Workhorse Strengthens Financial Position with Convertible Note Transaction

Rhea-AI Summary

Workhorse Group Inc. secures $139 million in financing to support its product roadmap for zero-emission commercial vehicles, with immediate liquidity from a registered direct offering.

Insights

Financial Analyst

The recent financing obtained by Workhorse Group Inc. reflects a strategic move to bolster its financial position and ensure the continuation of its product development. The issuance of senior secured convertible notes and warrants is a common funding mechanism that allows investors to convert debt into equity at a later date, potentially diluting current shareholders but also providing the company with necessary capital.

From a financial perspective, the immediate liquidity of $9 million addresses short-term operational needs and the redemption of existing debt, which could improve the company's debt profile. However, the potential increase in debt up to $139 million raises questions about the long-term debt servicing capabilities of Workhorse, especially since the commercial electric vehicle sector is capital-intensive with long payback periods.

The market's reaction to this news will likely hinge on the investor's confidence in Workhorse's product roadmap and its ability to capture market share in the zero-emission commercial vehicle space. Given the competitive landscape, Workhorse must demonstrate that the funds will lead to tangible progress in product development and sales growth.

Market Research Analyst

The transition to zero-emission commercial vehicles is a rapidly growing market, driven by increasing environmental regulations and corporate sustainability goals. Workhorse's focus on this sector positions it in a high-potential market but also in a highly competitive one, with major players investing heavily in electric vehicle (EV) technology.

The funding announcement may signal to the market that Workhorse is serious about maintaining and accelerating its position in the industry. However, the effectiveness of this financing in achieving technological advancements and market penetration will be critical for the company's success. Investors and stakeholders will be closely monitoring Workhorse's ability to meet production targets and secure orders, which are key performance indicators in this industry.

Moreover, the use of registered direct offerings is indicative of a targeted approach to raising capital, which can be more efficient than public offerings but also suggests that specific institutional investors see potential in the company's strategy.

Legal Expert

The legal framework governing the issuance of securities is complex and Workhorse's adherence to SEC regulations, as evidenced by the effective registration statement and the filing of a Form 8-K, is essential for the legitimacy of the transaction. The company's transparency in these filings provides investors with the necessary information to assess the terms and potential risks associated with the financing.

It's important for investors to understand that the senior secured status of the convertible notes gives the holders a priority claim over the company's assets in case of default, which can be both a reassurance for debt investors and a concern for equity holders. Additionally, the issuance of warrants could result in future share price volatility as they are exercised, affecting the stock market performance of Workhorse.

Investors will need to review the final prospectus supplement and the accompanying prospectus for a full understanding of the financial instruments being utilized and the implications for their investments.

New Financing Provides Immediate Liquidity and Financial Resources to Support Company’s Continued Progress Advancing Its Product Roadmap

CINCINNATI, March 19, 2024 (GLOBE NEWSWIRE) -- Workhorse Group Inc. (Nasdaq: WKHS) (“Workhorse” or “the Company”), an American technology company focused on pioneering the transition to zero emission commercial vehicles, today announced it entered into an agreement on March 15, 2024 with an institutional investor (the “Investor”) on the terms of financing transactions that will deliver up to $139 million to Workhorse and support the Company’s continued execution of its product roadmap.

The financing transactions contemplate the issuance and sale by Workhorse to the Investor of senior secured convertible notes in an aggregate principal amount of up to $139 million and warrants to purchase shares of common stock in multiple tranches over a period beginning on March 15, 2024. In connection with the agreement, the Company completed a registered direct offering pursuant to which it issued and sold to the Investor a $9 million note and related warrants (the “March Securities”). The sale of the March Securities provides Workhorse immediate liquidity which is being used to fund operations and redeem the remaining $2,500,000 in aggregate principal amount of its existing Green Senior Secured Convertible Note.

The March Securities were offered in the registered direct offering pursuant to a registration statement on Form S-3 (File No. 333-273357), which was declared effective by the Securities and Exchange Commission (the “SEC”) on July 28, 2023. The March Securities were offered in the registered direct offering only by means of a prospectus which is a part of the effective registration statement. A final prospectus supplement and the accompanying prospectus relating to the registered direct offering were filed with the SEC and will be available on the SEC’s website at www.sec.gov.

This press release shall not constitute an offer to sell or a solicitation of an offer to buy any securities, nor shall there be any sale of any securities in any state or other jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state or other jurisdiction.

Additional information, including the full terms of the financing transactions, is available in the Form 8-K that the Company filed with the Securities and Exchange Commission.

About Workhorse Group Inc.

Workhorse is a technology company focused on providing ground and air-based electric vehicles to the last-mile delivery sector. As an American original equipment manufacturer, we design and build high performance, battery-electric trucks and drones. Workhorse also develops cloud-based, real-time telematics performance monitoring systems that are fully integrated with our vehicles and enable fleet operators to optimize energy and route efficiency. All Workhorse vehicles are designed to make the movement of people and goods more efficient and less harmful to the environment. For additional information visit workhorse.com.

FORWARD LOOKING STATEMENTS

The discussions in this press release 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 our liquidity and capital resources, the likelihood of us obtaining additional financing in the immediate future and the expected terms of such financing, 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 W4 CC, W750, W56 and WNext programs; our ability to attract and retain customers for our existing and new products; risks associated with obtaining orders and executing upon such orders; the unavailability, reduction, elimination or adverse application of government subsidies, incentives and regulations; 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 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; our general inability to raise additional capital to fund our operations and business plan; our ability to obtain financing to meet our immediate liquidity needs and the potential costs, dilution and restrictions imposed by any such financing; our ability to regain compliance with the listing requirements of the Nasdaq Capital Market and otherwise maintain the listing of our securities thereon and the impact of any steps we take to regain such compliance, such as a reverse split of our common stock, on our operations, stock price and future access to liquidity; our ability to protect our intellectual property; market acceptance for our products; our ability to obtain sufficient liquidity from operations and financing activities to continue as a going concern and, our ability to control our expenses; the effectiveness of our cost control measures and impact such measures could have on our operations; 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 conflicts in Ukraine and Israel) and/or terrorism; the prices being charged by our competitors; our inability to retain key members of our management team; our inability to satisfy our customer warranty claims; the outcome of any regulatory or legal proceedings; and other risks and uncertainties and other factors discussed from time to time in our filings with the Securities and Exchange Commission (“SEC”), including under the “Risk Factors” section of 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.

Media Contact:
Aaron Palash / Greg Klassen
Joele Frank, Wilkinson Brimmer Katcher
212-355-4449

Investor Relations Contact:
Matt Glover / Tom Colton
Gateway Investor Relations
949-574-3860
WKHS@gateway-grp.com

FAQ

What financing agreement did Workhorse Group Inc. enter into?

Workhorse Group Inc. entered into an agreement with an institutional investor for financing transactions that will provide up to $139 million.

What is the purpose of the financing transactions?

The financing transactions are intended to support Workhorse's continued execution of its product roadmap for zero-emission commercial vehicles.

How much did Workhorse Group Inc. issue and sell in the registered direct offering?

Workhorse Group Inc. issued and sold a $9 million note and related warrants in the registered direct offering.

What is the immediate use of the liquidity from the March Securities sale?

The immediate liquidity from the March Securities sale is being used to fund operations and redeem the remaining $2,500,000 in aggregate principal amount of its existing Green Senior Secured Convertible Note.

Where can additional information about the financing transactions be found?

Additional information, including the full terms of the financing transactions, can be found in the Form 8-K filed by Workhorse Group Inc. with the Securities and Exchange Commission.