Business Context and Reporting Period
This Form 8-K Current Report was filed by Workhorse Group Inc. on August 4, 2020, covering events occurring on August 1, 2020. The filing details a Confirmatory Agreement and related arrangements between Workhorse and Lordstown Motors Corp. (LMC) in connection with LMC's planned merger with DiamondPeak Holdings Corp.
Key Financial Metrics
The filing does not provide standard financial performance metrics such as revenue, profit, cash flow, or operating margins for Workhorse Group Inc. The primary financial data disclosed relates to the specific terms of the LMC Transaction:
- Royalty Advance: Defined as $4,750,000.
- Equity Stake: Workhorse will own 9.99% of DiamondPeak following the closing of the LMC Merger.
- Future Royalties: LMC is required to pay a 1% royalty on the gross sales price of the first 200,000 vehicles sold, applicable only to the extent such fees exceed the Royalty Advance.
Material Changes
The filing reports the following material developments:
- Merger Agreement: LMC entered into an Agreement and Plan of Merger with DiamondPeak Holdings Corp. on August 1, 2020.
- Capital Raise: DiamondPeak entered into subscription agreements to sell 50,000,000 shares of Class A Common Stock at $10.00 per share in private placements to close immediately prior to the LMC Merger.
- Anti-Dilution Resolution: The Confirmatory Agreement clarified that Workhorse's 10% equity interest in LMC (with anti-dilution rights) will be satisfied by a 9.99% ownership stake in DiamondPeak post-merger.
Guidance, Outlook, and Risks
Management Commentary and Conditions:
- The LMC Merger is subject to various conditions precedent and may be terminated if not consummated by February 1, 2021.
- Workhorse has entered into a Registration Rights and Lock-Up Agreement with DiamondPeak. DiamondPeak must file a registration statement for Workhorse's shares within 45 days of the merger closing.
- Workhorse has agreed to a six-month lock-up period, prohibiting the sale of its DiamondPeak shares following the merger closing, subject to certain exceptions.
Risks and Contingencies:
- The transaction is contingent upon the successful consummation of the LMC Merger.
- Future royalty payments depend on LMC's ability to sell 200,000 vehicles and exceed the initial Royalty Advance threshold.
Investor Verification Checklist
- Verify the closing status of the LMC Merger with DiamondPeak Holdings Corp.
- Confirm the final share count and valuation of Workhorse's 9.99% stake in DiamondPeak post-merger.
- Monitor the filing and effectiveness of the registration statement for Workhorse's DiamondPeak shares.
- Track LMC's progress on the Capital Raise and vehicle sales to assess potential future royalty income.
- Review the specific exceptions to the six-month lock-up agreement for Workhorse's shares.