Workhorse Group Inc.
For the period ended Dec 31, 2024. Filed Mar 31, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 31, 2025
WKHS$3.09-1.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-12.
0001425287-24-000068
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-31.
0001425287-25-000024
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 142 previous paragraphs and 136 current paragraphs.
55 unchanged; 28 reworded; 50 added; 57 removed; 2 previous and 3 current paragraphs rearranged.
Tables are not compared: 2 previous and 2 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (50)
Current report
We are an American technology company with a vision to pioneer the transition to zero-emission commercial vehicles. Our primary focus is to provide sustainable and cost-effective solutions to the commercial transportation sector. We design and manufacture all-electric vehicles, including the technology that optimizes the way these vehicles operate. We are focused on our core competency of bringing our electric delivery vehicle platforms to serve the "last mile delivery" market.
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We believe our all-electric commercial vehicles offer fleet operators significant benefits, which include:
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•Lower total cost-of-ownership as compared to conventional gas/diesel vehicles;
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•Improved profitability through lower maintenance costs and reduced fuel expenses;
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•Increased package deliveries per day through use of more efficient delivery methods;
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•Decreased vehicle emissions and reduced carbon footprint; and
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•Improved vehicle safety and operator experience.
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product innovations to market.
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In 2024, we continued to focus on product quality, manufacturing capacity, operational planning, engineering and design to enable increased deliveries and deployments of our products and future revenue growth. We have executed our strategic product roadmap for our electric vehicle offerings, including the production of the W4 CC, 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, OH 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. 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 the "last mile delivery" sector.
Current report
On October 15, 2024 our 208-inch extended wheelbase version of the W56 step van was certified to meet full Federal Motor Vehicle Safety Standards (FMVSS) and received California's HVIP certification. We believe these certifications not only validate the vehicle's safety and environmental compliance but also underscore our capability of providing reliable solutions for the electric commercial vehicle market.
Current report
On February 26, 2025, we completed registration as a foreign manufacturer under Transport Canada’s Appendix G pre-clearance program, and received approval for Canadian import dealers to bring Workhorse W56 and W750 step vans into the country and sell them nationwide. As part of the process, Transport Canada completed a review of the Company’s documentation validating Canadian Motor Vehicle Safety Standards (CMVSS) compliance of both vehicles.
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Market Demand
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The EV adoption landscape in 2025 presents a mixed outlook. State-level incentives continue to provide support for EV ownership, including our W56 platform's approval for California's HVIP through CARB, which offers buyers an $85,000 base voucher per W56 vehicle purchased. However, the changed Presidential Administration has created regulatory uncertainty that may impact market growth. Furthermore, California's recent withdrawal of its waiver request to the EPA has suspended implementation of the Advanced Clean Fleets Regulation ("ACF Regulation"). This withdrawal significantly alters the regulatory framework we previously anticipated. Under the Clean Air Act, California requires EPA approval to establish its own emissions standards for new motor vehicles. With this approval process now paused, the timeline and enforcement mechanisms for emissions regulations remain uncertain. These regulatory developments, together with the new Presidential Administration’s general shift away from policies that promote the reduction of carbon emissions and the use of electric vehicles, constitute material considerations for our operations and strategic planning, potentially affecting adoption rates in ways that are difficult to predict at this time. This evolving regulatory landscape represents a material consideration for our operations and strategic planning, and introduces uncertainty that may impact projected adoption rates.
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Liquidity and Capital Resources
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2024 Securities Purchase Agreement
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As part of management's plan to raise capital to fund operations, we entered into a financing arrangement that makes liquidity available in both the short term and over time. 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, (i) senior secured convertible notes for up to an aggregate principal amount of $139.0 million (the “2024 Notes”) that are convertible into shares of the Company’s Common Stock, and (ii) warrants (the “ 2024 Warrants”) to purchase shares of Common Stock.
Current report
Pursuant to the 2024 Securities Purchase Agreement, during the year ended December 31, 2024, the Company issued and sold to the Investor (i) 2024 Notes in the original principal amount of $39.0 million and (ii) issued 15.6 million 2024 Warrants, (1.3 million shares adjusted for the 2025 Reverse).
Current report
As of December 31, 2024, the 2024 Notes had an outstanding fair value aggregate principal amount of $10.5 million, with an outstanding aggregate principal amount of $7.6 million. No shares had been issued pursuant to the 2024 Warrants as of December 31, 2024.
Current report
In addition, during the first two months of 2025, we issued and sold to the Investor 2024 Notes in the aggregate principal amount of $38.5 million and 2024 Warrants to purchase up to 55.0 million shares of Common Stock, (4.4 million shares adjusted for the 2025 Reverse Stock Split). As described in our Current Report on Form 8-K filed with the SEC on February 12, 2025, we issued a 2024 Note in the aggregate principal amount of $35.0 million (the “Tenth Additional 2024 Note”) governed by a lockbox letter entered into between the Company and the Investor (the “Lockbox Letter”). Pursuant to the Lockbox Letter, the net proceeds of $30.6 million after 12.5% original issue discount and related fees and expenses, of the Tenth Additional 2024 Note were deposited into a lockbox account under the control of the collateral agent under the 2024 Securities Purchase Agreement. Funds may only be released from the lockbox account from time to time (i) in an amount corresponding to the principal amount converted, if the Investor converts any portion of the Tenth Additional 2024 Note; (ii) in the amount of $2.6 million each calendar month, if the Company satisfies the conditions of a Market Release Event (as defined in the Lockbox Letter), including a minimum Common Stock price and trading volume conditions; or (iii) otherwise, with the consent of the Investor. On March 7, 2024, the Investor notified us that it consented to the release of $3.0 million from the lockbox account, which released funds we received on March 11, 2025. Although we expect that we will receive additional funds held in the lockbox account during the term of the Tenth Additional 2024 Note, it is possible that the foregoing events will not occur with respect to some or all of the principal amount of the Tenth Additional 2024 Note and that, accordingly, we will not be able to draw any or all of the remaining funds in the lockbox account.
Current report
Although the 2024 Securities Purchase Agreement contemplates the issuance of up to $61.5 million in aggregate principal amount of additional 2024 Notes and corresponding 2024 Warrants, we can issue such 2024 Notes only to the extent we can offer and sell them pursuant to a Registration Statement on Form S-3. Because the “public float” of our Common Stock is currently less than $75 million, the SEC’s “baby shelf” rules will limit the amount of securities we can offer and sell on Form S-3, including the 2024 Notes, Common Stock and all other securities, to one-third of our public float in any twelve month period. Accordingly, our ability to obtain liquidity though public sales of securities, including pursuant to our ATM program and the 2024 Securities Purchase Agreement, is substantially limited.
Current report
Prior to entering the 2024 Securities Purchase Agreement described above, the Company satisfied in full the $20.0 million principal amount of green senior convertible notes (the “2026 Notes”) due October 1, 2026, by utilizing $10.0 million of restricted cash and redeeming the related warrants through a combination of cash payment and the exchange of Common Stock.
Current report
In connection with the ELOC Purchase Agreement and ELOC Registration Rights Agreement, the Company paid a non-cash commitment fee to the Purchaser in the amount of 3.8 million shares of Common Stock of the Company (valued at $1.5 million). The Company reflected the commitment fee as an expense in Interest expense, net in the Consolidated Statements of Operations based on the fair value on the issuance date.
Current report
Under applicable rules of the Nasdaq Capital Market, the Company cannot issue or sell more than 19.99% of the shares of Common Stock outstanding immediately prior to the execution of the ELOC Purchase Agreement to the Purchaser under the ELOC Purchase Agreement without stockholder approval.
Current report
During the year ended December 31, 2024, excluding the additional commitment shares issued to the Purchaser disclosed above, the Company did not sell any shares of Common Stock pursuant to the ELOC Purchase Agreement. The Company sold 48,000 shares of Common Stock (adjusted for the 2024 Reverse Stock Split and 2025 Reverse Stock Split) pursuant to the ELOC Purchase Agreement and received proceeds of $3.1 million.
Current report
The Company evaluated the contract that includes the right to require the Purchaser to purchase shares of Common Stock in the future (“purchased put right”) considering the guidance in ASC 815-40, Derivatives and Hedging - Contracts on an Entity’s Own Equity, (“ASC 815-40”) and concluded that it is an equity-linked contract that does not qualify for equity classification, as the number of shares is not fixed and therefore requires fair value accounting as a derivative asset. The Company has analyzed the terms of the freestanding purchased put right and has concluded that it has insignificant value as of December 31, 2024.
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Commodities
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Inflation
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Components of our results of operations
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The Company operates as a single reporting segment under ASC 280, Segment Reporting, (“ASC 280”) consistent with how management evaluates and prioritizes investment and resource allocation decisions, and assesses operating performance.
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Sales, net of returns and allowances
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Sales, net of returns and allowances decreased $6.5 million for the year ended December 31, 2024, compared to the year ended December 31, 2023. The decrease in sales was primarily due to lower W4 CC vehicle sales compared with the prior year, which was partially offset by an increase in W56 vehicle sales, other service revenue generated from operating our Stables by Workhorse route, and Drones as a Service revenue prior to the Aero Divestiture.
Current report
Cost of sales decreased $9.5 million for the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily due to lower W4 CC vehicle sales, partially offset by higher W56 vehicle sales and additional service revenue generated from operating our Stables by Workhorse route, and Drones as a Service before the Aero Divestiture. The decrease was further driven by cost-saving initiatives, including reduced employee costs of $3.0 million, improved inventory management resulting in a savings of $4.4 million, lower consulting expense of $1.5 million and lower freight expenses of $1.4 million, partially offset by higher depreciation and amortization expense of $3.1 million.
Current report
SG&A expenses decreased $13.1 million for the year ended December 31, 2024, compared to the year ended December 31, 2023. The decrease in SG&A expenses was driven by a $8.2 million decrease in employee compensation and related expenses primarily due to lower headcount, a decrease of $2.0 million in consulting expenses, a decrease in legal and professional expenses of $1.7 million, a decrease of $1.2 million in marketing expenses, a decrease in travel and entertainment of $0.8 and lower corporate insurance of $0.6 million, partially offset by a $1.1 million increases in IT related expenses and, depreciation and amortization expense.
Current report
R&D expenses decreased $15.3 million for the year ended December 31, 2024, compared to the year ended December 31, 2023. The decrease was primarily driven by a $6.9 million decrease in employee compensation and related expenses due to lower headcount, a $4.1 million decrease in prototype expenses related to development expenses for new products which launched in 2023, a $3.4 million decrease in consulting expenses related to the W56-178 wheel base model, offset by the development of the W56-208 wheel base model, and a reduction in other expenses of $0.9 million.
Current report
For the year ended December 31, 2024, Interest expense, net was $22.2 million, compared to $8.7 million for the year ended December 31, 2023. The increase was primarily driven by an $11.9 million loss on the fair value of the 2024 Notes, and an increase of $2.0 million of interest expense compared to $1.5 million of interest income in the prior year. due to higher cash balances in the previous periods.
Current report
During the year ended December 31, 2024, the Investor converted $31.2 million of principal into Common Stock and we recorded a $2.9 million fair value net loss in Interest expense, net in the Consolidated Statements of Operations. Future fair value adjustments attributable to changes in credit risk will be recorded in Other comprehensive loss.
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Fair value adjustment (loss) on warrants
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As of December 31, 2024 the estimated fair value of the 2024 Warrants totaled $5.8 million. During the year ended December 31, 2024, we recorded $5.8 million fair value net loss in the Consolidated Statements of Operations related to the 2024 Warrants.
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Benefit for Income Tax
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We had sales, net of returns and allowances of $6.6 million and incurred a net loss of $101.9 million and used $47.6 million of cash in operating activities during the year ended December 31, 2024. As of December 31, 2024, the Company had $4.6 million of cash and cash equivalents, net accounts receivable of $0.5 million, other receivables of $0.5 million, inventory, net of reserves of $41.8 million and accounts payable of $11.5 million. As of December 31, 2024, the Company had working capital of $8.2 million and an accumulated deficit of $853.4 million.
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Removed paragraphs (57)
Previous report
During 2023, we were focused on our goals of launching new vehicle platforms, increasing our vehicle production and capacity, increasing the affordability of our vehicles, and developing plans for our next generation of products. We continue to focus on product quality, manufacturing capacity and operational planning, as well as engineering and design to enable increased deliveries and deployments of our products and future revenue growth. In addition to our ongoing production ramp in 2023, we intend to continue to generate demand and brand awareness by demonstrating our vehicles’ performance and functionality. During the period, we began executing our revised strategic product roadmap for our electric vehicle delivery offerings. The foundation of this plan is the development of a new truck chassis platforms, the W56, which entered production during the year.
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In 2023, we launched the production of two new delivery EVs, the W750 and W56, highlighting our continued success in executing our revised strategic product roadmap for our electric vehicle delivery offerings. The foundation of this plan is the development of the W56 truck chassis platform. The W56 is our first fully-designed, purpose-built Class 5/6 model chassis platform built from the ground up, is an EV-space leading vehicle which provides a unique blend of high reliability, quality, and serviceability. The zero-emission delivery work truck is designed to meet the challenging demands of the commercial vehicle industry, supporting benchmark payload capacity of up to approximately 10,000 pounds and with a range of up to 150 miles. The W56 step van also offers a large 1,000+ cubic foot cargo box with lowered step-in and wide cabin door for easier entry and exit. During 2023, we were focused on bringing our existing W56 vehicles into full compliance with Federal Motor Safety Vehicle Standards (“FMVSS”), which we achieved. Our product roadmap also includes the WNext platform, which will be our second generation, low floor, advanced content offering and is expected to begin production in late 2025 or 2026.
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In 2023, we continued producing and selling the W4 CC and delivered the first units of the W750, despite unforeseen production and supply issues affecting the W4 CC and W750 vehicles, which have been resolved. The W4 CC is a Class 4 vehicle, under the Workhorse brand and with Workhorse after sales and support service, providing us with an accelerated time-to-market for customers seeking delivery of electric vehicles. We also launched and started selling the step van version, known as the W750, which has approximately 750 cubic foot capacity and will feature up to 150 miles of all-electric range, with a payload capacity of five thousand pounds.
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Aero
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During 2023, we entered our third program with the NRCS to demonstrate our ability to provide small UAS DaaS to support NRCS efforts. We started this program as a small pilot in 2021. After over two years of working with the NRCS, farmers and ranchers, we have developed data products that help underserved farmers and ranchers providing LiDar data to stakeholders in reports they can use to increase the efficiency of their land. As part of the pilot program, we offer small UAS services, including monitoring via drone, data procurement and analytics, allowing expedited information delivery, increased safety, cost-effective, and increase fidelity of the data gathered, creating a more efficient procedure.
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In 2023, we developed and launched the production of two product lines of small UAS. During the first quarter of 2024, we have made the decision to fully transition from a design and manufacturing drone business to DaaS. This transition resulted in, among other things, our stopping production and development of both product lines and the termination of employees who performed the related work.
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During 2023, CARB approved Workhorse's application to participate in the HVIP with its W4CC and W750 work trucks. Workhorse received this approval as part of a first-of-its-kind program that allows vehicle modifiers to list their vehicles directly with HVIP. Workhorse will be the first company to participate in the program. These Workhorse vehicles are listed on the HVIP website and we have our own manufacturer's pool for the trucks. We additionally received approval for the W56 Step Van to participate in the HVIP program in late Q4 of 2023 and, as such, all Workhorse vehicles are now eligible for the program.
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Securities Litigation and Shareholder Derivative Litigation
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On July 24, 2023, the U.S. District Court for the Central District of California entered an order granting final approval of the Stipulation of Settlement entered into by the parties to the Securities Litigation on January 13, 2023. Pursuant to the Stipulation of Settlement, in exchange for a release of all claims and dismissal with prejudice of the Securities Class Action, the Company agreed to create a settlement fund with an escrow agent (the “Settlement Fund”), consisting of $15 million in cash and $20 million in shares of common stock of the Company (the “Settlement Shares”) from which class members would receive payment.
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On June 21, 2023, the State District Court of Nevada granted final approval of the settlement of the Shareholder Derivative Litigation. Under the terms of the settlement, the Company will receive $12.5 million of the $15.0 million described above from the Company’s directors and officers insurers and will, in turn, deliver the $12.5 million in connection with the settlement of the Securities Litigation. The Company has also agreed to adopt various corporate governance changes. The parties agreed to a $4.0 million fee to the derivative plaintiffs’ attorneys, $3.5 million of which is payable by the D&O insurers and $0.5 million of which was payable by the Company.
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During the third quarter of 2023, we issued 25.4 million shares of common stock in settlement of our previously disclosed securities class action litigation, pursuant to the stipulation of settlement. For further information regarding the Shareholder Derivative Litigation and the settlement thereof, please see Note 15, “Commitments and Contingencies – Legal Proceedings – Shareholder Derivative Litigation” included in Item 8 of this Annual Report on Form 10-K.
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High Trail Securities Purchase Agreement and Amendment
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On December 27, 2023 (the “Closing Date”), the Company consummated the transactions contemplated by the previously disclosed securities purchase agreement (the “Securities Purchase Agreement”) entered into with High Trail Special Situations LLC (the “Investor”) on December 12, 2023. On the Closing Date the Company issued and sold in a registered public offering by the Company directly to the Investor (the “Offering”) a (i) green senior secured convertible note for the principal amount of $20.0 million (the “Note”) that is convertible into common stock and (ii) warrant (the “Warrant”) to purchase 25,601,639 shares of common stock. The Note was issued pursuant to an indenture (the “Base Indenture”) and supplemental indenture (the
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“Supplemental Indenture” and together with the Base Indenture, the “Indenture”) that the Company entered into with U.S. Bank Trust Company, National Association, as trustee, on the Closing Date.
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The Securities Purchase Agreement permits, but does not require, the Company to issue up to $20.0 million of additional pari passu notes (the “Additional Note”) on substantially the same terms as the Notes, on the terms and subject to the conditions set forth in the Securities Purchase Agreement. If the Company issues any Additional Note, it will also be required to issue warrants (“Additional Warrants”) on substantially the same terms as the Warrant, on the terms and subject to the conditions set forth in the Securities Purchase Agreement.
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The Note was issued with original issue discount of 12.5%, resulting in $17.5 million of proceeds to the Company before fees and expenses. The Note’s stated maturity date is October 1, 2026, and the Note provides that the Investor may, at its option, require us to redeem up to 12.5% of the original principal amount of the Note in cash on the 1st and 15th of each month beginning on January 1, 2024. Accordingly, we expect that the full principal amount of the Note will be recorded on our balance sheet as a short-term liability. The Note will be a senior secured obligation of the Company and rank senior to all unsecured debt of the Company. The Company’s obligations under the Note will be guaranteed by all of its subsidiaries, pursuant to a certain subsidiary guaranty entered into on the Closing Date between the Company, each of its subsidiaries and the Investor in its capacity as collateral agent (the “Collateral Agent”) (the “Guaranty”). The Note will initially be secured by substantially all the assets of the Company and its subsidiaries, pursuant to a security agreement entered into between the Company, each of its subsidiaries and the Collateral Agent (the “Security Agreement”). The Note will not bear interest, other than default interest, if any.
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The Note is convertible into common stock at a conversion price equal to $0.5178 (the “Conversion Price”), subject to customary adjustments for certain corporate events. The Investor may also elect to receive redemption payments in the form of common stock on the conversion terms provided in the Note. Subject to certain conditions, the Company can require the Investor to convert the Note at any time if the Daily VWAP (as defined below) of the Company’s common stock exceeds 175% of the Conversion Price on each of the immediately preceding 20 consecutive trading days.
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The Investor also may require us to redeem the Note in cash in full upon (i) a change of control or other fundamental change at the Company, as described in the Note, at a premium equal to the greater of (a) 115% of the Conversion Value (as defined below) and (b) 105% of the outstanding principal amount of the Note, plus any accrued and unpaid default interest, or (ii) an event of default under the terms of the Note at a premium equal to the greater of (a) 115% of the Conversion Value and (b) 115% of the outstanding principal amount of the Note, plus any accrued and unpaid default interest. As used herein, “Conversion Value” means the outstanding principal amount of the Note, plus any accrued and unpaid default interest, divided by the Conversion Price multiplied by the highest daily volume weighted average price for our common stock (the “Daily VWAP”) in the 30 trading days preceding the applicable triggering event.
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The Note contains customary affirmative and negative covenants, including certain limitations on debt, liens, restricted payments, asset transfers, changes in the business and transactions with affiliates. It also requires the Company to at all times maintain minimum liquidity of the lesser of (i) $10.0 million and (ii) the then aggregate outstanding principal amount under the Notes and any Additional Notes in a deposit account under the control of the collateral agent. Further, it requires the Company to reserve unissued shares for issuance upon conversion or exercise of all Notes and Warrants, and any Additional Notes and Additional Warrants, if issued, in a number equal to the sum of (A) the greater of (i) 150% of (x) the principal amount outstanding under all Notes and any Additional Notes plus all interest accruable on such outstanding principal amount through the Maturity Date divided by the Daily VWAP for our common stock on such applicable determination date and (ii) the maximum number of shares issuable upon the full conversion of all Notes then outstanding and (B) the maximum number of shares issuable upon the full exercise of the Warrants and any Additional Warrants then outstanding. In addition, the Note requires that the Company have cash and cash equivalents of at least (x) $25.0 million on December 31, 2023, (y) $13.5 million on January 31, 2024, and (z) of $20.0 million on February 29, 2024. In the event of a default or event of default under the Note, the Note would accrue default interest at a rate of 15.0% per annum (“Default Interest”) until such default is cured and all outstanding Default Interest has been paid. In addition, in the event we consummate a sale and leaseback transaction with respect to the real property where our Union City plant is located, the Investor may, at its option, require us to use up to half of the proceeds we receive in such a sale leaseback transaction to redeem outstanding principal under the Note.
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The exercise price per share of common stock under the Warrant, which has since been cancelled, as discussed below, was $0.4492, which was equal to 115% of the Nasdaq Minimum Price on the date of the Securities Purchase Agreement, subject to adjustments for certain corporate events. The Warrant was immediately exercisable and expires three years after the Closing Date. The Investor had a purchase right that allows the Investor to participate in transactions in which the Company issues or sells certain securities or other property to holders of the Company’s common stock (the “Purchase Rights”). The Purchase Rights allowed the Investor to acquire, on the terms and conditions applicable to such Purchase Rights, the aggregate Purchase Rights which the Investor would have been able to acquire if the Investor held the number of shares of common stock acquirable upon exercise of the Warrant. In the event of a Fundamental Transaction (as defined in the Warrant) that is not a change of control or corporate event as described in the Warrant, the surviving entity would have been required to assume the Company’s obligations under the Warrant. In addition, if the Company had engaged in certain transactions that result in the holders of the common stock receiving consideration, a holder of the Warrant would have had the option to either (i) exercise the Warrant prior to the consummation of such transaction and receive the consideration to be issued or distributed in connection with such transaction or (ii) cause the Company to repurchase the Warrant for its then Black-Scholes Value.
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In addition to the $7.5 million principal amount of the Note previously redeemed by the Company on the Partial Redemption Dates (as defined in the Note) provided in the Note, on February 29, 2024, the Company entered into a First Amendment to Green Senior Secured Convertible Note Due 2026 (the “Note Amendment”) with the Holder pursuant to which (i) the Company redeemed $10.0 million principal amount of the Note using funds in a controlled account that had been pledged as collateral securing the Company’s obligations under the Note, thereby reducing the outstanding principal amount of the Note to $2.5 million, and (ii) the parties amended the Note to remove February 15, 2024 and March 1, 2024 as Partial Redemption Dates, permit the Company to prepay the Note at its option, subject to certain conditions, and delete the minimum liquidity covenant. In connection with the Note Amendment, the Company entered into a letter agreement (the “Exchange Agreement”) whereby the Company exchanged the Warrant with the Holder for a total of 8.5 million shares of common stock, whereupon the Warrant was cancelled (the “Exchange”). The Exchange was made pursuant to the exemption registration provided under Section 3(a)(9) of the Securities Act.
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In addition to Regular Purchases and provided that the Company has directed a Regular Purchase in full, the Company in its sole discretion may require the Purchaser on each Purchase Date to purchase on the following business day (“Accelerated Purchase Date”) up to the lesser of (i) three (3) times the number of shares purchased pursuant to such Regular Purchase or (ii) an amount equal to (A) the Accelerated Purchase Share Percentage (as defined in the Purchase Agreement) multiplied by (B) the total number (or volume) of shares of common stock traded on the Principal Market (as defined in the Purchase Agreement) during the period on the applicable Accelerated Purchase Date (as defined in the Purchase Agreement) beginning at the Accelerated Purchase Commencement Time (as defined in the Purchase Agreement) for such Accelerated Purchase and ending at the Accelerated Purchase Termination Time (as defined in the Purchase Agreement) for such Accelerated Purchase (the
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“Accelerated Purchase”) at a purchase price equal to the lesser of 97% of (i) the closing sale price on the Accelerated Purchase Date, or (ii) the Accelerated Purchase Date’s volume weighted average price (the “Accelerated Purchase Price”).
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The Company may also direct the Purchaser, on any business day on which an Accelerated Purchase has been completed, to make additional purchases upon the same terms as an Accelerated Purchase (an “Additional Accelerated Purchase”).
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The purchase price of Regular Purchases, Accelerated Purchases and Additional Accelerated Purchases and the minimum closing sale price for a Regular Purchase will be adjusted for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction occurring during the business days used to compute the purchase price. The aggregate number of shares that the Company can sell to the Purchaser (including the Commitment Shares) at or below the price of $0.3906 per share under the Purchase Agreement may in no case exceed 52,151,507 shares (subject to adjustment as described above) of common stock (which is equal to approximately 19.99% of the shares of the common stock outstanding immediately prior to the execution of the Purchase Agreement) (the “Exchange Cap”), unless shareholder approval is obtained to issue Purchase Shares above the Exchange Cap, in which case the Exchange Cap will no longer apply, in accordance with Nasdaq Capital Market rules.
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The Purchase Agreement contains customary representations, warranties, covenants, closing conditions, indemnification and termination provisions. The Company is not permitted to make sales under the Purchase Agreement during the pendency of certain “Suspension Events,” including the unavailability of an effective registration statement for the sale of Purchase Shares by the Company or the Purchaser.
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The Purchase Agreement may be terminated by the Company at any time, at its sole discretion, without any cost or penalty, by giving one business day’s notice to the Purchaser to terminate the Purchase Agreement. The Purchaser has covenanted not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of the common stock. In connection with the execution of the Purchase Agreement, the Company issued 3,775,105 shares of common stock to the Purchaser as a fee for its commitment to purchase shares of common stock under the Purchase Agreement (the “Commitment Shares”).
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There are no restrictions on future financings, rights of first refusal, participation rights, penalties or liquidated damages in the Purchase Agreement or Registration Rights Agreement, other than a prohibition (with certain limited exceptions) on entering into specified Variable Rate Transactions (as defined in the Purchase Agreement) for the period specified in the Purchase Agreement.
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The Purchase Agreement and Registration Rights Agreement contain customary representations and warranties, covenants and indemnification provisions that the parties made to, and solely for the benefit of, each other in the context of all of the terms and conditions of such agreements and in the context of the specific relationship between the parties thereto. The provisions of the Purchase Agreement and the Registration Rights Agreement, including any representations and warranties contained therein, are not for the benefit of any party other than the parties thereto and are not intended as documents for investors and the public to obtain factual information about the current state of affairs of the parties thereto. Rather, investors and the public should look to other disclosures contained in the Company’s annual, quarterly and current reports it may file with the Securities and Exchange Commission.
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Management Opportunities, Challenges, Risks and 2024 Outlook
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The following section provides a narrative discussion of our financial condition and results of operations. The comments should be read in conjunction with our Consolidated Financial Statements and related Notes thereto included in Part II of this Annual Report on Form 10-K.
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Revenue
Previous report
Sales increased $8.1 million in the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to an increase in W4 CC volumes. The W750 and W56 products, which launched in 2023, Stables by Workhorse and drones as a service also contributed to the increase.
Previous report
Cost of sales increased $0.7 million in the year ended December 31, 2023 as compared to the year ended December 31, 2022. The increase was primarily due to increased production and overhead costs to support higher sales volumes related to new vehicle platforms and an increase in employee compensation and related expenses compared to 2022 levels. This increase was partially offset by a decrease in inventory reserves, adjustments and disposals, which was driven by the disposition of C-Series inventory in 2022.
Previous report
SG&A expenses decreased $17.6 million in the year ended December 31, 2023 as compared to the year ended December 31, 2022. The decrease was driven by a $25.2 million decrease in expenses attributable to the securities and derivative litigation settlements and legal expenses recognized in the same period last year. This decrease was partially offset by a $3.0 million increase in employee compensation and related expenses, including non-cash stock-based compensation expense, a $2.1 million increase in professional and other services expenses, a $0.9 million impairment of our leased Aero facility and a $0.6 million increase in corporate insurance expenses.
Previous report
R&D expenses increased $1.3 million in the year ended December 31, 2023 as compared to the year ended December 31, 2022.
Previous report
The increase was primarily driven by an increase of $1.4 million in employee compensation and related expenses and a $0.8 million increase in development expenses for new products. These increases were partially offset by a $1.4 million decrease in consulting expenses.
Previous report
Net interest expense for the year ended December 31, 2023 was $8.7 million as compared to $1.8 million for the year ended December 31, 2022. Net interest expense in the current year was driven by a fair value adjustment of our convertible notes and warrants of $8.3 million and $2.1 million fees paid in connection with the Securities Purchase Agreement and Equity Line of Credit Purchase Agreement (“ELOC”), offset by interest earned on cash balances in our money market investment accounts. Net interest expense in the prior year was primarily related to $1.4 million of fair value adjustments, $0.3 million of contractual interest expense, and $0.4 million of loss on conversion of our former convertible notes, which were exchanged for shares of our common stock during 2022.
Previous report
Provision for Income Tax
Previous report
We had $13.1 million of sales for the year ended December 31, 2023. As of December 31, 2023, we had total working capital of $40.5 million, including $35.8 million in cash, cash equivalents and restricted cash, and accumulated deficit of $751.6 million. During the year ended December 31, 2023, we incurred a loss from operations of $105.3 million and used $123.0 million of cash in operating activities.
Showing the first 40 of 57 passages. Open the source sections for the rest.
Reworded paragraphs (28)
Previous wording
We continue to seek opportunities to grow the business organically, and by expanding relationships with existing and new customers. We believe we are well positioned to take advantage of long-term opportunities and continue our efforts to bring product innovations to market.
Current wording
customers. We believe we are well positioned to take advantage of long-term opportunities and continue our efforts to bring
Previous wording
During 2023, we continued to add dealers to our Certified Dealer Program, expanding the official network of verified dealers trained to safely repair and maintain the electric components of our vehicles into new states to support our customers. The Certified Dealer Program allows us to establish a comprehensive training program enabling dealers to safely assist customers with vehicle maintenance in addition to providing strategies for vehicle deployment into their fleets. To ensure high quality vehicle maintenance, Workhorse certified dealers have also made investments in electric vehicle charging infrastructure, tooling, and building out spare parts inventory. The Certified Dealer Program is designed to provide a strong foundation of safety and reliability in our vehicles for both our dealers and end customers. Our California dealers are eligible to participate in the CARB HVIP as a result of our recent approval by CARB to participate as an intermediate-stage manufacturer.
Current wording
During 2024, we continued to expand our network of certified dealers trained to safely repair and maintain the electric components of our vehicles into new states to support our customers. This program allows us to establish a comprehensive training program enabling dealers to safely assist customers with vehicle maintenance in addition to providing strategies for vehicle deployment into their fleets. To ensure high quality vehicle maintenance, Workhorse certified dealers have also made investments in electric vehicle charging infrastructure, tooling, and building out spare parts inventory. The program is designed to provide a strong foundation of safety and reliability in our vehicles for both our dealers and end customers. Our California dealers are eligible to participate in the CARB HVIP following our approval by CARB to participate as an intermediate-stage manufacturer.
Previous wording
During 2023, we became certified and obtained several state and federal voucher and tax credit incentive programs supporting the sale of our EV products. All of our MY 2023/2024 Class 4 - 6 products received approval under the New York Truck Voucher Incentive Program (“NYTVIP”) with voucher amounts ranging from $100,000 - $125,000 for eligible vehicles.
Current wording
During 2024, our vehicles continued to be eligible for several state and federal voucher and tax credit incentive programs supporting the sale of our EV products. All of our MY 2023/2024 Class 4 - 6 vehicles received approval under each state’s voucher incentive program with voucher amounts ranging from $60,000 - $125,000 for eligible vehicles. We also received approval for the W56 – 208 step van to participate in the HVIP program in late 2024 and, as such, all Workhorse vehicles are now eligible for the program.
Previous wording
During 2023, we continued to electrify the fleet of vehicles being used to operate the FedEx delivery route in the greater Cincinnati area of Ohio known as Stables by Workhorse. The electrification of the fleet will provide us with firsthand data on of the challenges and benefits 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, including how to develop adequate charging infrastructure, training and maintenance services.
Current wording
Throughout 2024, we continued to electrify the fleet of vehicles being used in our Stables by Workhorse initiative. 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. We expect to continue to benefit from ongoing insights gained from the electrification of the commercial vehicle market and in particular last mile delivery sector.
Previous wording
We continue to monitor macroeconomic conditions to remain flexible and to optimize and evolve our business as appropriate, and we will have to accurately project demand and infrastructure requirements globally and deploy our production, workforce and other resources accordingly. For more detailed descriptions of the impact and risks to our business, please see certain risk factors described in Part I, Item 1A, Risk Factors in this Annual Report on Form 10-K.
Current wording
We continue to monitor macroeconomic conditions to remain flexible and to optimize and evolve our business as appropriate, in this tumultuous environment and we will endeavor to project demand and infrastructure requirements globally and deploy our production, workforce and other resources accordingly.
Previous wording
Market Demand. Sales performance during 2023 was down largely 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.
Current wording
Our sales in 2024 were lower than the prior year due to the continued slower-than-anticipated industry wide adoption rates for electric commercial vehicles, the lack of government subsidies and incentives available to our dealers and lagging electric grid infrastructure improvements and the resulting effect on roll-outs of electric vehicle charging infrastructure, nationwide.
Previous wording
On December 12, 2023, the Company entered into a purchase agreement (the “Purchase Agreement” or the “ELOC”) with Lincoln Park Capital Fund, LLC (the “Purchaser”) (each, a “Party”, and together, the “Parties”), which provides that, upon the terms and subject to the conditions and limitations set forth therein, the Company may sell to the Purchaser up to $50.0 million of shares (the “Purchase Shares”) of common stock over the 24-month term of the Purchase Agreement. Concurrently with entering into the Purchase Agreement, the Company also entered into a registration rights agreement with the Purchaser, pursuant to which it agreed to provide the Purchaser with certain registration rights related to the shares issued under the Purchase Agreement (the “Registration Rights Agreement”).
Current wording
On December 12, 2023, the Company entered into an equity line of credit purchase agreement (the “ELOC Purchase Agreement”) with Lincoln Park Capital Fund, LLC (the “Purchaser”) which provides that, upon the terms and subject to the conditions and limitations set forth therein, the Company may sell to the Purchaser up to $50.0 million of shares of Common Stock over the 24-month term of the ELOC Purchase Agreement. Concurrently with entering into the ELOC Purchase Agreement, the Company also entered into a registration rights agreement (the “ELOC Registration Rights Agreement”) with the Purchaser, whereby the issuance of the shares pursuant to the ELOC Purchase Agreement were registered pursuant to the Company’s effective shelf registration statement on Form S-3, and the related base prospectus included in the registration statement, as supplemented by a prospectus supplement filed on December 27, 2023.
Previous wording
For a period of up to 24 months after the satisfaction of the conditions set forth in the Purchase Agreement, the Company has the right, but not the obligation, on any business day selected by the Company (the “Purchase Date”), provided that on such day the closing sale price per-share of the common stock is above the Floor Price, as defined in the Purchase Agreement, to require the Purchaser to purchase up to 1.0 million shares of common stock (the “Regular Purchase Amount”) at the Purchase Price (as defined below) per purchase notice (each such purchase, a “Regular Purchase”) provided, however, that the limit on the Regular Purchase Amount will be increased to (i) 1.25 million, if the closing sale price of the common stock on the applicable Purchase Date is not below $0.40 and (ii) 1.5 million shares, if the closing sale price of the common stock on the applicable Purchase Date is not below $0.50. The purchase price for Regular Purchases (the “Purchase Price”) shall be equal to 97.5% of the lower of (i) the lowest Sale Price (as defined in the Purchase Agreement) on the Purchase Date (as defined in the Purchase Agreement) for such Regular Purchase and (ii) the arithmetic average of the three (3) lowest Closing Sale Prices (as defined in the Purchase Agreement) for the common stock during the ten (10) consecutive business days ending on the business day immediately preceding such Purchase Date for such Regular Purchase (in each case, to be appropriately adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction that occurs on or after the date of the Purchase Agreement). The Company shall have the right to submit a Regular Purchase notice to the Purchaser as often as every business day. A Regular Purchase notice is delivered to the Purchaser after the market has closed (i.e., after 4:00 P.M. Eastern Time) so that the Purchase Price is always fixed and known at the time the Company elects to sell shares to the Purchaser.
Current wording
The Company may direct the Purchaser, at its sole discretion, and subject to certain conditions, to purchase up to 1.0 million shares of Common Stock on any business day (a “Regular Purchase”). The amount of a Regular Purchase may be increased under certain circumstances to 1.25 million shares if the closing price is not below $0.40 and up to 1.5 million if the closing price is not below $0.50 provided the Purchaser’s committed obligation under any single Regular Purchase shall not exceed $2.0 million. The purchase price for Regular Purchases (the “Purchase Price”) shall be equal to 97.5% of the lower of the lowest sale price of Common Stock on the Purchase Date for such Regular Purchase and the arithmetic average of the three lowest closing sale prices for the Common Stock during the ten consecutive business days ending on the business day immediately prior to the Purchase Date, with a floor of $0.10. In the event the Company issues the full amount allowed under a Regular Purchase on any given business day, we may also direct the Purchaser to purchase additional amounts as accelerated purchases. The purchase price for the accelerated and additional accelerated purchases shall be equal to the lesser of 97.0% of such day’s the VWAP of the Common Stock on the principal market and the closing sale price of the Common Stock on such day.
Previous wording
We have a minority ownership investment in Tropos Technologies, Inc. (“Tropos”) which was obtained during the third quarter of 2022 in exchange for a cash payment of $5.0 million and a $5.0 million contribution of non-cash consideration representing a deposit from Tropos for future assembly services under an Assembly Services Agreement. During the third quarter of 2023, we determined that our investment in Tropos was impaired based on the economic conditions and uncertainties that have significantly affected Tropos' performance and financial position. The impairment charge recognized for our investment is $10.0 million, which represents the difference between the original cost of the investment and its fair value as of the impairment assessment date. Despite the impairment, we continued to perform assembly services.
Current wording
We have a minority ownership investment in Tropos Technologies, Inc. (“Tropos”) which was obtained during the third quarter of 2022 in exchange for a cash payment of $5.0 million and a $5.0 million contribution of non-cash consideration representing a deposit from Tropos for future assembly services under an Assembly Services Agreement. During the third quarter of 2023, we determined that our investment in Tropos was impaired based on the economic conditions and uncertainties that have significantly affected Tropos' performance and financial position. The impairment charge recognized for our investment was $10.0 million, which represents the difference between the original cost of the investment and its fair value as of the impairment assessment date. Despite the impairment, the Company remains obligated to continue to perform assembly services for Tropos.
Previous wording
Commodities. Prices for commodities remain volatile, and we expect to experience price increases for base metals and raw materials that are used in batteries for electric vehicles (e.g., lithium, cobalt, and nickel) as well as steel, aluminum and other material inputs. Global demand and differences in output across sectors have generated divergence in price movements across different commodities. We expect the net impact on us overall will be higher material costs.
Current wording
Prices for commodities remain volatile, and we expect to experience price increases for base metals and raw materials that are used in batteries for electric vehicles (e.g., lithium, cobalt, and nickel) as well as steel, aluminum and other material inputs. Global demand and differences in output across sectors have generated divergence in price movements across different commodities. Tariffs imposed by the new Presidential Administration and any retaliatory tariffs or other countermeasures by other countries may also drive increased commodity prices in 2025. We expect the net impact on us overall will be higher material costs.
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 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 the Middle East. We are seeing a near-term impact on our business due to inflationary pressure. In an effort to dampen inflationary pressures, certain central banks raised interest rates, which has, and will likely continue to raise the cost of our financing.
Previous wording
Our consolidated statements of operations financial information is as follows:
Current wording
Our Consolidated Statements of Operations is as follows:
Previous wording
Other loss for the year ended December 31, 2023 was $10.0 million as compared to $13.6 million other income for the year ended December 31, 2022. Other loss in the current period represents the impairment of our investment in Tropos. Other income in the prior year represents proceeds from the sale of C-Series inventory that was previously fully reserved.
Current wording
Other loss for the year ended December 31, 2024 was zero compared to $10.0 million for the year ended December 31, 2023 related to the impairment of our investment in Tropos.
Previous wording
For the years ended December 31, 2023 and 2022, the Company has taxable losses and therefore no provision for income tax has been recorded. During the year ended December 31, 2023, we did receive $(0.1) million for the return of a prior year tax provision.
Current wording
For the years ended December 31, 2024 and 2023, the Company incurred taxable losses and therefore no provision for income tax has been recorded. During the years ended December 31, 2024 and 2023, the Company received $0.1 million as a refund from a prior year tax provision.
Previous wording
For the year ended December 31, 2023, we maintained an investment in a bank money market fund. Cash in excess of immediate requirements is invested with regard to liquidity and capital preservation. Wherever possible, we seek to minimize the potential effects of concentration and degrees of risk. We will continue to monitor the impact of the changes in the conditions of the credit and financial markets to our investment portfolio and assess if future changes in our investment strategy are necessary.
Current wording
For the year ended December 31, 2024, we maintained an investment in a bank money market fund. Cash in excess of immediate requirements is invested with regard to liquidity and capital preservation. Wherever possible, we seek to minimize the potential effects of concentration and degrees of risk.
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 use 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
We may also rely on other 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 vehicle programs and satisfy our obligations as they become due, we will be materially and adversely affected. This could affect future vehicle program production and sales. Failure to receive additional proceeds will have a material, adverse impact on our business operations. There can be no assurance that we will be able to obtain the additional proceeds needed to achieve our goals on acceptable terms or at all. Additionally, any additional 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 operating expenses, capital expenditures and working capital funding that will deplete our cash on hand. These conditions raise substantial doubt regarding our ability to continue as a going concern for a period of at least one year from the date of issuance of these Consolidated Financial Statements included in this Annual Report on Form 10-K.
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 proceeds from financings is extremely limited under current conditions and if we are unable to identify other sources of funding, we may need to further adjust our operations and seek protection by 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
Cash flows used in investing activities and their variability across each period related primarily to capital expenditures to upgrade our administrative, research, and production facilities, which were $18.7 million for the year ended December 31, 2023 and $17.5 million for the year ended December 31, 2022. Cash flows used in investing activities for the year ended December 31, 2022 also included a $5.0 million cash payment made in connection with our investment in Tropos, which is described in Note 5, Contract Manufacturing Services and Investment in Tropos.
Current wording
Cash flows used in investing activities and their variability across each period related primarily to capital expenditures to upgrade and maintain our research and production facilities.
Previous wording
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Current wording
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Previous wording
There are other items within our financial statements that require estimation but are not deemed critical as defined above.
Current wording
There are other items within our Consolidated Financial Statements that require estimation but are not deemed critical as defined above.
Previous wording
Assumptions and Approach Used: We review our inventory to determine whether its carrying value exceeds the net amount realizable upon the ultimate sale of the inventory. This requires us to determine the estimated selling price of our inventory based on market conditions. Once inventory is written-down, a new, lower cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. The following are key assumptions we used in establishing inventory reserves:
Current wording
Assumptions and Approach Used: We review our inventory to determine whether its carrying value exceeds the net amount realizable upon the ultimate sale of the inventory. This requires us to determine the estimated selling price of our inventory based on market conditions. Once inventory is written-down, a new, lower cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. The following are key assumptions we use in establishing inventory reserves:
Previous wording
Nature of Estimates Required: We accounted for the warrant in accordance with the guidance contained in topic ASC 480, Distinguishing Liabilities from Equity, (“ASC 480”), under which the warrant is required to be accounted for as a liability. Accordingly, the Company classified the warrant as a liability at fair value upon issuance and will adjust the instrument to fair value at each reporting period until settled or the contract expires. The change in fair value of the warrant will be recognized in our statement of operations.
Current wording
Accordingly, the Company classified the warrant as a liability at fair value upon issuance and will adjust the instrument to fair value at each reporting period until settled or the contract expires. The change in fair value of the warrant will be recognized as Fair value gain (loss) on warrants in our Consolidated Statement of Operations.
Previous wording
•Volatility: The volatility used in the Black-Scholes option pricing model was estimated based on historical prices for the Company’s common stock with a look-back period equal to the time difference between the issuance date and maturity date for the Warrant. A significant increase in the volatility of the market price of the Company’s common stock, in isolation, would result in a significantly higher fair value; and a significant decrease in volatility would result in a significantly lower fair value.
Current wording
•Volatility: The volatility used in the Black-Scholes option pricing model was estimated based on historical prices for our Common Stock with a look-back period equal to the time difference between the issuance date and maturity date for the warrant. A significant increase in the volatility of the market price of our Common Stock, in isolation, would result in a significantly higher fair value; and a significant decrease in volatility would result in a significantly lower fair value.
Previous wording
A change in assumptions used to estimate the fair value of the warrant could materially affect our financial condition and results of operations. Refer to Note 7, Debt ,and Note 10, Fair Value Measurements, to the consolidated financial statements regarding the warrant.
Current wording
A change in assumptions used to estimate the fair value of the warrant could materially affect our financial condition and results of operations. Refer to Note 7, Debt ,and Note 10, Fair Value Measurements, to the Consolidated Financial Statements regarding our warrants.
Previous wording
Nature of Estimates Required: As permitted under ASC 825, Financial Instruments, (“ASC 825”), we elected the fair value option to account for our convertible notes. We record changes in fair value of the convertible notes in Interest expense in the consolidated statements of operations, and changes in fair value of the convertible notes attributable to credit risk in Other comprehensive loss. The primary reason for electing the fair value option is for simplification and cost-benefit considerations of accounting for the convertible notes (the hybrid financial instrument) at fair value in its entirety versus bifurcation of the embedded derivatives.
Current wording
Nature of Estimates Required: As permitted under ASC 825, Financial Instruments, (“ASC 825”), we elected the fair value option to account for our convertible notes. We record changes in fair value of the convertible notes in Interest expense, net in the Consolidated Statements of Operations, and changes in fair value of the convertible notes attributable to credit risk in Other comprehensive loss. The primary reason for electing the fair value option is for simplification and cost-benefit considerations of accounting for the convertible notes (the hybrid financial instrument) at fair value in its entirety versus bifurcation of the embedded derivatives.
Previous wording
•Volatility: The volatility used in the binomial lattice valuation model was estimated based on historical prices for the Company’s common stock with a look-back period of one year. A significant increase in the volatility of the market price of the Company’s common stock, in isolation, would result in a significantly higher fair value; and a significant decrease in volatility would result in a significantly lower fair value.
Current wording
•Volatility: The volatility used in the binomial lattice valuation model was estimated based on historical prices for our Common Stock with a look-back period of one year. A significant increase in the volatility of the market price of our Common Stock, in isolation, would result in a significantly higher fair value; and a significant decrease in volatility would result in a significantly lower fair value.
Previous wording
During 2023, we identified triggering events related to certain asset groups. In each situation in which we experienced a triggering event during the year, we tested our long-lived assets for impairment using our internal economic and business projections, and determined that the carrying values of the long-lived assets were recoverable. If, in future quarters, our economic or business projections were to change as a result of an update to our plans, a deterioration of the economic or business environment, a significant adverse change in the extent or manner in which a long-lived asset is being used, or an expectation that a long-lived asset group will be disposed of significantly before the end of its useful life, we would undertake additional testing, as appropriate, which could result in an impairment of long-lived assets.
Current wording
During 2024, we identified triggering events under ASC 360-35-21, Property, Plant, and Equipment, ("ASC 360") related to certain asset groups. In each situation in which we experienced a triggering event during the year, we tested our long-lived assets for impairment using our internal economic and business projections, and determined that no impairment was required to the carrying values of the long-lived assets. If, in future periods, our economic or business projections were to change as a result of an update to our plans, a deterioration of the economic or business environment, a significant adverse change in the extent or manner in which a long-lived asset is being used, or an expectation that a long-lived asset group will be disposed of significantly before the end of its useful life, we would undertake additional testing, as appropriate, which could result in an impairment of long-lived assets.
Previous wording
See Note 12, Recent Pronouncements, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Current wording
See Note 12, New Accounting Standards, to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
We continue to seek opportunities to grow the business organically, and by expanding relationships with existing and new
Current report — wording carried from elsewhere
Because of the foregoing, our ability to obtain additional proceeds from financing is extremely limited under current conditions, and if we are unable to obtain such proceeds, we may need to further adjust our operations and seek protection by 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 report — wording carried from elsewhere
Nature of Estimates Required: We accounted for our warrants in accordance with the guidance contained in ASC 480, Distinguishing Liabilities from Equity, (“ASC 480”), under which the warrant is required to be accounted for as a liability.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
The issuance of the Purchase Shares and Commitment Shares have been registered pursuant to the Company’s effective shelf registration statement on Form S-3 (File No. 333-273357) (the “Registration Statement”), and the related base prospectus included in the Registration Statement, as supplemented by a prospectus supplement to be filed on or around the Commencement Date (as defined in the Purchase Agreement).
Previous report — wording carried elsewhere
On December 12, 2023, the Company also entered into an equity line of credit purchase agreement (the “ELOC Purchase Agreement”) with Lincoln Park Capital Fund, LLC (the “Purchaser”) under which the Company may sell to the Purchaser up to $50.0 million of shares of common stock over the 24-month term of the ELOC Purchase Agreement. During the year ended December 31, 2023, the Company did not sell any shares of common stock pursuant to the ELOC Purchase Agreement.