WKHS

Workhorse Group Inc. (WKHS) - Q1 2025 10-Q Summary

Business Context and Reporting Period

This report covers the quarterly period ended March 31, 2025. Workhorse Group Inc. is an American technology company focused on designing, developing, and manufacturing fully electric commercial trucks. The company operates as a single reporting segment. As of March 31, 2025, the company had 9,473,055 shares of Common Stock outstanding (post-reverse split adjustments).

Key Financial Metrics

Note: Revenue decreased primarily due to the divestiture of the Aero drone business and lower truck sales volumes. The increase in restricted cash is due to proceeds from the "Tenth Additional 2024 Note" held in a lockbox account.

Material Changes vs. Prior Period

• Revenue Decline: Sales dropped 52% year-over-year to $0.64 million, driven by the Aero divestiture and reduced sales of W4 CC and W56 trucks.
• Expense Reduction: Operating expenses decreased significantly to $8.31 million from $17.62 million. SG&A fell by $7.3 million and R&D by $2.0 million, largely due to a 20% reduction in workforce (excluding direct labor) and furloughs.
• Debt Issuance: The company issued $38.5 million in principal amount of 2024 Notes during the quarter. The fair value of convertible notes on the balance sheet increased from $10.5 million to $45.2 million.
• Stock Splits: Financials reflect a 1-for-12.5 reverse stock split effective March 17, 2025, and a prior 1-for-20 split in 2024.

Outlook, Risks, and Management Commentary

Going Concern Warning: Management has expressed substantial doubt regarding the company's ability to continue as a going concern for at least one year from the filing date. This is due to recurring losses, an accumulated deficit of $874 million, and negative working capital.

Liquidity Strategy:

• Lockbox Proceeds: Approximately $24.4 million of proceeds from the Tenth Additional 2024 Note remain in a lockbox account. Release of these funds is contingent on market conditions (stock price/volume) or investor consent. As of May 14, 2025, $7.1 million had been released, with an additional $2.5 million consented for release.
• Financing Limits: Due to a public float under $75 million, the company's ability to raise capital via Form S-3 (including ATM sales) is restricted to one-third of its public float annually.
• Cost Cutting: Continued furloughs, reduced R&D, and limited capital expenditures are planned. The company is also negotiating payment term extensions with suppliers.

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.
• Internal Controls: The company disclosed material weaknesses in internal controls over financial reporting related to third-party valuation reviews and timely issuance of reports due to personnel turnover.
• Market Conditions: Slower-than-anticipated EV adoption, supply chain constraints, and potential changes in government subsidies or tariffs pose significant risks.

Investor Verification Checklist

• Lockbox Release Conditions: Verify the specific "Market Release Event" criteria (stock price and volume) required to access the remaining ~$24.4 million in restricted cash.
• Supplier Solvency: Confirm the status of overdue payments to suppliers and the risk of supply chain disruption for the W56 platform.
• Legal Exposure: Monitor the status of the Coulomb Solutions Inc. lawsuit and potential impact on battery supply.
• Capital Raising Capacity: Assess the impact of the $75 million public float threshold on the ability to utilize the ATM program or issue additional notes.
• Internal Control Remediation: Review progress on fixing material weaknesses in financial reporting to ensure future filing reliability.