wkhs-20220930

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, 2022


☐			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.)

3600 Park 42 Drive, Suite 160E, Sharonville, Ohio 45241

(Address of principal executive offices, including zip code)

1 (888) 646-5205

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value per share

WKHS

The NASDAQ Capital Market

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 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 company, 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 ☒

The number of shares of the Registrant's Common Stock, $0.001 par value per share, outstanding as of October 31, 2022, was 164,101,244.

TABLE OF CONTENTS


PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	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	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	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26

PART II	OTHER INFORMATION	27

Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Mine Safety Disclosures	27
Item 5.	Other Information	27
Item 6.	Exhibits	28
	SIGNATURES	29

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 resources, 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 develop and manufacture our new product portfolio, including the W750, W56 and W34 platforms; our ability to attract and retain customers for our existing and new products; risks associated with obtaining orders and executing upon such orders; supply chain disruptions, including constraints on steel, semiconductors and other material inputs and resulting cost increases impacting our company, our customers, our suppliers or the industry; our ability to implement modifications to vehicles to achieve compliance with Federal Motor Vehicle Safety Standards and to meet customer requirements with respect to the C1000s; our ability to capitalize on opportunities to deliver products to meet customer requirements; our limited operations and need to expand and enhance elements of our production process to fulfill product orders; the ability to protect our intellectual property; negative impacts stemming from the COVID-19 pandemic; market acceptance for our products; our ability to control our expenses; potential competition, including without limitation shifts in technology; volatility in and deterioration of national and international capital markets and economic conditions; global and local business conditions; acts of war (including without limitation the conflict in Ukraine) and/or terrorism; 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 maintain our listing of our securities on the Nasdaq Capital Market; our inability to satisfy our customer warranty claims; the outcome of any regulatory or legal 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, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	120,117,862	$	201,647,394
Accounts receivable, less allowance for credit losses of zero as of September 30, 2022 and December 31, 2021	1,548,196		149,776
Other receivable	15,000,000		—
Inventory, net	11,567,607		10,067,367
Prepaid expenses and other current assets	14,946,935		4,357,829
Total current assets	163,180,600		216,222,366
Property, plant and equipment, net	17,047,641		7,897,807
Investment in Tropos	10,000,000		—
Lease right-of-use assets	11,476,927		1,538,852
Other assets	176,310		2,479,865
Total Assets	$	201,881,478	$	228,138,890
Liabilities
Current liabilities:
Accounts payable	$	7,728,111	$	7,849,607
Accrued and other current liabilities	44,825,969		14,752,827
Deferred revenue, current	3,375,000		—
Warranty liability	3,339,484		4,583,916
Current portion of lease liabilities	1,105,016		363,714
Total current liabilities	60,373,580		27,550,064
Deferred revenue, long-term	1,505,000		—
Lease liabilities, long-term	8,736,715		1,191,053
Convertible notes, at fair value	—		24,705,000
Total Liabilities	70,615,295		53,446,117
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, 2022 and December 31, 2021	—		—
Common stock, par value $0.001 per share, 250,000,000 shares authorized, 160,448,077 shares issued and outstanding as of September 30, 2022 and 151,915,455 shares issued and outstanding as of December 31, 2021	160,448		151,916
Additional paid-in capital	720,100,887		686,318,201
Accumulated deficit	(588,995,152)		(510,374,844)
Accumulated other comprehensive loss	—		(1,402,500)
Total stockholders’ equity	131,266,183		174,692,773
Total Liabilities and Stockholders’ Equity	$	201,881,478	$	228,138,890

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,
	2022		2021		2022		2021
Sales, net of returns and allowances	$	1,548,798	$	(576,602)	$	1,575,652	$	1,147,334
Cost of sales	9,515,547		11,549,187		16,459,102		32,570,616
Gross loss	(7,966,749)		(12,125,789)		(14,883,450)		(31,423,282)
Operating expenses
Selling, general and administrative	34,753,017		10,579,586		59,693,419		24,470,953
Research and development	6,126,951		2,801,394		15,165,946		8,788,969
Total operating expenses	40,879,968		13,380,980		74,859,365		33,259,922
Loss from operations	(48,846,717)		(25,506,769)		(89,742,815)		(64,683,204)
Interest income (expense), net	27,716		18,599,130		(2,290,993)		23,040,886
Other income (loss)	13,413,500		(77,127,266)		13,413,500		(225,432,884)
Loss before benefit for income taxes	(35,405,501)		(84,034,905)		(78,620,308)		(267,075,202)
Benefit for income taxes	—		2,919,491		—		21,833,930
Net loss	$	(35,405,501)	$	(81,115,414)	$	(78,620,308)	$	(245,241,272)

Net loss per share of common stock
Basic	$	(0.22)	$	(0.66)	$	(0.50)	$	(1.99)
Diluted	$	(0.22)	$	(0.63)	$	(0.50)	$	(1.90)

Weighted average shares used in computing net loss per share of common stock
Basic	160,213,944		123,584,023		157,117,380		123,186,350
Diluted	160,213,944		129,251,351		157,117,380		128,853,678

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,
	2022		2021		2022		2021
Net loss	$	(35,405,501)	$	(81,115,414)	$	(78,620,308)	$	(245,241,272)
Other comprehensive loss:
Change in fair value of convertible notes attributable to credit spread	—		—		—		(10,200,000)
Comprehensive loss	$	(35,405,501)	$	(81,115,414)	$	(78,620,308)	$	(255,441,272)

See accompanying notes to the condensed consolidated financial statements.

Workhorse Group Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)


	Common Stock			Additional Paid-in Capital	Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	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			Additional Paid-in Capital	Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	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 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		$	505,281,242	$	(354,271,303)	$	(10,200,000)	$	140,933,562

*Net of tax payments related to shares withheld for option exercises and vested stock.

See accompanying notes to the condensed consolidated financial statements.

Workhorse Group Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)


	Common Stock			Additional Paid-in Capital	Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Number of Shares	Amount
Balance as of June 30, 2022	160,058,512	$	160,059		$	717,258,045	$	(553,589,651)	$	—	$	163,828,453


Stock options and warrants exercised, and vesting of restricted shares*	389,565	389			(142,433)		—		—		(142,044)
Stock-based compensation	—	—			2,985,275		—		—		2,985,275
Net loss for the three months ended September 30, 2022	—	—			—		(35,405,501)		—		(35,405,501)

Balance as of September 30, 2022	160,448,077	$	160,448		$	720,100,887	$	(588,995,152)	$	—	$	131,266,183


	Common Stock			Additional Paid-in Capital	Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Number of Shares	Amount
Balance as of December 31, 2021	151,915,455	$	151,916		$	686,318,201	$	(510,374,844)	$	(1,402,500)	$	174,692,773
Common stock issued in exchange of convertible notes	7,833,666	7,834			25,373,244		—		—		25,381,078
Common stock issued through At-The-Market offering	98,986	99			248,596		—		—		248,695
Stock options and vesting of restricted shares*	599,970	599			(467,131)		—		—		(466,532)
Stock-based compensation	—	—			8,627,977		—		—		8,627,977
Net loss for the nine months ended September 30, 2022	—	—			—		(78,620,308)		—		(78,620,308)
Other comprehensive loss	—	—			—		—		1,402,500		1,402,500
Balance as of September 30, 2022	160,448,077	$	160,448		$	720,100,887	$	(588,995,152)	$	—	$	131,266,183

*Net of tax payments related to shares withheld for option exercises and vested stock.

See accompanying notes to the condensed consolidated financial statements.

Workhorse Group Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities:
Net loss	$	(78,620,308)	$	(245,241,272)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	1,378,365		1,342,348
Change in fair value and loss on exchange of convertible notes	1,769,857		(27,600,000)
Change in fair value of Investment in LMC	—		225,429,997
Stock-based compensation	8,627,977		3,253,546
Change in inventory and prepaid purchases reserve	5,196,774		(10,919,259)
Forgiveness of PPP Term Note	—		(1,411,000)
Deferred taxes	—		(21,833,930)
Non-cash lease expense	855,119		—
Other non-cash items	175,750		—
Effects of changes in operating assets and liabilities:
Accounts receivable	(16,398,420)		1,035,715
Inventory	(6,969,095)		(35,118,442)
Prepaid expenses and other current assets	(10,317,025)		(2,220,967)
Other assets	(84,401)		—
Accounts payable, accrued liabilities and other	29,650,491		3,743,729
Warranty liability	(1,244,432)		(508,002)
Net cash used in operating activities	(65,979,348)		(110,047,537)
Cash flows from investing activities:
Capital expenditures	(9,708,699)		(3,803,807)
Investment in Tropos	(5,000,000)		—
Net cash used in investing activities	(14,708,699)		(3,803,807)
Cash flows from financing activities:
Proceeds from sale of Investment in LMC	—		105,789,310
Commissions and fees on sale of Investment in LMC	—		(662,563)
Proceeds from issuance of common stock	248,695		—
Payments on finance lease	(623,648)		—
Exercise of warrants and options and restricted share award activity	(466,532)		(2,083,046)
Net cash provided by (used in) financing activities	(841,485)		103,043,701
Change in cash and cash equivalents	(81,529,532)		(10,807,643)
Cash, cash equivalents and restricted cash, beginning of the period	201,647,394		241,229,067
Cash and cash equivalents, end of the period	$	120,117,862	$	230,421,424

Supplemental disclosure of non-cash activities
Investment in Tropos in exchange for non-cash deferred revenue	5,000,000		—
Leased assets obtained in exchange for finance lease liabilities	6,022,694		—
Leased assets obtained in exchange for operating lease liabilities	5,024,284

SEC Form 10-Q filed by Workhorse Group Inc.