Workhorse Group Inc. Form 8-K Summary
Business Context and Reporting Period
Workhorse Group Inc. (WKHS) filed this Current Report on Form 8-K on June 6, 2019, covering events occurring between May 31, 2019, and June 5, 2019. The Company, incorporated in Nevada and trading on the Nasdaq Capital Market, announced a private placement of equity securities and the termination of a prior sales agreement.
Key Financial Metrics and Transaction Details
The filing details a capital raise rather than operational financial results. Key transaction metrics include:
- Total Aggregate Purchase Price: $25,000,000.
- Securities Issued: 1,250,000 units consisting of Series B Preferred Stock and Common Stock Purchase Warrants.
- Preferred Stock Stated Value: $20.00 per share.
- Dividend Rate: 8.0% simple interest per annum, payable quarterly in common stock.
- Warrant Exercise Price: $1.62 per share (7.41 warrants per unit).
- Closing Schedule: Approximately $15,000,000 closed on May 31, 2019; the remaining $10,000,000 scheduled to close on June 10, 2019.
The filing does not provide current revenue, profit, cash flow, or debt levels outside of the reference to an existing Credit Agreement dated December 31, 2018.
Material Changes and Agreements
Material changes reported in this filing include:
- Entry into Material Definitive Agreement: Subscription Agreements with institutional investors for the $25 million private placement.
- Unregistered Sales of Equity: Issuance of Series B Preferred Stock and Warrants to accredited investors under Section 4(a)(2) and Rule 506 exemptions.
- Termination of Prior Agreement: Termination of the At-the-Market Offering Sales Agreement with Cowen and Company, LLC, effective April 23, 2019.
Outlook, Risks, and Contingencies
Management commentary is limited to the terms of the new financing. Key structural terms and risks include:
- Redemption Terms: The Preferred Stock is redeemable at the Stated Value plus accrued dividends on the fourth anniversary of the Closing Date. Optional redemption prior to this date is permitted only if the Company repays its Credit Agreement or obtains lender consent.
- Dilution Cap: Issuance of common stock for dividends and warrant exercises is capped at 19.9% of outstanding shares or voting power unless stockholder approval is obtained.
- Liquidity Priority: Preferred Stock ranks senior to common stock regarding dividends and liquidation rights.
- Warrant Expiration: Warrants expire seven years from issuance and are immediately exercisable.
Investor Verification Checklist
- Verify the final closing of the remaining $10,000,000 tranche scheduled for June 10, 2019.
- Review the Certificate of Designation of Series B Preferred Stock (Exhibit 4.1) for full rights and limitations.
- Confirm the status of the Credit Agreement dated December 31, 2018, as it impacts optional redemption rights.
- Monitor the Company's cash position post-closing to assess liquidity improvements.
- Check for any subsequent filings regarding stockholder approval if the 19.9% dilution cap is approached.