Workhorse(US:WKHS)2025-08-15 13:07PART I FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Unaudited financial statements for June 30, 2025, show increased revenue, continued net losses, and negative working capital, with total assets at $99.3 million and liabilities at $76.9 million, addressing a 'going concern' via merger and financing Condensed Consolidated Balance Sheets As of June 30, 2025, total assets reached $99.3 million due to increased restricted cash, while total liabilities surged to $76.9 million from convertible notes, leading to a decrease in stockholders' equity to $22.3 million Condensed Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $2,190,820 | $4,119,938 | | Restricted cash | $22,528,341 | $525,000 | | Inventory, net | $32,757,831 | $41,839,020 | | Total current assets | $63,688,513 | $53,431,820 | | Total Assets | $99,254,112 | $93,840,770 | | Liabilities & Equity | | | | Accounts payable | $10,823,073 | $11,509,150 | | Convertible notes at fair value | $39,520,020 | $10,491,792 | | Total current liabilities | $73,482,778 | $45,235,937 | | Total Liabilities | $76,907,373 | $49,552,845 | | Total stockholders' equity | $22,346,739 | $44,287,925 | Condensed Consolidated Statements of Operations Q2 2025 sales significantly increased to $5.7 million year-over-year, yet the company reported a $7.4 million gross loss, with net loss narrowing to $14.8 million due to lower operating expenses Condensed Consolidated Statements of Operations Highlights (Unaudited) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Sales, net | $5,669,469 | $842,440 | $6,310,391 | $2,181,735 | | Gross loss | ($7,381,887) | ($6,458,908) | ($11,905,728) | ($12,562,391) | | Loss from operations | ($14,472,933) | ($20,518,240) | ($27,309,704) | ($44,244,912) | | Net loss | ($14,780,964) | ($26,319,999) | ($35,425,098) | ($55,475,786) | | Net loss per share (Basic and Diluted) | ($1.67) | ($17.45) | ($5.34) | ($40.81) | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash used in operating activities significantly reduced to $14.0 million, while financing activities provided $34.1 million, resulting in $24.7 million in total cash and equivalents Cash Flow Summary (Unaudited) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($14,027,313) | ($30,063,456) | | Net cash used in investing activities | $0 | ($3,759,353) | | Net cash provided by (used in) financing activities | $34,101,536 | $3,285,505 | | Change in cash, cash equivalents and restricted cash | $20,074,223 | ($30,537,304) | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies and critical events, highlighting a liquidity crisis and 'going concern' due to recurring losses and negative working capital, addressed by a planned merger with Motiv Power Systems, a sale-leaseback, and new financing - Substantial doubt exists regarding the company's ability to continue as a going concern due to recurring losses, an accumulated deficit of $888.8 million, and negative working capital of $9.8 million as of June 30, 2025293036 - On August 15, 2025, the company entered into a merger agreement with Motiv Power Systems, Inc., which is a key part of its plan to address liquidity issues44153 - In connection with the merger, the company arranged a $20 million sale-leaseback of its Union City, IN facility and a $5 million convertible note financing4950158 - The company is involved in litigation with supplier Coulomb Solutions Inc. (CSI) over alleged unpaid invoices exceeding $4 million, for which it has accrued $1.0 million152 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's focus on zero-emission trucks, detailing the August 15, 2025, merger with Motiv Power Systems and related financing as critical to addressing its 'going concern' status, alongside increased Q2 sales and reduced operating expenses Recent Developments and Going Concern This section details the August 15, 2025, merger with Motiv Power Systems, a $20 million sale-leaseback, and $5 million convertible note financing, all crucial for addressing severe liquidity issues and the 'going concern' warning - On August 15, 2025, the company entered into a merger agreement with Motiv Power Systems, where pre-merger Motiv investors will own approximately 62.5% of the combined entity169171 - To improve liquidity, the company is executing a $20 million sale-leaseback of its Indiana manufacturing facility and has secured $5 million in new convertible financing174175 - Management reiterates that substantial doubt exists about the company's ability to continue as a going concern and that failure to obtain proceeds from financing may require seeking bankruptcy protection188187 Results of Operations Q2 2025 sales significantly increased to $5.7 million due to W56 truck deliveries, despite a $7.4 million gross loss, while SG&A and R&D expenses decreased, contributing to a narrower net loss Comparison of Operating Results (Unaudited) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Sales, net | $5,669,469 | $842,440 | $6,310,391 | $2,181,735 | | Cost of sales | $13,051,356 | $7,301,348 | $18,216,119 | $14,744,126 | | Gross loss | ($7,381,887) | ($6,458,908) | ($11,905,728) | ($12,562,391) | | SG&A | $5,844,698 | $12,066,553 | $12,628,609 | $26,161,831 | | R&D | $1,246,348 | $1,992,779 | $2,775,367 | $5,520,690 | | Net loss | ($14,780,964) | ($26,319,999) | ($35,425,098) | ($55,475,786) | - The $4.8 million increase in sales for Q2 2025 was primarily due to the increased delivery of W56 trucks207 - SG&A expenses decreased by $6.3 million in Q2 2025 compared to Q2 2024, mainly due to lower employee compensation from reduced headcount and other cost-saving measures210 Liquidity and Capital Resources As of June 30, 2025, the company held $2.2 million in cash and $22.5 million in restricted cash, with cash used in operations at $14.0 million and financing providing $34.1 million, reiterating the 'going concern' warning - As of June 30, 2025, the company had $2.2 million of cash and cash equivalents and $22.5 million in restricted cash222 Summary of Cash Flows (Six Months Ended June 30) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($14,027,313) | ($30,063,456) | | Net cash used in investing activities | $0 | ($3,759,353) | | Net cash provided by financing activities | $34,101,536 | $3,285,505 | - The company's ability to continue as a going concern is contingent upon the successful execution of management's plan, including raising capital through the announced merger and related financing223224 Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes have occurred in the company's quantitative and qualitative disclosures about market risk since the 2024 Form 10-K filing - There have been no material changes to the company's market risk disclosures from the 2024 Form 10-K238 Item 4. Controls and Procedures As of June 30, 2025, disclosure controls and procedures were deemed ineffective due to material weaknesses in third-party valuation reviews and insufficient accounting personnel, with remediation plans ongoing - The CEO and CFO concluded that as of June 30, 2025, the company's disclosure controls and procedures were not effective240 - The ineffectiveness is due to material weaknesses related to the review of third-party valuations and a lack of sufficient, experienced accounting personnel243 - Remediation plans are in process, but the material weaknesses remain unresolved as of the end of the quarter246248 PART II OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 15 for details on material legal proceedings, specifically the ongoing litigation with supplier Coulomb Solutions Inc. (CSI) seeking over $4 million in damages - The company directs readers to Note 15 for details on material legal proceedings, which describes a lawsuit filed by supplier Coulomb Solutions Inc. (CSI)251152 Item 1A. Risk Factors New material risks are primarily associated with the pending merger with Motiv Power Systems, including non-completion, adverse effects on business relationships, restrictive covenants, and potential litigation - The consummation of the merger with Motiv is subject to numerous conditions, including stockholder and regulatory approvals, which may not be satisfied253 - The merger agreement contains provisions that restrict the company from soliciting alternative acquisition proposals and limit its ability to conduct certain business operations before the closing257258 - Failure to complete the merger could negatively impact the company's business and stock price and could trigger the payment of a termination fee255256 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the reporting period - None261 Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported during the period - None262 Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable263 Item 5. Other Information No directors or officers adopted or terminated Rule 10b5-1 trading plans or other non-Rule 10b5-1 trading arrangements during Q2 2025 - No directors or officers adopted or terminated any Rule 10b5-1 trading arrangements during the three months ended June 30, 2025264 Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL data files - The report includes required CEO and CFO certifications (Exhibits 31.1, 31.2, 32.1, 32.2) and Inline XBRL filings266