Workhorse(US:WKHS)2025-11-10 22:15Merger and Acquisition - The company entered into a merger agreement with Motiv Power Systems, Inc. on August 15, 2025, which will result in Motiv becoming a wholly-owned subsidiary of the company [176]. - Upon closing of the merger, pre-merger Motiv investors will own approximately 62.5% of the company, while existing shareholders will own about 26.5% [178]. - The merger agreement includes a condition for up to $20 million in debt financing, with $10 million allocated for general corporate purposes and $10 million for vehicle manufacturing [179]. - The company plans to repay approximately $24.1 million in outstanding obligations under the 2024 Notes upon closing of the merger [186]. Financial Performance - Sales for the three months ended September 30, 2025, were $2.4 million, a decrease of $0.1 million compared to $2.5 million in the same period of 2024, primarily due to lower truck sales [215]. - For the nine months ended September 30, 2025, sales increased to $8.7 million from $4.7 million in 2024, driven by increased delivery of W56 trucks [215]. - Cost of sales for the three months ended September 30, 2025, was $10.1 million, an increase of $3.5 million from $6.6 million in 2024, mainly due to higher inventory reserves [216]. - The gross loss for the three months ended September 30, 2025, was $7.7 million, compared to a gross loss of $4.1 million in the same period of 2024 [214]. - Selling, general and administrative expenses for the nine months ended September 30, 2025, were $20.4 million, down from $33.9 million in 2024, a decrease of $13.5 million [219]. - Research and development expenses for the nine months ended September 30, 2025, were $3.9 million, a decrease of $3.9 million from $7.8 million in 2024, attributed to cost-saving measures [221]. - The net loss for the nine months ended September 30, 2025, was $43.3 million, compared to a net loss of $80.6 million in the same period of 2024 [214]. - The company recognized a gain on the sale of assets of $13.8 million during the three and nine months ended September 30, 2025, primarily from the sale-leaseback of its Union City, IN facility [228]. Cash Flow and Liquidity - As of September 30, 2025, the company had $12.7 million in cash and cash equivalents and $25.5 million in restricted cash [233]. - The company reported a net cash used in operating activities of $25.0 million for the nine months ended September 30, 2025, a decrease from $40.1 million in the same period of 2024, primarily due to reduced spending on inventory and cost-saving measures [242][244]. - Cash provided by investing activities was $19.5 million for the nine months ended September 30, 2025, compared to cash used of $4.0 million in the same period of 2024, driven by proceeds from the Sale Leaseback of the Union City, IN manufacturing facility [245]. - Net cash provided by financing activities was $39.1 million for the nine months ended September 30, 2025, significantly higher than $11.5 million in the same period of 2024, primarily due to issuances of Notes and Warrants under the 2024 Securities Purchase Agreement [246]. - As of September 30, 2025, approximately $17.0 million of proceeds from the Tenth Additional 2024 Note remain in a lockbox account, contingent on satisfaction of specific conditions [235]. - Approximately $15.8 million has been released from the lockbox account as of November 7, 2025, with net proceeds received by the company totaling approximately $15.2 million [236]. Cost Management - Management has implemented cost-saving measures, significantly reducing operating costs during the first nine months of 2025 compared to the prior year [198]. - The company has deferred approximately 20% of executive officers' cash compensation from Q1 2024 to Q3 2024, with $0.4 million paid in July 2025 [200]. - The company continues to seek additional opportunities to reduce costs and maintain significantly reduced capital expenditures to address liquidity needs [202]. Challenges and Concerns - The company continues to face challenges with slower-than-anticipated electric truck adoption rates and regulatory uncertainties impacting demand [206]. - The company has substantial doubt regarding its ability to continue as a going concern for at least one year from the issuance date of the financial statements due to recurring losses and projected capital needs [240]. - The company plans to generate liquidity through increasing truck sales, reducing expenses, and raising capital via debt or equity securities [238]. - If the company fails to obtain additional financing, it may need to adjust operations or seek bankruptcy protection, which could significantly impact stakeholder value [239]. - The company has the potential to issue up to $61.5 million of additional 2024 Notes, but existing financing arrangements impose substantial restrictions on obtaining additional financing [237].