WKHS

Business Context and Reporting Period

Company: Workhorse Group Inc. (WKHS)
Filing Type: Form 10-K (Annual Report)
Period Ended: December 31, 2025
Key Event: On December 15, 2025, Workhorse completed a reverse merger with Motiv Power Systems, Inc. For accounting purposes, Motiv is treated as the acquirer. The combined entity operates as a North American manufacturer of medium-duty electric trucks and buses, focusing on last-mile delivery and commercial fleet applications.

Key Financial Metrics

Debt and Liquidity: As of December 31, 2025, the company had $10.0 million outstanding under the Cash Flow Credit Agreement (fully utilized) and $40.0 million available under the Customer Order Credit Agreement. A $5.0 million Convertible Note is outstanding. The company holds $12.9 million in cash and cash equivalents.

Material Changes vs. Prior Period

• Revenue Growth: Net sales increased 201.1% to $21.2 million, driven by delivering 63 more vehicles and a 25% increase in average selling price per vehicle.
• Increased Losses: Net loss widened to $64.1 million from $51.6 million. This was primarily due to a $17.4 million increase in interest expense (related to pre-merger debt before forgiveness) and $6.5 million in merger-related transaction costs.
• Merger Impact: The reverse merger resulted in the forgiveness of $107.7 million of pre-merger debt held by MGMH. The company also recorded $3.1 million in goodwill and $10.2 million in intangible assets.
• Inventory: Net inventory increased to $39.1 million from $21.4 million, largely due to the acquisition of Motiv's inventory and increased reserves for obsolete items ($19.0 million total reserves).
• Stock Structure: A 1-for-12 reverse stock split was effected on December 8, 2025, to comply with Nasdaq listing standards.

Outlook, Risks, and Management Commentary

Going Concern Warning: Management has concluded that substantial doubt exists 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 of $319 million, and projected capital needs exceeding current resources. Continued operations depend on securing external financing and executing cost-saving measures.

Strategic Plan: The company plans to improve liquidity by increasing vehicle sales, realizing synergies from the merger (specifically shifting production to the Union City, IN facility), and lowering the bill of materials to compete with internal combustion engine vehicles.

Key Risks:

• Financing Constraints: Public float is under $75 million, limiting equity offerings under "baby shelf" rules. Additional financing is not currently probable.
• Regulatory Uncertainty: Changes in the U.S. presidential administration have introduced uncertainty regarding EV subsidies, tax credits, and emissions regulations (e.g., California's Advanced Clean Fleets rule).
• Internal Controls: A material weakness in internal control over financial reporting was identified due to insufficient accounting personnel and expertise.
• Supply Chain: The company faces risks related to component costs, tariffs, and litigation with battery supplier Coulomb Solutions Inc.

Investor Verification Checklist

• Financing Status: Verify the status of the potential equity or equity-linked financing required to sustain operations beyond the current cash runway.
• Merger Synergies: Monitor the timeline and cost savings associated with transitioning all vehicle production to the Workhorse Union City facility.
• Regulatory Landscape: Track updates on federal and state EV incentives and the enforcement status of California's Advanced Clean Fleets regulation.
• Legal Proceedings: Review the outcome of the litigation with Coulomb Solutions Inc. regarding battery payments.
• Internal Controls: Assess the progress of the remediation plan for the material weakness in financial reporting controls.