they're the same platform underneath, the pickup truck is a more complicated vehicle only because it's a 5-passenger vehicle with all the regulatory that goes around that. And what people expect from a modern-day pickup is a lot. So very, very rough and tumble. So we - and the other thing is the N-GEN, because it's geared for delivery folks, which have defined routes for the most part, the all-electric engine is more popular than the hybrid or the range-extended engine. In the pickup truck, it only comes as a range extender. So having two powertrains underneath, it's just more complicated, and the regulatory really kicks in a lot when you have gasoline on board. So that's the reason for the, kind of, staggered approach. But having the underpinnings, the same chassis, the same brakes, the same steering columns, the same electric motors, the same -- a lot of the same is -- those are leverages you dream of and you have to do that consciously way upfront. So we started that effort way upfront when we started the post office design.

[Operator Instructions] Our next question comes from Carter Driscoll with FBR. Please state your question.

This is Carson Sippel on for Carter Driscoll. And I was wondering, have you explored any partnerships or development opportunities in Class 7 and 8 vehicles? And if so, do you think hydrogen fuel cells will play a role here?

Carson, this is Steve. I'll take a stab at that. We are -- we had to dial down the innovation meter and new product meters so that we can get to market with these and get profitable. But with all the, kind of, electric semis coming out, we really think we could play a hand in there. But we're going to wait until we got on top of the pickup truck before we do that, but it is a viable market. We do have a hydrogen truck on route with FedEx. We're using a partner's fuel cell on that. And in package delivery, it's -- the infrastructure might not be there, the fueling infrastructure for hydrogen, but certainly, on a highway, there's a lot of people threatening them to do it. So it could be a viable thing. We wanted to have our hand in there. Essentially a hydrogen fuel cell vehicle is really an electric vehicle. Hydrogen acts as a basically a charging mechanism for the battery pack. So the underlying everything is on electric vehicle, and that's what we have. So switching now to internal combustion generator or range extender for a hydrogen one, we wanted to make sure we have the ability to do that, if that is a direction some fleets want to go. But hydrogen has ebbed and flowed for 20 years. We just -- we don't want to be in the prediction game of when it happens. We just want to be ready in case it happens.

[Operator Instructions] Our next question comes from [Mike Silivan] with Maxim Group. Please state your question.

Steve, a question. I know we're making package deliveries. The revenues from the package delivery side and the ramp that hopefully we're seeing, are those included in the numbers for the quarter? Or do we see them going forward? And the other question is as far as the drone delivery, are we planning on monetizing -- we have the patent from a drone delivery, from a truck. How do we monetize that side of the business?

I don't know - as far as the revenue from the package delivery from the San Francisco effort, it's fairly small, of course, it's only one truck, expanding to two next week. So I don't know if Paul is breaking that out separately. Are you, Paul?

No. It's immaterial in our revenue number.

On the drone side, Mike, it's a great question. But again, a drone to supplement a package car, a package truck on top of it, it eliminates a lot of driver cost on a particular package delivery. It uses $0.03 a mile electricity. So almost, almost -- I mean, it's just phenomenally less expensive, but again, it's got to be coupled with a truck. Having a driver close by within a mile or two is what the FAA likes to see. That's why we're not flying these from a warehouse or anything like that. But we think it's the perfect combination to really bring the first meaningful change. We're electrifying the fleet, right? But it's still a truck with 4 wheels going door to door. And which has been refined to nth degree over these 100 years of doing that. So drone delivery represents -- and I think everybody's aware, it's not a long shot to say that package delivery is only going to increase, right? Last-mile delivery vehicles and mechanisms and people are one of the fastest-growing segments. And we find ourselves as the only electric package delivery truck company in United States, and also of course, the only one with a drone on the top. And that's protectively the patent you're speaking of. So we think we're well positioned. And we don't have to wait for the market to come. The market is right in the middle of this huge disruption of how last-mile delivery happens. And just we think we are really well positioned for it.

At this time, this concludes the company's question-and-answer session. If your question was not taken, you may contact Workhorse's Investor Relations team at WKHS@liolios.com. I'd now like to turn the call back over to Mr. Burns for his closing remarks.

Just like to again thank everyone that supports us and follows us, and we're excited about the future.

Thank you. This concludes today's conference call. All parties may disconnect. Have a great day.