Business Context and Reporting Period
Company: Workhorse Group Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: June 30, 2020
Event: Entry into a Material Definitive Agreement (Securities Purchase Agreement) for a Registered Direct Offering.
Key Financial Metrics and Transaction Details
- Instrument: Senior Secured Convertible Note.
- Principal Amount: $70,000,000.
- Net Proceeds: Approximately $69,000,000 (no underwriting discounts or commissions).
- Interest Rate: 4.50% per annum, payable quarterly commencing October 1, 2020 (cash or stock at Company's option).
- Maturity Date: July 1, 2023.
- Conversion Price: $19.00 per share (subject to adjustments).
- Debt Seniority: Senior secured obligation; ranks pari passu with existing senior secured notes and senior to all unsecured debt.
Material Changes and Transaction Terms
The filing discloses a significant capital raise intended to finance truck production and general corporate purposes. Key terms include:
- Repayment Penalty: If the Company repays principal early, it must pay 110% of the principal amount (Repayment Price).
- Investor Redemption Rights: Starting October 1, 2020, the Investor may require redemption of up to $3.5 million 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 conversion value or 105% of the Repayment Price, plus accrued interest.
- Closing Expectation: Expected before July 15, 2020.
Guidance, Risks, and Contingencies
Use of Proceeds: Working capital to finance truck production and general corporate purposes.
Risks and Uncertainties: The filing contains forward-looking statements regarding the expected settlement and receipt of proceeds. Actual results may differ due to the Company's ability to satisfy closing conditions. The filing explicitly states it does not constitute an offer to sell securities in jurisdictions where such an offer would be unlawful prior to registration.
Investor Verification Checklist
- Verify the final closing date of the Registered Direct Offering (expected before July 15, 2020).
- Confirm the exact number of shares issued upon conversion or interest payment based on the Market Stock Payment Price.
- Review the full text of the Purchase Agreement (Exhibit 10.1) for specific anti-dilution adjustments and conditions for stock payments.
- Monitor the Company's cash position to ensure it can meet quarterly interest payments or the 110% early repayment requirement if triggered.