Workhorse Group Inc. (WKHS) - 10-Q Summary for Period Ended June 30, 2025
Business Context and Reporting Period
This is the Quarterly Report on Form 10-Q for Workhorse Group Inc. for the period ended June 30, 2025. Workhorse is an American technology company focused on designing, developing, and manufacturing zero-emission commercial trucks. The company operates as a single reporting segment. As of August 12, 2025, there were 15,373,266 shares of Common Stock outstanding.
Key Financial Metrics
| Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 |
|---|---|---|
| Net Sales | $6.31 million | $2.18 million |
| Gross Loss | $(11.91) million | $(12.56) million |
| Net Loss | $(35.43) million | $(55.48) million |
| Net Loss Per Share (Basic & Diluted) | $(5.34) | $(40.81) |
| Cash Used in Operating Activities | $(14.03) million | $(30.06) million |
| Cash Provided by Financing Activities | $34.10 million | $3.29 million |
| Cash and Cash Equivalents (End of Period) | $2.19 million | $4.12 million |
| Restricted Cash (End of Period) | $22.53 million | $0.53 million |
| Total Assets | $99.25 million | $93.84 million |
| Total Liabilities | $76.91 million | $49.55 million |
| Stockholders' Equity | $22.35 million | $44.29 million |
Debt and Liquidity: As of June 30, 2025, the company had convertible notes at fair value of $39.52 million and warrant liabilities of $3.15 million. The company reported negative working capital of $9.8 million and an accumulated deficit of $888.8 million.
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased by approximately 190% year-over-year for the six-month period, driven primarily by increased deliveries of W56 trucks.
- Expense Reduction: Operating expenses decreased significantly. Selling, general, and administrative (SG&A) expenses dropped from $26.2 million to $12.6 million, and R&D expenses fell from $5.5 million to $2.8 million. These reductions were due to lower headcount, reduced consulting fees, and the completion of initial W56 design.
- Inventory Reserves: Inventory reserves increased to $15.0 million from $11.6 million at year-end 2024, reflecting excess inventory due to slower-than-anticipated sales. Net inventory write-downs for the six months were $4.6 million.
- Financing Activity: The company raised significant capital through the issuance of convertible notes and common stock, resulting in a net cash inflow from financing of $34.1 million, compared to $3.3 million in the prior year.
Guidance, Outlook, Risks, and Unusual Items
Going Concern: Management has expressed substantial doubt regarding the company's ability to continue as a going concern for at least one year from the issuance date. This is due to recurring losses, an accumulated deficit, and projected capital needs. Continued operations depend on successful execution of liquidity plans, including financing and cost reductions.
Recent Transactions (Subsequent Events): On August 15, 2025, the company entered into several critical agreements:
- Merger Agreement: Entered into a merger with Motiv Power Systems, Inc. Upon closing, pre-Merger Motiv investors would own approximately 62.5% of the combined entity, while existing Workhorse stockholders would own approximately 26.5%.
- Financing: Issued a $5 million Subordinated Secured Convertible Note and agreed to a Sale Leaseback of its Union City, IN facility for $20 million to fund debt repayment and operations.
- Debt Repayment: Agreed to repay outstanding 2024 Notes (approx. $30.9 million) in connection with the Merger closing.
Risks and Contingencies:
- Legal Proceedings: Ongoing litigation with battery supplier Coulomb Solutions Inc. (CSI) seeking over $4 million. The company has accrued $1.0 million for this dispute.
- Market Conditions: Slower-than-anticipated electric truck adoption, lack of government subsidies, and supply chain constraints (e.g., long lead times for components) pose significant risks.
- Internal Controls: The company disclosed material weaknesses in internal controls over financial reporting related to third-party valuation deliverables and personnel turnover, which remain unresolved as of June 30, 2025.
Key Facts for Investor Verification
- Liquidity Status: Verify the release conditions for the $17.4 million remaining in the lockbox account from the Tenth Additional 2024 Note, as access is contingent on market release events or investor consent.
- Merger Closing Conditions: Confirm the status of regulatory approvals, stockholder votes, and the $20 million Closing Debt Financing required to consummate the Motiv merger.
- Debt Obligations: Monitor the repayment of the $30.9 million in 2024 Notes and the terms of the new $5 million Convertible Note issued in August 2025.
- Inventory Valuation: Assess the adequacy of the $15.0 million inventory reserve given the company's focus on selling existing stock and reduced production of the W56 platform.
- Internal Control Remediation: Track progress on remediation plans for material weaknesses in financial reporting to ensure future financial statement reliability.