Workhorse Group Inc. - Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K, dated July 16, 2020, details a material definitive agreement entered into by Workhorse Group Inc. (WKHS) on June 30, 2020, with a closing date of July 16, 2020. The Company, incorporated in Nevada, operates in the electric truck manufacturing sector.
Key Financial Metrics and Transaction Details
- Debt Issuance: The Company issued a senior secured convertible note with a principal amount of $70,000,000.
- Proceeds: Net proceeds before expenses were $69,000,000 after discounts. No underwriting discounts or commissions were paid.
- Interest Rate: The Note bears interest at 4.50% per annum, payable quarterly starting October 1, 2020.
- Conversion Terms: The Note is convertible into Common Stock at a price of $19.00 per share, subject to anti-dilution adjustments.
- Maturity: The Note is due on July 1, 2023.
- Use of Proceeds: Funds are designated for working capital to finance truck production and general corporate purposes.
- Unregistered Equity: The Company issued 409,356 additional warrants to Marathon Lenders at an exercise price of $20.90 per share pursuant to a prior credit agreement.
Material Changes and Debt Structure
The transaction represents a significant increase in the Company's debt obligations. The new Note ranks pari passu with the Company's outstanding senior secured note and senior to all unsecured debt. The filing does not provide comparative financial metrics (revenue, profit, cash flow) for the period, as this is a transaction-specific report rather than a periodic financial statement.
Terms, Risks, and Management Commentary
- Repayment Penalty: If the Company elects to repay the principal early, it must pay 110% of the principal amount (Repayment Price).
- Investor Redemption Rights: Beginning October 1, 2020, the Investor may require the Company to redeem up to $3.5 million of principal per month at the Repayment Price.
- Company Redemption Rights: The Company may redeem the Note (in excess of $8,000,000) at the greater of 115% of the conversion value or 105% of the Repayment Price, plus accrued interest.
- Payment Flexibility: Interest and redemption payments may be made in cash or freely saleable shares of Common Stock at the Company's option, subject to certain conditions.
- Risks: Forward-looking statements regarding the settlement and receipt of proceeds are subject to risks, including the ability to satisfy closing conditions.
Investor Verification Checklist
- Verify the exact net proceeds received after all transaction expenses, as the filing only states proceeds "before expenses" were $69,000,000.
- Review the full text of the Purchase Agreement (Exhibit 10.1) for specific conditions limiting the Company's ability to pay interest or redemption amounts in stock.
- Confirm the impact of the 409,356 additional warrants issued to Marathon Lenders on the Company's fully diluted share count.
- Assess the Company's current liquidity position to determine its ability to meet the quarterly interest payments and potential monthly redemption requests starting October 2020.