Workhorse(WKHS) - 2025 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION Overview of the company's financial performance and position, highlighting recurring losses and going concern issues Financial Statements (Unaudited) Presents the company's unaudited Q1 2025 financial statements, revealing decreased sales, a net loss, and significant going concern doubts Condensed Consolidated Balance Sheets Details the company's financial position as of March 31, 2025, showing increased assets and liabilities, and negative working capital Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $2,645 | $4,120 | | Restricted cash | $27,947 | $525 | | Inventory, net | $41,309 | $41,839 | | Total current assets | $77,544 | $53,432 | | Total Assets | $115,484 | $93,841 | | Liabilities & Equity | | | | Accounts payable | $11,092 | $11,509 | | Convertible notes at fair value | $45,244 | $10,492 | | Total current liabilities | $80,388 | $45,236 | | Total Liabilities | $84,092 | $49,553 | | Total stockholders' equity | $31,392 | $44,288 | - The company had negative working capital of $2.8 million as of March 31, 2025[25] Condensed Consolidated Statements of Operations Reports the company's operational results for Q1 2025, indicating reduced sales, a gross loss, and a net loss Q1 2025 vs Q1 2024 Statement of Operations (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Sales, net | $641 | $1,339 | | Cost of sales | $5,165 | $7,443 | | Gross loss | $(4,524) | $(6,103) | | Selling, general and administrative | $6,784 | $14,095 | | Research and development | $1,529 | $3,528 | | Loss from operations | $(12,837) | $(23,727) | | Net loss | $(20,644) | $(29,156) | | Net loss per share (Basic and Diluted) | $(4.68) | $(24.09) | Condensed Consolidated Statements of Stockholders' Equity Outlines changes in stockholders' equity for Q1 2025, primarily driven by the net loss and capital raised from convertible notes - The company's accumulated deficit grew from $853.4 million to $874.0 million during the first quarter of 2025[17] - Common stock issued under convertible notes added $7.0 million to stockholders' equity during the quarter[17] Condensed Consolidated Statements of Cash Flows Summarizes cash movements for Q1 2025, showing cash used in operations and significant cash generated from financing activities Q1 2025 vs Q1 2024 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(8,154) | $(17,964) | | Net cash used in investing activities | $(18) | $(3,026) | | Net cash provided by (used in) financing activities | $34,118 | $(8,128) | | Change in cash, cash equivalents and restricted cash | $25,946 | $(29,117) | - Proceeds from convertible notes were the primary source of financing, providing $33.7 million in cash during Q1 2025[20] Notes to Condensed Consolidated Financial Statements Provides critical disclosures, including the company's going concern status, financing dependencies, and legal proceedings - Management has concluded that substantial doubt exists regarding the company's ability to continue as a going concern for at least one year from the issuance date of the financial statements[26][33] - The company's ability to continue operations is contingent on obtaining proceeds from third-party financing, primarily the 2024 Securities Purchase Agreement, which has conditions for fund release[27][37] - The company is in a legal dispute with supplier Coulomb Solutions Inc. (CSI) over alleged unpaid invoices exceeding $4 million. Workhorse has accrued $1.0 million in connection with this dispute[127] - Subsequent to the quarter end, the company received consent for the release of an additional $5.5 million from its lockbox account in two tranches ($3.0M in April, $2.5M in May)[131] Management's Discussion and Analysis of Financial Condition and Results of Operations Discusses the company's financial condition and operational results, emphasizing going concern risks, cost-saving measures, and market challenges - The company's ability to obtain additional financing is 'extremely limited under current conditions,' and if unsuccessful, it may need to seek bankruptcy protection[141][179] - Cost-saving measures implemented include a 20% reduction in workforce (excluding direct labor), furloughing employees, reducing capital expenditures, and raising capital through the 2024 Securities Purchase Agreement[149] Q1 2025 vs Q1 2024 Results of Operations Summary (in millions) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Sales, net | $0.6 | $1.3 | $(0.7) | | Cost of sales | $5.2 | $7.4 | $(2.2) | | SG&A expenses | $6.8 | $14.1 | $(7.3) | | R&D expenses | $1.5 | $3.5 | $(2.0) | | Net loss | $(20.6) | $(29.2) | $8.6 | - Market demand in Q1 2025 was negatively impacted by slower-than-anticipated EV adoption, lack of government subsidies, and delays in charging infrastructure roll-out[152] Quantitative and Qualitative Disclosures About Market Risk Confirms no material changes to market risk disclosures from the prior annual report - There have been no material changes to the market risk disclosures previously reported in the 2024 Form 10-K[188] Controls and Procedures Concludes that disclosure controls and procedures were ineffective due to material weaknesses in internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were not effective as of March 31, 2025[190] - Material weaknesses identified include deficiencies in reviewing third-party valuations and a lack of sufficient, experienced accounting personnel due to turnover and cost-cutting measures[193] - The company is implementing remediation plans, but the material weaknesses remain unresolved as of the reporting date[196][198] PART II OTHER INFORMATION Contains supplementary information not covered in the financial statements, including legal proceedings and risk factors Legal Proceedings Refers to the financial statement notes for details on material legal disputes, specifically the CSI litigation - For details on legal proceedings, the report directs readers to Note 15 in the financial statements, which discusses the CSI litigation[201] Risk Factors States that no material changes to the company's previously disclosed risk factors occurred during the period - There have been no material changes in the company's risk factors during the current period[202] Unregistered Sales of Equity Securities and Use of Proceeds Reports no unregistered sales of equity securities during the reporting period - None[203] Defaults Upon Senior Securities Indicates that the company experienced no defaults on senior securities - None[204] Mine Safety Disclosures Confirms that this disclosure item is not applicable to the company's operations - Not applicable[205] Other Information Notes that no directors or officers adopted or terminated Rule 10b5-1 trading plans in Q1 2025 - No directors or officers adopted or terminated any Rule 10b5-1 trading plans or similar arrangements in Q1 2025[206] Exhibits Lists all documents filed as exhibits with the Form 10-Q, including financing agreements and certifications