wkhs-20210930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission file number: 001-37673

WORKHORSE GROUP INC.

(Exact name of registrant as specified in its charter)


Nevada						26-1394771
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

100 Commerce Drive, Loveland, Ohio 45140

(Address of principal executive offices, including zip code)

(513) 360-4704

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth comp any, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.001 par value per share

WKHS

The NASDAQ Capital Market

The number of shares of the Registrant's Common Stock, $0.001 par value per share, outstanding as of October 29, 2021, was 140,185,565.

TABLE OF CONTENTS


PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Comprehensive Loss	3
	Condensed Consolidated Statements of Stockholders’ Equity (Deficit)	4
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	22

PART II	OTHER INFORMATION	23

Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 3.	Defaults Upon Senior Securities	24
Item 4.	Mine Safety Disclosures	24
Item 5.	Other Information	24
Item 6.	Exhibits	25
	SIGNATURES	26

Forward-Looking Statements

The discussions in this Quarterly Report on Form 10-Q (this “Report”) contain forward-looking statements reflecting our current expectations that involve risks and uncertainties. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. When used in this Report, the words “anticipate”, “expect”, “plan”, “believe”, “seek”, “estimate” and similar expressions are intended to identify forward-looking statements. These are statements that relate to future periods and include, but are not limited to, statements about the features, benefits and performance of our products, our ability to introduce new product offerings and increase revenue from existing products, expected expenses including those related to selling and marketing, product development and general and administrative, our beliefs regarding the health and growth of the market for our products, anticipated increase in our customer base, expansion of our products functionalities, expected revenue levels and sources of revenue, expected impact, if any, of legal proceedings, the adequacy of liquidity and capital resource, and expected growth in business. Forward-looking statements are statements that are not historical facts. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from the forward-looking statements contained in this Report. Factors that could cause actual results to differ materially include, but are not limited to: our ability to successfully complete the additional testing and implement required modifications to vehicles to achieve compliance with Federal Motor Vehicle Safety Standards with respect to the C-1000s; the results of our ongoing review of the Company’s business and go-forward operating and commercial plans; our ability to capitalize on opportunities to deliver products to meet customer requirements; our limited operations and need to expand to fulfill product orders; risks associated with obtaining orders and executing upon such orders; the ability to protect our intellectual property; negative impacts stemming from the continuing COVID-19 pandemic; market acceptance for our products; our ability to attract and retain customers for existing and new products; our ability to control our expenses; potential competition, including without limitation shifts in technology; global and local business conditions; the prices being charged by our competitors; our inability to retain key members of our management team; our inability to raise additional capital to fund our operations and business plan; our inability to satisfy covenants in our financing agreements; our inability to maintain our listing of our securities on the Nasdaq Capital Market; our inability to satisfy our customer warranty claims; the outcome of any regulatory proceedings; our liquidity and other risks and uncertainties and other factors discussed from time to time in our filings with the Securities and Exchange Commission (“SEC”), including our annual report on Form 10-K filed with the SEC. Forward-looking statements speak only as of the date hereof. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based, except as required by law.

All references in this Report that refer to the “Company”, “Workhorse Group”, “Workhorse”, “we,” “us” or “our” are to Workhorse Group Inc.

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Workhorse Group Inc.

Condensed Consolidated Balance Sheets

(Unaudited)


	September 30, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	230,421,424	$	46,817,825
Restricted cash held in escrow	—		194,411,242

Accounts and lease receivable, less allowance for credit losses of zero at September 30, 2021 and December 31, 2020, respectively	96,449		1,132,164

Inventory, net	61,504,713		15,467,012
Prepaid expenses	34,615,183		32,759,216
Other current assets	365,000		—
Total current assets	327,002,769		290,587,459
Property, plant and equipment, net	13,859,625		11,398,166
Investment in LMC	—		330,556,744
Total Assets	$	340,862,394	$	632,542,369
Liabilities
Current liabilities:
Accounts payable	$	6,020,838	$	4,790,763
Accrued liabilities and other	8,508,956		5,995,302
Warranty liability	4,891,998		5,400,000


Current portion of convertible notes, at fair value	155,508,750		—
PPP Term Note	—		1,411,000
Total current liabilities	174,930,542		17,597,065
Other long-term liabilities	207,040		207,040
Deferred tax liability	—		21,833,930
Convertible notes, at fair value	24,791,250		197,700,000
Total Liabilities	199,928,832		237,338,035
Commitments and contingencies
Stockholders’ Equity:
Series A preferred stock, par value $0.001 per share, 75,000,000 shares authorized, zero shares issued and outstanding as of September 30, 2021 and December 31, 2020	—		—
Common stock, par value $0.001 per share, 250,000,000 shares authorized, 123,622,875 shares issued and outstanding as of September 30, 2021 and 121,922,532 shares issued and outstanding as of December 31, 2020	123,623		121,923
Additional paid-in capital	505,281,242		504,112,442
Accumulated deficit	(354,271,303)		(109,030,031)
Accumulated other comprehensive loss	(10,200,000)		—
Total stockholders’ equity	140,933,562		395,204,334
Total Liabilities and Stockholders’ Equity	$	340,862,394	$	632,542,369

See accompanying notes to the condensed consolidated financial statements.

Workhorse Group Inc.

Condensed Consolidated Statements of Operations

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Sales, net of returns and allowances	$	(576,602)	$	564,707	$	1,147,334	$	740,949
Cost of sales	11,549,187		2,815,242		32,570,616		6,074,577
Gross loss	(12,125,789)		(2,250,535)		(31,423,282)		(5,333,628)
Operating expenses
Selling, general and administrative	10,579,586		5,950,058		24,470,953		15,464,926
Research and development	2,801,394		1,614,485		8,788,969		5,133,325
Total operating expenses	13,380,980		7,564,543		33,259,922		20,598,251
Loss from operations	(25,506,769)		(9,815,078)		(64,683,204)		(25,931,879)
Interest (income) expense, net	(18,599,130)		74,315,644		(23,040,886)		185,638,961
Other loss (income)	77,127,266		—		225,432,884		(864,900)
Loss before benefit for income taxes	(84,034,905)		(84,130,722)		(267,075,202)		(210,705,940)
Benefit for income taxes	(2,919,491)		—		(21,833,930)		—
Net loss	$	(81,115,414)	$	(84,130,722)	$	(245,241,272)	$	(210,705,940)

Net loss per share of common stock
Basic	$	(0.66)	$	(0.78)	$	(1.99)	$	(2.52)
Diluted	$	(0.77)	$	(0.78)	$	(2.07)	$	(2.52)

Weighted average shares used in computing net loss per share of common stock
Basic	123,584,023		107,406,000		123,186,350		83,611,526
Diluted	129,251,351		107,406,000		128,853,678		83,611,526

See accompanying notes to the condensed consolidated financial statements.

Workhorse Group Inc.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net loss	$	(81,115,414)	$	(84,130,722)	$	(245,241,272)	$	(210,705,940)
Other comprehensive (loss) income
Change in fair value of convertible notes attributable to credit spread	—		—		(10,200,000)		1,100,000
Comprehensive loss	$	(81,115,414)	$	(84,130,722)	$	(255,441,272)	$	(209,605,940)

See accompanying notes to the condensed consolidated financial statements.

Workhorse Group Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(Unaudited)


	Common Stock			Series A Preferred Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total Stockholders’ Deficit
	Number of Shares	Amount		Number of Shares	Amount
Balance as of June 30, 2020	89,330,123	$	89,330	—	$	—	$	233,715,623	$	(305,381,748)	$	1,100,000	$	(70,476,795)
Stock options and warrants exercised, and vesting of restricted shares	19,247,746	19,248		—	—		30,634,257		—		—		30,653,505
Common stock issued for preferred stock dividends	303,617	304		—	—		491,556		—		—		491,860
Conversion of convertible notes	6,065,576	6,066		—	—		110,236,598		—		—		110,242,664
Common stock issued for interest on convertible notes	16,083	16		—	—		294,782		—		—		294,798
Stock-based compensation	—	—		—	—		738,516		—		—		738,516
Net loss for the three months ended September 30, 2020	—	—		—	—		—		(84,130,722)		—		(84,130,722)
Other comprehensive income	—	—		—	—		—		—		—		—
Balance as of September 30, 2020	114,963,145	$	114,964	—	$	—	$	376,111,332	$	(389,512,470)	$	1,100,000	$	(12,186,174)


	Common Stock			Series A Preferred Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total Stockholders’ Deficit
	Number of Shares	Amount		Number of Shares	Amount
Balance as of December 31, 2019	67,105,000	$	67,105	—	$	—	$	143,826,315	$	(178,806,530)	$	—	$	(34,913,110)
Stock options and warrants exercised, and vesting of restricted shares	32,158,980	32,159		—	—		77,779,745		—		—		77,811,904
Common stock issued for preferred stock dividends	920,901	922		—	—		1,490,938		—		—		1,491,860
Conversion of convertible notes	14,449,846	14,450		—	—		148,963,233		—		—		148,977,683
Common stock issued for interest on convertible notes	328,418	328		—	—		1,283,367		—		—		1,283,695
Stock-based compensation	—	—		—	—		2,767,734		—		—		2,767,734
Net loss for the nine months ended September 30, 2020	—	—		—	—		—		(210,705,940)		—		(210,705,940)
Other comprehensive income	—	—		—	—		—		—		1,100,000		1,100,000
Balance as of September 30, 2020	114,963,145	$	114,964	—	$	—	$	376,111,332	$	(389,512,470)	$	1,100,000	$	(12,186,174)

See accompanying notes to the condensed consolidated financial statements.

Workhorse Group Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(Unaudited)


	Common Stock			Series A Preferred Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Number of Shares	Amount		Number of Shares	Amount
Balance as of June 30, 2021	123,414,045	$	123,414	—	$	—	$	506,073,876	$	(273,155,889)	$	(10,200,000)	$	222,841,401
Stock options and warrants exercised, and vesting of restricted shares	208,830	209		—	—		(2,013,839)		—		—		(2,013,630)
Stock-based compensation	—	—		—	—		1,221,205		—		—		1,221,205
Net loss for the three months ended September 30, 2021	—	—		—	—		—		(81,115,414)		—		(81,115,414)
Other comprehensive loss	—	—		—	—		—		—		—		—
Balance as of September 30, 2021	123,622,875	$	123,623	—	$	—	$	505,281,242	$	(354,271,303)	$	(10,200,000)	$	140,933,562


	Common Stock			Series A Preferred Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Number of Shares	Amount		Number of Shares	Amount
Balance as of December 31, 2020	121,922,532	$	121,923	—	$	—	$	504,112,442	$	(109,030,031)	$	—	$	395,204,334
Stock options and warrants exercised, and vesting of restricted shares	1,700,343	1,700		—	—		(2,084,746)		—		—		(2,083,046)
Stock-based compensation	—	—		—	—		3,253,546		—		—		3,253,546
Net loss for the nine months ended September 30, 2021	—	—		—	—		—		(245,241,272)		—		(245,241,272)
Other comprehensive loss	—	—		—	—		—		—		(10,200,000)		(10,200,000)
Balance as of September 30, 2021	123,622,875	$	123,623

SEC Form 10-Q filed by Workhorse Group, Inc.