Workhorse Group Inc

Previous wording

Accordingly, on March 15, 2024, we entered into a securities purchase agreement (the “2024 Securities Purchase Agreement”) with an institutional investor (the “Investor”), under which we agreed to issue and sell, in one or more registered public offerings by the Company directly to the Investor, in multiple tranches over a period beginning on March 15, 2024, senior secured convertible notes for up to an aggregate principal amount of $139.0 million (the “2024 Notes”) that will be convertible into shares of the Company’s common stock, par value of $0.001 per share (the “Common Stock”) and warrants to purchase shares of Common Stock (the “2024 Warrants”). Pursuant to the 2024 Securities Purchase Agreement, on May 10, 2024, the Company issued and sold to the Investor a (i) 2024 Note in the original principal amount of $6,285,714 (the “First Additional 2024 Note”) and (ii) 2024 Warrant to purchase up to 36,785,453 shares of Common Stock (the “First Additional 2024 Warrant”). If we are not able to complete the additional closings or find another source of liquidity in the immediate future, we may be unable to continue our operations or may need to substantially reduce them.

Current wording

On March 15, 2024, we entered into a securities purchase agreement (the “2024 Securities Purchase Agreement”) with an institutional investor (the “Investor”), under which we agreed to issue and sell, in one or more registered public offerings by the Company directly to the Investor, in multiple tranches over a period beginning on March 15, 2024, senior secured convertible notes (the "2024 Notes") for up to an aggregate principal amount of $139.0 million that are convertible into shares of the Company's Common Stock, par value of $0.001 per share (“Common Stock”) and warrants to purchase shares of Common Stock (the “2024 Warrants”).

Previous wording

The 2024 Securities Purchase Agreement provides additional closings of up to $123.7 million in aggregate principal amount of additional 2024 Notes and, if our share price makes such exercise feasible, the possible receipt of proceeds from the exercise of the corresponding 2024 Warrants pursuant to the 2024 Securities Purchase Agreement. Additional information concerning the 2024 Securities Purchase Agreement, the 2024 Notes, and the 2024 Warrants is set forth in Note 1 and Note 7 to the Condensed Consolidated Financial Statements.

Current wording

If we are not able to complete the additional closings, receive proceeds from the exercise of 2024 Warrants or find another source of liquidity in the immediate future, we may be unable to continue our operations or may need to substantially reduce them. Additional information concerning the 2024 Securities Purchase Agreement, the 2024 Notes, and the 2024 Warrants is set forth in Note 1 and Note 7 to the Condensed Consolidated Financial Statements.

Previous wording

Another vital component of management’s intended plan over the next twelve months to improve our liquidity and working capital requirements is reducing our operating costs to, among other things, reduce demands on the liquidity that is available to us. Accordingly, in the first quarter of 2024 we took the measures described below.

Current wording

Another vital component of management’s intended plan over the next twelve months to improve our liquidity and working capital requirements is reducing our operating costs to, among other things, reduce demands on the liquidity that is available to us. Accordingly, in the first and second quarter of 2024 we took the measures described below and started to realize the full benefit of such measures during the second quarter ended June 30, 2024.

Previous wording

•Each of our executive officers agreed to defer payment of approximately 20% of their cash compensation into the second quarter of 2024.

Current wording

•Each of our executive officers agreed to defer payment of approximately 20% of their cash compensation into the third quarter of 2024.

Previous wording

In addition, on April 22, 2024, the Company furloughed 73 employees at its Union City manufacturing facility without pay. The Company expects the furloughs to provide operational savings and has not incurred, and does not expect to incur, material costs in connection with the furloughs. The Company is also currently working with certain of its vendors to extend or restructure the payment terms of certain of its accounts payable. The furloughs, salary deferrals and vendor discussions are part of the Company’s previously disclosed strategy to reduce costs. The Company currently intends to reinstate all furloughed employees when the Company’s financial and operational position permits. There can, however, be no assurance that all such furloughed employees will be available and willing to return to work.

Current wording

In addition, on April 22, 2024, we furloughed 73 employees at our Union City manufacturing facility without pay, and we have experienced voluntary attrition of personnel, including senior managers of the Company, during and after the second quarter of 2024. We expect the furloughs and voluntary attrition to continue to provide operational savings. We have not incurred, and do not expect to incur, material costs in connection with the furloughs. We are also currently working with certain of our vendors to extend or restructure the payment terms of past due accounts payable balances. The furloughs, salary deferrals and vendor discussions are part of our previously disclosed strategy to reduce costs. During the second quarter of 2024, we started to reinstate certain furloughed employees to fulfill vehicle production requirements for the W56. However, there is still no assurance that all furloughed employees, including key personnel will be available and willing to return to work or that we will be able to replace the employees who departed voluntarily.

Previous wording

As previously disclosed in the Form 10-K and discussed above as part of our cost-saving measures, on February 20, 2024, our Board of Directors approved a plan to cease the production operations of our drone design and manufacturing business and transition to only operating as a Drones as a Service business. The decision to cease operation of our drone design and manufacturing product line was not considered a strategic shift having major effects on operations and therefore does not meet the criteria to qualify as a discontinued operation.

Current wording

As previously disclosed and discussed above as part of our cost-saving measures, on February 20, 2024, our Board of Directors approved a plan to cease the production operations of our drone design and manufacturing business and transition to only operating as a Drones as a Service business. The decision to cease operation of our drone design and manufacturing product line was not considered a strategic shift having major effects on operations and therefore does not meet the criteria to qualify as a discontinued operation.

Previous wording

NASDAQ Listing Requirements; Proposed Reverse Stock Split

Current wording

Nasdaq Listing Requirements; Reverse Stock Split

Previous wording

As previously disclosed, on September 22, 2023, the Company received notice from Nasdaq indicating that the closing bid price for its common stock had fallen below the $1.00 minimum bid price for continued listing for 30 consecutive trading days and was no longer in compliance with the minimum bid requirement. In order for the Company to regain compliance, the closing bid price of its common stock must be equal to or above the $1.00 minimum bid price for a period of 10 consecutive trading days prior to March 20, 2024. As also previously disclosed, on March 21, 2024, the Company received written notification from Nasdaq granting the Company’s request for a 180-day extension to regain compliance with the minimum bid requirement. After the granting of the extension, the closing bid price of the Company's common stock must be equal to or above the $1.00 minimum bid price for a period of 10 consecutive trading days prior to September 16, 2024. Based on recent trading prices of our common stock, we believe that it is highly unlikely that we will be able to meet this requirement by that date.

Current wording

As previously disclosed, on September 22, 2023, we received notice from Nasdaq indicating that the closing bid price for our Common Stock had fallen below Nasdaq’s $1.00 minimum bid price requirement (the“Minimum Bid Requirement”) for continued listing for 30 consecutive trading days and, therefore, we were no longer in compliance with the Minimum Bid Requirement. In order for us to regain compliance, the closing bid price of our Common Stock had to be equal to or above the $1.00 minimum bid price for a period of 10 consecutive trading days prior to March 20, 2024. As also previously disclosed, on March 21, 2024, we received written notification from Nasdaq granting our request for a 180-day extension to regain compliance with the minimum bid requirement. After the granting of the extension, the closing bid price of our Common Stock had to be equal to or above the $1.00 minimum bid price for a period of 10 consecutive trading days prior to September 16, 2024.

Previous wording

We continue to focus on product quality, manufacturing capacity and operational planning, and engineering and design to enable increased deliveries and deployments of our products and future revenue growth. During the first three months of 2024, we continued executing our strategic product roadmap for our electric vehicle offerings, including the production of the W56 vehicle program in both strip chassis and step van variants. We continued to electrify the fleet of vehicles being used in our Stables by Workhorse initiative, which operates FedEx Ground delivery routes in the greater Cincinnati area. The electrification of the fleet provides us with firsthand data on the benefits and challenges of independent fleet operators experience while executing last-mile delivery operations. The initiative also provides valuable insights into how our customers can plan for and manage the transition to EV operations, including how to develop adequate charging infrastructure, training and maintenance services. In addition to our ongoing production ramp in 2023, we intend to continue to generate demand and brand awareness by improving our vehicles’ performance and functionality, and by developing new vehicle programs, including new W56 variants and the WNext platform. We expect to continue to benefit from ongoing electrification of the commercial vehicle market and in particular "last mile delivery" sector.

Current wording

We continue to focus on product quality, manufacturing capacity and operational planning, and engineering and design to enable increased deliveries and deployments of our products and future revenue growth. During the first half of 2024, we continued executing our strategic product roadmap for our electric vehicle offerings, including the production of the W4CC, W56 and the development of the W56 208-inch wheelbase vehicle program in both strip chassis and step van variants. We continued to electrify the fleet of vehicles being used in our Stables by Workhorse initiative, which operates FedEx Ground delivery routes in the greater Cincinnati area. The electrification of the fleet provides us with firsthand data on the benefits and challenges of independent fleet operators experience while executing last-mile delivery operations. The initiative also provides valuable insights into how our customers can plan for and manage the transition to EV operations, including how to develop adequate charging infrastructure, training and maintenance services. In addition to our ongoing production ramp in 2024-2025, we intend to continue to generate demand and brand awareness by improving our vehicles’ performance and functionality, and by developing new vehicle programs, including new W56 variants. We expect to continue to benefit from ongoing electrification of the commercial vehicle market and in particular "last mile delivery" sector.

Previous wording

Market Demand. Our sales during the first quarter of 2024 were lower than the prior year period due to slower-than-anticipated industry wide electric vehicle adoption rates and lack of government subsidies and incentives available to our dealers as well as slower than expected roll-out of additional power to electric grids and the resulting effect on roll-outs of electric vehicle charging infrastructure, nationwide. However, we expect adoption rates to accelerate through 2024 driven by more stringent state and federal emissions requirements and continued government subsidies and incentives that will continue to reduce cost barriers for EV ownership, including the approval for our W56 platform for the HVIP program through CARB, providing an $85,000 base voucher per W56 vehicle purchased. The accelerated adoption rates are related to the enforcement of California’s Advanced Clean Fleets Regulation (“ACF Regulation”) which is contingent upon the Environmental Protection Agency (“EPA”) granting a waiver or determining that a waiver is not necessary. Under the Clean Air Act, California holds the unique authority to request a waiver of preemption, which typically restricts states from setting their own emissions standards for new motor vehicles. The EPA’s role involves a thorough review of comments and an assessment to determine if the criteria for granting a waiver are satisfied. This regulatory landscape is a significant consideration for our operations and strategic planning.

Current wording

Market Demand. Our sales during the first half of 2024 were lower than the prior year period due to slower-than-anticipated industry wide electric vehicle adoption rates and lack of government subsidies and incentives available to our dealers as well as slower than expected roll-out of additional power to electric grids and the resulting effect on roll-outs of electric vehicle charging infrastructure, nationwide. Delayed governmental approvals in certain states and slower than expected proliferation of charging stations across the country have also adversely impacted demand. However, we expect adoption rates to accelerate in 2025, driven by more stringent state and federal emissions requirements and continued government subsidies and incentives that will continue to reduce cost barriers for EV ownership, including the approval for our W56 platform for the California’s Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project (HVIP) program through California Air Resource Board (CARB), providing buyers with an $85,000 base voucher per W56 vehicle purchased. The accelerated adoption rates are related to the enforcement of California’s Advanced Clean Fleets Regulation (“ACF Regulation”), which is contingent upon the Environmental Protection Agency (“EPA”) granting a waiver or determining that a waiver is not necessary. Under the Clean Air Act, California holds the unique authority to request a waiver of preemption, which typically restricts states from setting their own emissions standards for new motor vehicles. The EPA’s role involves a thorough review of comments and an assessment to determine if the criteria for granting a waiver are satisfied. This regulatory landscape is a significant consideration for our operations and strategic planning.

Previous wording

Supply Chain. We continue to develop relationships with suppliers of key parts, components and raw materials to be used in the manufacture of our products such as batteries, electronics, and vehicle chassis that are sourced from suppliers across the world. As we continue to execute on our new vehicle programs, we will continue to identify supplier relationship and vehicle program synergies which may allow us to take advantage of pricing efficiencies from economies of scale. Where available, we will utilize multiple supply sources for key parts, and we will work to qualify multiple supply sources to achieve pricing efficiencies and minimize potential production risks related to supply chain. As previously disclosed, the Company is currently working with certain of its vendors to extend or restructure the payment terms of certain accounts payable. We are also currently in litigation with one of our battery suppliers, Coulomb Solutions Inc. For more information concerning this matter, see Note15, Commitments and Contingenciesto the Condensed Consolidated Financial Statements attached hereto.

Current wording

Supply Chain. We continue to develop relationships with suppliers of key parts, components and raw materials to be used in the manufacture of our products such as batteries, electronics, and vehicle chassis that are sourced from suppliers across the world. As we continue to execute on our new vehicle programs, we will continue to identify supplier relationship and vehicle program synergies which may allow us to take advantage of pricing efficiencies from economies of scale. Where available, we will utilize multiple supply sources for key parts, and we will work to qualify multiple supply sources to achieve pricing efficiencies and minimize potential production risks related to supply chain. As previously disclosed, we are currently working with certain of our vendors to extend or restructure the payment terms of past due accounts payable balances. We are also currently in litigation with one of our battery suppliers, Coulomb Solutions Inc. For more information concerning this matter, see Note15, Commitments and Contingenciesto the Condensed Consolidated Financial Statements attached hereto.

Previous wording

Inflation. Inflation continues to impact our operations, resulting from both supply and demand imbalances as economies continue to face constraints as well as the impact on the availability and cost of energy and other commodities as a result of the ongoing conflicts in Ukraine and Israel. We are seeing a near-term impact on our business due to inflationary pressure. In an effort to dampen inflationary pressures, central banks have continued to raise interest rates which will likely raise the cost of any financing the Company may undertake in the future.

Current wording

Inflation. Inflation continues to impact our operations, resulting from both supply and demand imbalances as economies continue to face constraints as well as the impact on the availability and cost of energy and other commodities as a result of the ongoing conflicts in Ukraine and Israel. We are seeing a near-term impact on our business due to inflationary pressure. In an effort to dampen inflationary pressures, central banks have continued to hold constant high interest rates, which will likely raise the cost of any financing the Company may undertake in the future.

Previous wording

Sales, net of returns and allowances for the three months ended March 31, 2024 and 2023 were $1.3 million and $1.7 million, respectively. The decrease in sales was primarily due to lower W4 CC vehicle sales compared with the same period a year ago, which was partially offset by an increase in other service revenue generated from operating our Stables by Workhorse route, Drones as a Service and other service revenue.

Current wording

Sales, net of returns and allowances for the three months ended June 30, 2024 and 2023 were $0.8 million and $4.0 million, respectively. Sales, net of returns and allowances, for the six months ended June 30, 2024 and 2023 were $2.2 million and $5.7 million, respectively. The decrease in sales was primarily due to lower W4 CC vehicle sales compared with the same period a year ago, which was partially offset by an increase in other service revenue generated from operating our Stables by Workhorse route, Drones as a Service before the Aero Divestiture and other service revenue.

Previous wording

Cost of sales for the three months ended March 31, 2024 and 2023 were $7.4 million and $5.3 million, respectively. The increase in cost of sales was primarily due to a $2.2 million increase in inventory reserve expenses, a $1.0 million increase in depreciation expenses, and a $0.6 million increase in employee compensation and related expenses to support vehicle production during the period. The increase in cost of sales was partially offset by a $1.2 million decrease in costs related to direct materials and a $1.4 million reversal of warranty expenses previously accrued.

Current wording

Cost of sales for the six months ended June 30, 2024 and 2023 were $14.7 million and $13.8 million, respectively. The increase in cost of sales was primarily due to a $4.6 million increase in inventory reserve expenses and a $2.0 million increase in depreciation expense which was offset by a $4.4 million decrease in costs related to direct materials and a $1.4 million reversal of warranty expenses previously accrued.

Previous wording

Selling, general and administrative (“SG&A”) expenses during the three months ended March 31, 2024 and 2023 were $14.1 million and $14.7 million, respectively. The decrease in SG&A expenses was driven by a $1.7 million decrease in employee compensation and related expenses primarily due to a decreased headcount which was partially offset by a $0.3 million increase in non-cash stock-based compensation expense and an increase of $0.6 million in professional and other services expenses during the period.

Current wording

Selling, general and administrative (“SG&A”) expenses during the three months ended June 30, 2024 and 2023 were $12.1 million and $14.0 million, respectively. The decrease in SG&A expenses was driven by a $2.4 million decrease in employee compensation and related expenses primarily due to lower headcount and a decrease of $0.6 million in marketing expenses during the period, which was partially offset by a $0.2 million increase in depreciation expense and a $0.3 million increase in information technology costs.

Previous wording

Research and development (“R&D”) expenses during the three months ended March 31, 2024 and 2023 were $3.5 million and $7.2 million, respectively. The decrease in R&D expenses was primarily driven by a $2.1 million decrease in prototype expenses related to development expenses for new products which launched in 2023, a $0.7 million decrease in consulting expenses and a $0.8 million decrease in employee compensation and related expenses due to decreased headcount.

Current wording

R&D expenses during the six months ended June 30, 2024 and 2023 were $5.5 million and $12.3 million, respectively. The decrease in R&D expenses was primarily driven by a $2.6 million decrease in employee compensation and related expenses due to lower headcount, a $1.7 million decrease in prototype expenses related to development expenses for new products which launched in 2023, a $1.5 million decrease in consulting expenses related to the W56 program, and a reduction in other expenses of $0.6 million.

Previous wording

Net interest expense for the three months ended March 31, 2024 was $5.4 million compared to net interest income $0.6 million for the three months ended March 31, 2023. Net interest expense in the current year was driven by a fair value adjustment of our 2024 Notes and 2024 Warrants during the period of $7.0 million and $1.2 million fees paid in connection with the 2024 Notes and 2024 Warrants issued during the period which were partially offset by a gain of $2.9 million from the extinguishment of our 2026 Notes and conversion of our 2023 Warrants and $0.1 million of interest earned on cash balances in our money market investment accounts. Net interest income in the prior period was primarily driven by interest earned on cash balances in our money market investment account.

Current wording

Net interest expense for the six months ended June 30, 2024 was $6.8 million compared to net interest income $1.1 million for the six months ended June 30, 2023. Net interest expense in the current year was driven by a fair value adjustment of $3.5 million and $2.1 million financing fees paid in connection with the 2024 Notes issued during the period. Net interest incomewas higher in the prior period as a result of higher cash balances.

Previous wording

Benefit for income taxes during the three months ended March 31, 2024 and 2023 was zero.

Current wording

Benefit for income taxes during the three and six months ended June 30, 2024 and 2023 was zero as all income tax benefits

Previous wording

We have financed our operations primarily through sales of equity securities and issuance of debt. We have utilized this capital for research and development to fund designing, building and delivering vehicles to customers and for working capital purposes.

Current wording

We have financed our operations primarily through sales of equity securities and issuance of debt. We have utilized this capital for R&D to fund designing, building and delivering vehicles to customers and for working capital purposes.

Previous wording

We had $1.3 million of sales for the three months ended March 31, 2024. As of March 31, 2024, the Company had$6.7 million in cash and cash equivalents, accounts receivable of $1.8 million, net inventory of $49.9 million and accounts payable of $14.2 million. As of March 31, 2024, the Company hadpositive working capital of$24.2 million, accumulated deficit of$780.7 million, and during the three months ended March 31, 2024 incurred a loss from operations of$23.7 million and used$18.0 million of cash in operating activities.

Current wording

We had $2.2 million of sales for the six months ended June 30, 2024. As of June 30, 2024, the Company had$5.3 million in cash and cash equivalents, accounts receivable of $0.8 million, net inventory of $46.5 million and accounts payable of $10.5 million. As of June 30, 2024, the Company had aworking capital of$17.8 million, accumulated deficit of$807.0 million, and during thesix months ended June 30, 2024 incurred a loss from operations of$44.2 million and used$30.1 million of cash in operating activities.

Previous wording

Our ability to continue as a going concern is contingent upon successful execution of management’s intended plan over the next twelve months to improve the Company’s liquidity and working capital requirements. We have made significant progress executing on our revised strategic product roadmap for our electric vehicle offerings, and we expect to generate additional sales within the next twelve months which will help support our operations. Additionally, as previously disclosed, management has reduced its discretionary spend related to non-contracted capital expenditures, implemented cost-savings measures including a 20% reduction in force, our executive officers deferring approximately 20% of their cash compensation into the second quarter of 2024, furloughed 73 employees at our Union City manufacturing facility without pay, and fully transitioned our Aero business from a design and manufacturing drone business to Drones as a Service business. As previously disclosed, the Company is currently working with certain of its vendors to extend or restructure the payment terms of certain accounts payable. However, if the expected sales are not generated and management is not able to control capital expenditures and other expenses, we will continue to incur substantial operating losses and negative cash flows from operations. There can be no assurance that we will be successful in implementing our plans or acquiring additional funding, that our projections of our future capital needs will prove accurate, or that any additional funding would be sufficient to continue operations in future years.

Current wording

Our ability to continue as a going concern is contingent upon successful execution of management’s intended plan over the next twelve months to improve our liquidity and working capital requirements. We have made significant progress executing on our revised strategic product roadmap for our electric vehicle offerings, and we expect to generate additional sales within the next twelve months which will help support our operations. Additionally, as previously disclosed, management has reduced its discretionary spend related to non-contracted capital expenditures and, implemented cost-savings measures, including a 20% reduction in force, our executive officers deferring approximately 20% of their cash compensation into the third quarter of 2024, furloughing 73 employees at our Union City manufacturing facility without pay, of which 16 have already been reinstated as of June 30, 2024, and divesting our Aero business. We also experienced voluntary attrition during and after the three months ended June 30, 2024, which has further reduced employee compensation and related costs. As previously disclosed, we are currently working with certain of our vendors to extend or restructure the payment terms of certain past due accounts payable balances. However, if the expected sales are not generated and management is not able to control capital expenditures and other expenses, we will continue to incur substantial operating losses and negative cash flows from operations. There can be no assurance that we will be successful in implementing our plans or acquiring additional funding, that our projections of our future capital needs will prove accurate, or that any additional funding would be sufficient to continue operations in future years.

Previous wording

To the extent revenues from operations are insufficient to meet our liquidity requirements, our ability to continue as a going concern will be dependent on effectively raising capital through private or public placement of our equity securities, including the continued access to the additional closings of up to $123.7 million inaggregate principal amount of additional 2024 Notes and, if our share price makes such exercise feasible, the possible receipt of proceeds from the exercise of the corresponding 2024 Warrants pursuant to the 2024 Securities Purchase Agreement anduse of the ATM Agreement (as further described below), for which there can be no assurance we will be successful in such efforts. We will also rely on debt financing or other sources of capital funding such as through the sale of assets to obtain sufficient financial resources to fund our operating activities. If we are unable to maintain sufficient financial resources, our business, financial condition and results of operations, as well as our ability to continue to develop, produce and market our new vehicle programs and satisfy our obligations as they become due, will be materially and adversely affected. This could affect future vehicle program production and sales. Failure to obtain additional financing will have a material, adverse impact on our business operations. There can be no assurance that we will be able to obtain the financing needed to achieve our goals on acceptable terms or at all. Additionally, any equity or equity linked financings would likely have a dilutive effect on the holdings of our existing stockholders. The Company’s current level of cash and cash equivalents are not sufficient to execute our business plan. For the foreseeable future, we will incur significant operating expenses, capital expenditures and working capital funding that will deplete our cash on hand.

Current wording

In addition, if our share price makes such exercise feasible, we may receive proceeds from the exercise of the corresponding 2024 Warrants pursuant to the 2024 Securities Purchase Agreement anduse of the ATM Agreement (as further described below), for which there can be no assurance we will be successful in such efforts. We will also rely on debt financing or other sources of capital funding such as through the sale of assets to obtain sufficient financial resources to fund our operating activities. If we are unable to maintain sufficient financial resources, our business, financial condition and results of operations, as well as our ability to continue to develop, produce and market our new vehicle programs and satisfy our obligations as they become due, will be materially and adversely affected. This could affect future vehicle program production and sales. Failure to obtain additional financing will have a material, adverse impact on our business operations. There can be no assurance that we will be able to obtain the financing needed to achieve our goals on acceptable terms or at all. Additionally, any equity or equity-linked financings would likely have a dilutive effect on the holdings of our existing stockholders. Our current level of cash and cash equivalents are not sufficient to execute our business plan. For the foreseeable future, we will incur significant operating expenses, capital expenditures and working capital funding that will deplete our cash on hand.

Previous wording

Our ability to obtain additional financing is extremely limited under current market conditions including the significant amount of capital required, the Nasdaq Listing Requirements, the market price of our stock and potential dilution from the issuance of any additional securities. If we are unable to identify other sources of funding, we may need to further adjust our operations, including and up to filing a voluntary petition for relief under the Bankruptcy Code. If this were to occur, the value available to our various stakeholders, including our creditors and stockholders, is uncertain and trading prices for our securities may bear little or no relationship to the actual recovery, if any, by holders of our securities in bankruptcy proceedings, if any.

Current wording

Our ability to obtain additional financing is extremely limited under current market conditions including the significant amount of capital required, the market price of our stock and potential dilution from the issuance of any additional securities and our ability to maintain compliance with the listing requirements of the Nasdaq Capital Market. If we are unable to identify other sources of funding, we may need to further adjust our operations, including and up to filing a voluntary petition for relief under the Bankruptcy Code. If this were to occur, the value available to our various stakeholders, including our creditors and stockholders, is uncertain and trading prices for our securities may bear little or no relationship to the actual recovery, if any, by holders of our securities in bankruptcy proceedings, if any.

Previous wording

As a result of all of the matters discussed above, including our losses, current liquidity level and our projected capital needs, substantial doubt exists about the Company’s ability to continue as a going concern over the next twelve months from the date of issuance of the accompanying Condensed Consolidated Financial Statements. The Condensed Consolidated Financial Statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if the Company were unable to continue as a going concern.

Current wording

As a result of all of the matters discussed above, including our losses, current liquidity level and our projected capital needs, substantial doubt exists about our ability to continue as a going concern over the next twelve months from the date of issuance of the accompanying Condensed Consolidated Financial Statements. The Condensed Consolidated Financial Statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if we were unable to continue as a going concern.

Previous wording

Under the ATM Agreement, we may offer and sell shares of our common stock having an aggregate sales price of up to $175.0 million, in amounts and at times determined by management. During the three months ended March 31, 2024, we issued 9.8 million shares under the ATM Agreement for net proceeds of $2.7 million. During the year ended December 31, 2023, we issued 89.3 million shares under the ATM Agreement for net proceeds of $62.2 million. As of March 31, 2024 we had approximately $95.6 million available through the issuance of shares of common stock under the ATM Agreement. Certain of our other existing financing arrangements place certain conditions and restrictions on the use of our ATM Program.

Current wording

Under the ATM Agreement, we may offer and sell shares of our Common Stock having an aggregate sales price of up to $175.0 million, in amounts and at times determined by management. During the six months ended June 30, 2024, we issued 0.5 million shares under the ATM Agreement for net proceeds of $2.7 million. During the year ended December 31, 2023, we issued 89.3 million shares under the ATM Agreement for net proceeds of $62.2 million. As of June 30, 2024 we had approximately $95.6 million available through the issuance of shares of Common Stock under the ATM Agreement. Certain of our other existing financing arrangements, including our 2024 Securities Purchase Agreement, place certain conditions and restrictions on the use of our ATM Program.

Previous wording

During the three months ended March 31, 2024 and 2023, net cash used in operating activities was $18.0 million and $32.7 million, respectively. The decrease in net cash used in operations was primarily attributable to a $6.9 million decrease in spend related to inventory as we slowed our inventory build due to slower than anticipated sales throughout 2023 and the first three months of 2024. The decrease is also attributable to a $4.8 million decline in employee compensation and related expenses, excluding non-cash stock-based compensation, resulting from our reduction in force actions.

Current wording

During the six months ended June 30, 2024 and 2023, net cash used in operating activities was $30.1 million and $65.8 million, respectively. The decrease in net cash used in operations was primarily attributable to a $21.7 million decrease in spend related to inventory as we slowed our inventory build due to slower than anticipated sales throughout 2023 and the first half of 2024. The decrease is also attributable to a $5.0 million decline in employee compensation and related expenses, excluding non-cash stock-based compensation, resulting from our reduction in force actions.

Previous wording

Cash used in investing activities related primarily to capital expenditures to upgrade our production and research and development facilities, which were $3.0 million for the three months ended March 31, 2024 and $5.4 million for the three months ended March 31, 2023. The decrease is primarily driven by a decline in spending in tooling and equipment related to our vehicle programs at our Union City, Indiana manufacturing facility.

Current wording

Cash used in investing activities related primarily to capital expenditures to upgrade our production and research and development facilities, were $3.8 million for the six months ended June 30, 2024 and $10.5 million for the six months ended June 30, 2023. The decrease is primarily driven by a decline in spending in tooling and equipment related to our vehicle programs at our Union City, Indiana manufacturing facility.

Previous wording

Net cash used in financing activities during the three months ended March 31, 2024 was $8.1 million, which was primarily attributable to the repayment of the 2026 Notes, which were fully redeemed during the period, partially offset by proceeds from our ATM Program and the issuance of our 2024 Notes.

Current wording

Net cash provided by financing activities during the six months ended June 30, 2024 was $3.3 million, which was primarily attributable to the issuance of Common Stock under our ATM Program offset by the payment of our 2024 Notes.

Previous wording

Net cash provided by financing activities during the three months ended March 31, 2023 was $18.0 million, which was primarily attributable to the issuance of common stock under our ATM Program which provided net proceeds of approximately $18.6 million.

Current wording

Net cash provided by financing activities during the six months ended June 30, 2023 was $39.4 million, which was primarily attributable to the issuance of Common Stock under our ATM Program.