Workhorse Group Inc. (WKHS) - Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K was filed on October 16, 2024, by Workhorse Group Inc. The filing details the closing of a tranche under a previously disclosed Securities Purchase Agreement with an institutional investor. The Company is incorporated in Nevada and trades on The Nasdaq Capital Market.
Key Financial Metrics and Transaction Details
- Transaction: Issuance and sale of a "Sixth Additional Note" with an original principal amount of $1,200,000.
- Proceeds: The Note was issued with a 12.5% original issue discount, resulting in net proceeds of $1,050,000 before fees and expenses.
- Warrants: The Investor waived its right to receive Warrants in connection with this specific issuance.
- Outstanding Debt: As of October 15, 2024, $8,950,000 in aggregate principal amount remained outstanding under the Prior Notes. The total potential commitment under the original agreement allows for up to $139,000,000 in Notes.
- Interest Rate: 9.0% per annum, payable in cash or in-kind. Increases to 18.0% per annum upon an event of default.
- Liquidity Covenants: The Company must maintain minimum quarterly liquidity of $1,500,000 (if the Union City facility sale-leaseback is not consummated) or $4,000,000 (if consummated).
Material Changes and Agreements
Concurrent with the issuance of the Sixth Additional Note, the Company and the Investor entered into a Limited Waiver affecting the Securities Purchase Agreement and the asset purchase agreement for the divestiture of the aero business (Aero APA). Key changes include:
- Waiver of Warrants: The Investor waived rights to Warrants for this $1.2M Note and up to an additional $14.8M in future Notes.
- ATM Program Flexibility: For the period ending October 16, 2025, the Investor waived certain provisions to permit the Company to sell up to $5 million in Common Stock via an at-the-market offering program without a price floor and without triggering anti-dilution protections in the Notes/Warrants.
- Lease Payment Waiver: The Company waived the obligation of an Investor affiliate to make certain ongoing lease payments under the Aero APA.
- Beneficial Ownership Cap: The Investor exercised an option to increase the Beneficial Ownership Cap from 4.99% to 9.99%, effective November 4, 2024.
Terms, Risks, and Outlook
- Conversion Terms: Notes are convertible at the holder's option into Common Stock at a price equal to the lower of $0.5983 (Reference Price) or 87.5% of the 10-day VWAP (subject to a $0.1611 Floor Price). The Reference Price is subject to full-ratchet adjustments.
- Redemption and Default: The Company may prepay the Note with a 25% premium (or 75% during default). Upon a change of control or bankruptcy event of default, the holder may require redemption at a premium (25% or 75%) or the equity value of underlying shares.
- Security: The Note is a senior secured obligation, ranking senior to all other unsecured indebtedness, and is unconditionally guaranteed by subsidiaries.
- Forward-Looking Statements: The filing includes standard disclaimers that actual results may differ materially from expectations due to risks disclosed in other SEC reports.
Investor Verification Checklist
- Verify the current status of the Sale Leaseback transaction for the Union City, Indiana facility to determine the applicable liquidity covenant threshold ($1.5M vs. $4.0M).
- Monitor the Company's ability to maintain the required minimum liquidity levels to avoid an event of default.
- Review the impact of the waived anti-dilution protections on the potential dilution from the $5 million ATM program.
- Confirm the effective date of the increased 9.99% Beneficial Ownership Cap (November 4, 2024) and its implications for future conversions.
- Assess the remaining capacity under the Securities Purchase Agreement ($105.5M potential) and the likelihood of future closings.