Filing Analysis
Workhorse Group Inc. has appointed Berkowitz Pollack Brant Advisors + CPAs, LLP (BPB) as its new independent registered public accounting firm for the fiscal year ending December 31, 2024.
🚩 Red Flags
- Auditor change in a micro-cap/small-cap context can sometimes precede financial instability or restatements, though not explicitly stated here.
📋 Key Facts
- Appointment date: December 18, 2024.
- New Auditor: Berkowitz Pollack Brant Advisors + CPAs, LLP (BPB).
- The change is effective for the fiscal year ending December 31, 2024.
- The company stated there were no disagreements with the previous auditor regarding accounting principles or reporting issues.
Workhorse Group Inc. issued an 'Eighth Additional Note' for $3.5 million to an institutional investor, part of a larger $139 million securities purchase agreement. The note features high interest rates and aggressive conversion terms that could lead to significant dilution.
🚩 Red Flags
- High interest rate (9.0%) that doubles to 18.0% upon default.
- Aggressive conversion terms including full-ratchet anti-dilution protection.
- Liquidity requirements/covenants tied to a pending Sale Leaseback transaction.
- Redemption premiums of 25% to 75% in various scenarios, creating significant cash obligations.
- The company has previously undergone a 1-for-20 reverse stock split (June 2024), indicating historical capital distress.
📋 Key Facts
- Issued Eighth Additional Note with original principal of $3,500,000 on December 16, 2024.
- Note carries a 9.0% annual interest rate, increasing to 18.0% per annum upon an event of default.
- Conversion price is the lower of $0.5983 or a formula based on VWAP (with a floor of $0.20).
- The note includes a full-ratchet adjustment provision in connection with subsequent offerings at a lower price.
- Requires the company to maintain minimum liquidity of either $1,500,000 or $4,000,000 depending on the status of a Sale Leaseback transaction.
Workhorse Group Inc. announced that its long-term auditor, Grant Thornton LLP, has declined to stand for reappointment for the fiscal year ending December 31, 2024. The company has not yet engaged a replacement firm.
🚩 Red Flags
- Auditor change: The incumbent auditor declined reappointment.
- Going concern language: Previous reports indicated substantial doubt about the company's ability to continue as a going concern.
- Material weaknesses in internal controls over financial reporting (ICFR) identified regarding fair value calculations of convertible notes/warrants and personnel turnover/resource shortages.
- Lack of replacement auditor at time of filing increases risk of delayed financial filings.
📋 Key Facts
- Grant Thornton LLP declined to be reappointed on December 3, 2024.
- The auditor had served the company since 2018.
- No new independent accounting firm has been engaged as of the filing date.
- Previous audits (FY 2022 and FY 2023) did not contain adverse or disclaimer opinions, though FY 2023 included a going concern explanatory paragraph.
Workhorse Group Inc. issued a $2 million senior secured convertible note (the 'Seventh Additional Note') to an institutional investor as part of a larger $139 million securities purchase agreement. The issuance includes significant death-spiral conversion features and high interest rates in the event of default.
🚩 Red Flags
- Death-spiral conversion feature: Conversion price is tied to a percentage of the VWAP, leading to potential massive dilution for existing shareholders.
- High default interest rate: 18.0% per annum upon event of default.
- Significant redemption premiums: Holder can require cash redemption at a 25% or 75% premium in various scenarios (including bankruptcy).
- Liquidity covenants: Strict minimum liquidity requirements ($1.5M - $4.0M) that could trigger defaults if cash flow remains constrained.
- Full-ratchet anti-dilution: Protects the investor against future down-rounds, further increasing dilution risk for common shareholders.
📋 Key Facts
- Issued Seventh Additional Note with principal amount of $2,000,000 on November 27, 2024.
- Note carries a 9.0% annual interest rate, increasing to 18.0% per annum upon an event of default.
- Conversion price is the lower of $0.5983 or the greater of $0.2132 and 87.5% of the 10-day VWAP.
- The note is senior secured, ranking senior to all other unsecured indebtedness.
- Requires the company to maintain minimum liquidity of either $1.5M or $4.0M depending on the status of a Sale Leaseback transaction.
- Includes a full-ratchet adjustment provision in connection with subsequent offerings at prices lower than the current Reference Price.
Workhorse Group Inc. filed an 8-K to announce the release of its financial results for the quarter ended September 30, 2024.
📋 Key Facts
- The filing is a standard announcement of quarterly earnings (Results of Operations).
- Reporting period: Quarter ended September 30, 2024.
- Filing date: November 19, 2024.
Workhorse Group Inc. announced that it has been awarded a contract with the General Services Administration (GSA). The filing serves as a Regulation FD disclosure to provide public access to this material development.
📋 Key Facts
- Company was awarded a contract by the General Services Administration (GSA) on November 19, 2024.
- The announcement was made via press release furnished under Item 7.01 of Form 8-K.
- The filing includes forward-looking statements regarding potential future results from this development.
Workhorse Group Inc. has issued a press release to announce the rescheduling of its upcoming earnings call.
📋 Key Facts
- The company announced on November 13, 2024, that it is rescheduling its earnings call.
- The announcement was made pursuant to Item 7.01 (Regulation FD Disclosure).
- A press release detailing the change was furnished as Exhibit 99.1.
Workhorse Group Inc. issued a $1.2 million senior secured convertible note (the 'Sixth Additional Note') to an institutional investor as part of an ongoing financing arrangement. The issuance was accompanied by a limited waiver allowing the company more flexibility in its at-the-market offering program and asset divestiture obligations.
🚩 Red Flags
- Highly dilutive conversion terms (full-ratchet adjustment and low floor price).
- Significant interest rate hike (to 18%) in the event of default.
- The company is relying on continuous, small-scale debt issuances ($1.2M) to fund operations.
- Requirement to maintain specific liquidity levels creates a high risk of technical default if cash flow remains negative.
📋 Key Facts
- Issued $1,200,000 in senior secured convertible notes on October 16, 2024.
- The note features a 9.0% annual interest rate (increasing to 18.0% upon default) and an original issue discount of 12.5%.
- Conversion price is the lower of $0.5983 or a floating price based on VWAP, subject to a floor of $0.1611.
- The investor waived rights to warrants for this specific issuance and for potential future issuances up to $14.8 million.
- A limited waiver allows the company to sell up to $5 million in shares via an ATM program without price floors or anti-dilution protections through October 16, 2025.
- The note requires the company to maintain minimum liquidity of either $1.5M or $4.0M depending on the status of a manufacturing facility sale leaseback.
Workhorse Group Inc. received a notice from Nasdaq stating it is no longer in compliance with the $1.00 minimum bid price requirement after its stock closed below $1.00 for 30 consecutive trading days. The company has been granted a 180-day compliance period ending March 31, 2025, to regain compliance.
🚩 Red Flags
- Delisting notice (Nasdaq non-compliance)
- Stock price has been below $1.00 for 30 consecutive trading days
- Potential material adverse effect on the ability to raise capital if delisting occurs
📋 Key Facts
- Received written notice from Nasdaq on October 2, 2024.
- Non-compliance due to breach of Nasdaq Listing Rule 5550(a)(2) ($1.00 Minimum Bid Price Requirement).
- Initial compliance period expires March 31, 2025.
- To regain compliance, the stock must close at or above $1.00 for at least 10 consecutive trading days before the deadline.
- Potential for an additional 180-day grace period if market value requirements are met and intent to cure is communicated.
Workhorse Group Inc. issued a $3.4 million senior secured convertible note and warrants to an institutional investor as part of a larger existing securities purchase agreement. This transaction involves highly dilutive terms, including a conversion price floor and significant premiums upon default or redemption.
🚩 Red Flags
- Highly dilutive convertible debt structure with 'full-ratchet' adjustment potential.
- Significant interest rate step-up (from 9% to 18%) upon default.
- Heavy redemption premiums (25%-75%) that increase the cost of capital significantly during distress.
- Liquidity covenants require maintaining $1.5M to $4.0M in cash, which is tight for a micro-cap manufacturer.
- The conversion price floor ($0.1693) is extremely low relative to historical volatility and potential dilution.
📋 Key Facts
- Issued 'Fifth Additional Note' with principal amount of $3,400,000 on September 30, 2024.
- Note bears 9.0% interest per annum, payable in cash or in-kind (compounding).
- Interest rate increases to 18.0% per annum upon an event of default.
- Conversion price is the lower of $0.5983 or a floating price based on 87.5% of the 10-day VWAP, subject to a floor of $0.1693.
- Issued 'Fifth Additional Warrant' to purchase up to 4,546,024 shares of Common Stock with an exercise price of $1.2684.
- The note is senior and secured, ranking senior to all other unsecured indebtedness.
- Redemption terms include a 25% premium on face value (or 75% in event of default) or the equity value of underlying shares.
Workhorse Group Inc. announced the completion of manufacturing for 15 W56 step vans and confirmed receipt of full payment from a purchaser. The vehicles are currently with an upfitter for final customization and are expected to be delivered in Q4 2024.
🚩 Red Flags
- Delivery is subject to customary conditions on acceptance and warranty rights, meaning revenue recognition may be contingent on final inspection/acceptance.
📋 Key Facts
- Completed work on 15 W56 step vans as of September 27, 2024.
- Received payment in full for the Ordered Step Vans.
- Vehicles are currently with a third-party upfitter for final customizations.
- Expected delivery to the purchaser in Q4 2024.
Workhorse Group Inc. announced that FedEx (NYSE: FDX) has issued a purchase order for 15 W56 step vans.
📋 Key Facts
- Customer: FedEx (NYSE: FDX)
- Product: 15 W56 step vans
- Announcement Date: September 9, 2024
Workhorse Group Inc. issued a $2.6 million senior secured convertible note and warrants to an institutional investor as part of an existing securities purchase agreement. This represents the fourth installment of a larger potential financing arrangement aimed at providing liquidity.
🚩 Red Flags
- High interest rate escalation (to 18.0%) upon event of default.
- Significant redemption premiums (up to 75%) in the event of bankruptcy, change of control, or default.
- Convertible note features a 'full-ratchet' adjustment provision for subsequent offerings at lower prices, which is highly dilutive to existing shareholders.
- The company's survival appears tied to specific liquidity requirements and the consummation of a sale-leaseback transaction.
📋 Key Facts
- Issued 'Fourth Additional Note' with principal amount of $2,600,000 on August 23, 2024.
- The note features an original issue discount (OID) of 12.5%, resulting in $2,275,000 in net proceeds before fees.
- Interest rate is 9.0% per annum, payable quarterly; increases to 18.0% upon event of default.
- Issued 'Fourth Additional Warrant' to purchase up to 2,891,901 shares of Common Stock with an exercise price of $1.1101.
- Conversion price for the note is the lower of $0.7193 or a floating price based on VWAP (with a floor of $0.1586).
- The company must maintain minimum liquidity of either $1,500,000 or $4,000,000 depending on the status of a manufacturing facility sale-leaseback.
- Redemption terms include significant premiums (25% to 75%) in various scenarios including change of control or default.
Workhorse Group Inc. filed an 8-K to announce the release of its financial results for the quarter ended June 30, 2024. The filing serves as a formal notification that earnings data is being furnished via press release.
📋 Key Facts
- Report date: August 20, 2024
- Reporting period: Quarter ended June 30, 2024
- The company issued a press release containing financial results as Exhibit 99.1
- Information under Item 2.02 is not considered 'filed' for purposes of Section 18 of the Exchange Act.
Workhorse Group Inc. issued an 8-K to announce the rescheduling of its earnings call via a press release furnished under Item 7.01.
🚩 Red Flags
- Forward-looking statements explicitly mention risks regarding the ability to raise additional capital and maintain Nasdaq compliance via reverse splits, indicating ongoing liquidity/structural pressures common in micro-cap distressed companies.
📋 Key Facts
- The company rescheduled its earnings call as announced on August 13, 2024.
- Information is provided pursuant to Item 7.01 (Regulation FD Disclosure).
- The filing includes a press release as Exhibit 99.1.
Workhorse Group Inc. issued a $4 million senior secured convertible note and warrants to an institutional investor as part of a larger existing securities purchase agreement. This transaction includes significant conversion features, including a floor price and potential full-ratchet adjustments.
🚩 Red Flags
- High interest rate (9.0%) that doubles to 18.0% upon default.
- Significant dilution risk due to convertible features and warrants.
- Full-ratchet adjustment provision which is highly dilutive to existing shareholders in future down-rounds.
- Liquidity covenants require maintaining $1.5M - $4.0M in cash, putting pressure on working capital.
- The note is senior secured, ranking ahead of unsecured debt.
📋 Key Facts
- Issued 'Third Additional Note' with principal amount of $4,000,000 on July 18, 2024.
- The note was issued at a 12.5% original issue discount, resulting in $3,500,000 in net proceeds.
- Issued 'Third Additional Warrant' to purchase up to 2,715,777 shares of Common Stock with an exercise price of $2.9260.
- The note bears interest at 9.0% per annum (increases to 18.0% upon event of default).
- Conversion price is the lower of $1.1783 or a floating price based on VWAP, subject to a floor of $0.3708.
- The note includes a full-ratchet adjustment provision in connection with subsequent offerings at prices below the current reference price.
Workhorse Group Inc. announced on July 3, 2024, that it has regained compliance with the Nasdaq minimum bid requirement. This follows a period of non-compliance that likely required corrective action such as a reverse stock split.
🚩 Red Flags
- Historical non-compliance with Nasdaq minimum bid requirements suggests significant past volatility or low share price.
- Forward-looking statements explicitly mention the 'impact... of the steps we took to regain such compliance, such as the reverse split of our common stock' on operations and liquidity.
📋 Key Facts
- Company regained compliance with The Nasdaq Stock Market LLC's minimum bid requirement on July 3, 2024.
- The announcement was made via press release pursuant to Item 7.01 of Form 8-K.
- Compliance was achieved following previous non-compliance issues.
Workhorse Group Inc. has completed a 1-for-20 reverse stock split effective June 17, 2024. The action was taken to address non-compliance with Nasdaq's minimum bid price requirement.
🚩 Red Flags
- Reverse stock split (1-for-20) typically indicates a distressed share price.
- Explicit mention of potential delisting from the Nasdaq Capital Market.
- Risk of continued non-compliance with Nasdaq Listing Rules despite the split.
- Potential for substantial costs and diversion of management resources to address compliance issues.
📋 Key Facts
- A 1-for-20 reverse split of issued and outstanding shares became effective on June 17, 2024.
- The authorized number of shares of Common Stock remains unchanged.
- Exercise prices and share counts for stock options, warrants, and restricted stock were adjusted to reflect the split.
- The company is currently facing non-compliance with Nasdaq's minimum bid price requirement.
Workhorse Group Inc. has announced a 1-for-20 reverse stock split effective June 17, 2024. The action is intended to help the company regain compliance with Nasdaq's $1.00 minimum bid price requirement.
🚩 Red Flags
- Reverse stock split is a classic sign of extreme downward pressure on share price.
- Explicit mention of non-compliance with Nasdaq minimum bid price requirements.
- Risk disclosure states that delisting would materially and adversely affect the ability to raise capital.
📋 Key Facts
- Reverse split ratio: 1-for-20
- Effective date: June 17, 2024
- The reverse split aims to address non-compliance with the Nasdaq $1.00 minimum bid price requirement.
- Fractional shares will be rounded up to the nearest whole share; no fractional shares will be issued.
- Trading on a split-adjusted basis begins at market open on June 17, 2024.
- The ticker symbol 'WKHS' and CUSIP (98138J305) are noted/updated.
Workhorse Group Inc. has completed the divestiture of its Aero business to a third party. The move is intended to reduce monthly costs by approximately $375,000 and allow the company to focus on its core commercial electric vehicle truck business.
🚩 Red Flags
- Forward-looking statements explicitly mention risks regarding 'the ability to obtain sufficient liquidity from operations and financing activities to continue as a going concern'.
- Mention of potential need for a reverse stock split to regain Nasdaq compliance.
- Ongoing legal proceedings mentioned (e.g., Coulomb Solutions Inc.).
📋 Key Facts
- Completed divestiture of the 'Aero' business as of June 6, 2024.
- Expected monthly cost savings from the divestiture: ~$375,000.
- The deal includes earn-out provisions where Workhorse may receive additional proceeds based on Aero's future revenues.
- Strategic focus is shifting entirely toward the commercial electric vehicle truck business.
Workhorse Group Inc. issued a $7 million senior secured convertible note and warrants to an institutional investor as part of a larger $139 million securities purchase agreement. The terms include highly dilutive conversion features and significant redemption premiums in the event of default.
🚩 Red Flags
- Highly dilutive conversion terms with a floor price as low as $0.0421.
- Significant redemption premiums: 25% to 75% premium on principal in various default/change of control scenarios.
- Interest rate spike from 9% to 18% upon event of default.
- Potential for massive equity dilution via the issuance of over 40 million warrants and convertible note shares.
📋 Key Facts
- Issued 'Second Additional Note' with $7,000,000 original principal amount on May 29, 2024.
- The note bears a 9.0% interest rate, which increases to 18.0% upon an event of default.
- Issued 'Second Additional Warrant' to purchase up to 40,965,618 shares of Common Stock at an exercise price of $0.2944.
- Conversion price for the note is the lower of $0.1367 or a formula based on VWAP with a floor price of $0.0421.
- The note is senior secured and unconditionally guaranteed by all company subsidiaries.
- Requires maintenance of minimum liquidity: $1,500,000 (pre-sale leaseback) or $4,000,000 (post-sale leaseback).
Workhorse Group Inc. filed an 8-K to announce its financial results for the first quarter ended March 31, 2024. The filing serves as a formal announcement of quarterly earnings via a press release.
📋 Key Facts
- The report covers financial results for the quarter ended March 31, 2024.
- The company issued a press release on May 20, 2024, regarding these results (Exhibit 99.1).
- The filing was signed by Robert Ginnan, Chief Financial Officer.
Workhorse Group Inc. held its Annual Meeting on May 14, 2024, where shareholders approved a significant reverse stock split to maintain Nasdaq compliance. The meeting also resulted in the election of seven directors and approval for certain share issuances related to convertible notes.
🚩 Red Flags
- Approval of a reverse stock split (1-for-10 to 1-for-20) is a strong indicator of imminent delisting risk or extreme share price depression.
- The necessity of the split specifically to comply with Nasdaq Listing Rules indicates the company is in violation of minimum bid price requirements.
📋 Key Facts
- Shareholders approved a reverse stock split with a ratio between 1-for-10 and 1-for-20, to be implemented before August 30, 2024.
- The purpose of the reverse split is to comply with Nasdaq Listing Rules.
- All seven nominees for the Board of Directors were elected.
- Shareholders approved the issuance of common stock underlying senior secured convertible notes and warrants (Nasdaq Rule 5635(D) compliance).
- Grant Thornton LLP was ratified as the independent auditor for fiscal year 2024.
Workhorse Group Inc. has issued a $6.285 million senior secured convertible note and warrants to an institutional investor as part of a larger $139 million financing program. The filing also notes significant liquidity requirements and the potential failure of a previously planned $34.5 million sale-leaseback transaction.
🚩 Red Flags
- Highly dilutive financing: The warrant allows for the purchase of over 36 million shares, and conversion prices are extremely low ($0.1367/floor $0.0420).
- Death Spiral characteristics: The conversion price is tied to a percentage of the VWAP with a very low floor, typical of predatory financing.
- Liquidity risk: The company explicitly stated it does not believe its planned $34.5 million sale-leaseback transaction will be consummated at the current purchase price.
- Default penalties: Interest rates double to 18% upon default, and redemption premiums increase from 25% to 75% in event of default or bankruptcy.
📋 Key Facts
- Issued 'First Additional Note' with principal amount of $6,285,714 to an institutional investor on May 10, 2024.
- The note bears a 9.0% annual interest rate, which increases to 18.0% upon an event of default.
- Issued 'First Additional Warrant' to purchase up to 36,785,453 shares of Common Stock at an exercise price of $0.2943.
- The note is senior and secured, ranking ahead of all other unsecured indebtedness.
- Conversion price for the note is the lower of $0.1367 or 87.5% of the 10-day VWAP, with a floor price of $0.0420.
- The company requires minimum liquidity of either $1.5 million or $4.0 million depending on the consummation of a sale-leaseback transaction.
Workhorse Group Inc. has received a 180-day extension from Nasdaq to regain compliance with the $1.00 minimum bid price requirement. To address this, the company plans to seek stockholder approval for a reverse stock split between 1-for-10 and 1-for-20 at its May 14, 2024 Annual Meeting.
🚩 Red Flags
- Delisting notice/Non-compliance with Nasdaq minimum bid price requirement.
- Proposed reverse stock split (typically viewed as a sign of extreme distress in micro-caps).
- Risk that the reverse split may not successfully regain compliance or maintain listing.
📋 Key Facts
- Nasdaq granted a 180-day extension on March 21, 2024, to regain compliance with the $1.00 Minimum Bid Price Requirement.
- The deadline to meet the Bid Price Requirement is September 16, 2024.
- Compliance can be achieved if the stock closes at $1.00 or more for 10 consecutive trading days before the deadline.
- The company proposes a reverse stock split of a ratio between 1-for-10 and 1-for-20.
- Stockholder vote on the proposed reverse split is scheduled for the Annual Meeting on May 14, 2024.
Workhorse Group Inc. entered into a massive $139 million securities purchase agreement for senior secured convertible notes and warrants to provide immediate liquidity. The deal includes highly dilutive terms, including a requirement for stockholders to approve a reverse stock split.
🚩 Red Flags
- Requirement for a reverse stock split to satisfy Nasdaq/investor terms.
- Highly dilutive conversion features with a floor price as low as $0.05.
- Significant 'death spiral' characteristics in the convertible note structure (floating conversion price).
- High interest rate penalty (18%) in the event of default.
- The company must maintain minimum liquidity levels ($1.5M - $4M) to avoid default.
📋 Key Facts
- Entered into an agreement for up to $139M in senior secured convertible notes and warrants.
- Initial closing on March 15, 2024: Issued $9M in Initial Notes and a warrant for 31,992,890 shares of Common Stock.
- Notes feature an original issue discount (OID) of 12.5%, resulting in $7.875M net proceeds from the initial note.
- Interest rate is 9.0% per annum, increasing to 18.0% upon event of default.
- Conversion price is set at the lower of $0.26 or a floating 'Alternate Conversion Price' (floor of $0.05).
- Warrants have an exercise price of $0.35 per share.
- The agreement requires stockholder approval for: (i) issuance exceeding 19.99% of outstanding shares and (ii) a reverse stock split.
Workhorse Group Inc. filed an 8-K to announce its financial results for the quarter and year ended December 31, 2023, and provided notice regarding its upcoming Annual Meeting of Stockholders.
📋 Key Facts
- Financial results for the quarter and fiscal year ended December 31, 2023, were released on March 12, 2024.
- The Annual Meeting of Stockholders is scheduled for May 14, 2024.
- The record date for the Annual Meeting is March 15, 2024.
Workhorse Group Inc. amended its $20M green senior secured convertible note with High Trail Special Situations LLC, reducing the outstanding principal to $2.5M and exchanging a large warrant for 8.5 million shares of common stock.
🚩 Red Flags
- Significant dilution: The exchange of warrants for 8.5 million shares represents a substantial issuance of equity to a single holder.
- Removal of minimum liquidity covenant suggests the company was previously under strict cash constraints and is negotiating terms with creditors.
- Heavy reliance on debt restructuring/exchanges to manage balance sheet obligations.
📋 Key Facts
- Redeemed $10,000,000 of the Note's principal using funds from a controlled collateral account on February 29, 2024.
- Outstanding principal amount of the Green Senior Secured Convertible Note reduced to $2,500,000.
- Exchanged a warrant (previously for 25,601,639 shares) for 8,500,000 shares of Common Stock with High Trail Special Situations LLC.
- Amended the Note to remove February 15 and March 1, 2024, as Partial Redemption Dates.
- Deleted the minimum liquidity covenant from the Note agreement.
Workhorse Group Inc. entered into a sale-leaseback agreement to sell its Union City, Indiana manufacturing facility for approximately $34.5 million. The company will lease the property back under a 20-year triple-net lease with annual rent increases.
🚩 Red Flags
- Asset disposition involving core manufacturing facility (sale-leaseback).
- Long-term fixed obligation: 20-year lease commitment with escalating rent increases.
- Triple-net lease structure shifts all maintenance, tax, and insurance costs to the company.
📋 Key Facts
- Sale price of manufacturing facility: ~$34.5 million (before fees and expenses).
- Purchaser: William Repny LLC.
- Lease structure: Triple-net lease for an initial term of 20 years.
- Base annual rent: ~$3.375 million, subject to a 3% annual increase during the initial term.
- Renewal options: Three additional 10-year terms available.
- Use of proceeds: General corporate purposes.