Workhorse Group Inc.

Notes to Condensed Consolidated Financial Statements

1. SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING PRINCIPLES

Overview

Workhorse Group Inc. (“Workhorse”, the “Company”, “we”, “us”, or “our”) is an American technology company with a vision to pioneer the transition to zero-emission commercial trucks. Our primary focus is to provide robust, sustainable and cost-effective solutions to the commercial transportation sector. We design, develop, manufacture and sell fully electric trucks.

Liquidity, Capital Resources, and Going Concern

The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) applicable to a going concern. The going concern basis of presentation assumes that the Company will continue in operation one year after the date these Condensed Consolidated Financial Statements are issued and will be able to realize assets and discharge its liabilities and commitments in the normal course of business. 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.

Pursuant to the requirements of the Financial Accounting Standard Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 205-40, Presentation of Financial Statements - Going Concern(“ASC 205-40”), management must evaluate whether there are conditions and events, considered in aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for at least one year after the date that these Condensed Consolidated Financial Statements are issued. In accordance with ASC 205-40, management’s analysis can only include the potential mitigating impact of management’s plans that have not been fully implemented as of the issuance date if (a) it is probable that management’s plans will be effectively implemented on a timely basis, and (b) it is probable that the plans, when implemented, will alleviate the relevant conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern.

We had sales of $8.7 million, incurred a net loss of $43.3 million and used $25.0 million of cash in operating activities during the nine months ended September 30, 2025. As of September 30, 2025, we had $12.7 million of cash and cash equivalents and $25.5 million in restricted cash, net accounts receivable of $1.2 million, other receivables of $1.5 million, net inventory of $30.0 million and accounts payable of $11.2 million. As of September 30, 2025, the Company had positive working capital of $12.5 million and an accumulated deficit of $896.6 million.

As a result of our recurring losses from operations, accumulated deficit, projected capital needs, and delays in bringing our trucks to market and lower than expected market demand, substantial doubt exists regarding our ability to continue as a going concern within one year after the issuance date of the accompanying Condensed Consolidated Financial Statements. Our ability to continue as a going concern is contingent upon the outcome of the Recent Transactions (as defined below), as well as the successful execution of management’s intended plan over the next twelve months to improve the Company’s liquidity and working capital, which includes, but is not limited to:

•Generating revenue by increasing sales of our trucks and other services.

•Reducing expenses and limiting non-contracted capital expenditures.

•Raising capital to fund operations through the issuance of debt or equity securities or other financing arrangements.

It is essential that we have access to capital as we bring our existing line of trucks to market, scale up production and sales of such trucks and continue to develop additional variations of our existing trucks and our next generation of trucks. There is no assurance that we will be successful in implementing management’s plans to generate liquidity to fund these activities or other aspects of our short and long-term strategy, that our projections of our future capital needs will prove accurate or that any additional funding would be available or sufficient to continue operations in future periods.

Our revenues from operations are unlikely to be sufficient to meet our liquidity requirements for the twelve months following the date of the issuance of our Condensed Consolidated Financial Statements, and, accordingly, our ability to continue as a going concern depends on our ability to obtain and receive proceeds from third-party financing. We currently expect that our primary source of third-party financing will be the proceeds of the Tenth Additional 2024 Note (as defined below), which we issued under our 2024 Securities Purchase Agreement, and the Sale Leaseback and the Motive Convertible Note (as defined below). As of November 7, 2025, approximately $15.8 million of the gross proceeds of the Tenth Additional 2024 Note had been released from the lockbox account and approximately $17.0 million of such proceeds remain in the lockbox account and will be available to us only upon satisfaction or waiver of the conditions described below. Accordingly, there can be no assurance that any or all of such proceeds will be available to us on a timely basis or ever.

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, at amounts and times determined by management. During the year ended December 31, 2024, we issued 0.2 million shares under the ATM Agreement for net proceeds of $4.2 million, as adjusted for our 2025 Reverse Stock Split (as defined below). During the nine months ended September 30, 2025, no shares were issued under the ATM Agreement. In comparison, during the same period in 2024, we issued 0.5 million shares under the ATM Agreement, for net proceeds of $2.7 million. As of September 30, 2025, approximately $95.0 million remained available under the ATM Agreement. Certain of our other existing financing arrangements place certain conditions and restrictions on the use of our ATM Agreement. In addition, the terms of our existing financing arrangements impose substantial restrictions on our ability to obtain additional financing.

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.

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 accompanying Condensed Consolidated Financial Statements.

In order to manage liquidity and operating capital, the Company has taken or plans to take the actions described below.

Financings under the 2024 Securities Purchase Agreement

As part of management’s plan to raise capital to fund operations, we have 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, par value of $0.001 per share (the “Common Stock”) and (ii) warrants (the “2024 Warrants”) to purchase shares of Common Stock.

During the three months ended September 30, 2025, the Company did not issue or sell to the Investor any additional notes and warrants. As of September 30, 2025, we had issued and sold to the Investor (i) 2024 Notes in the aggregate original principal amount of $77.5 million and (ii) 2024 Warrants to purchase up to 5.7 million shares of Common Stock pursuant to the 2024 Securities Purchase Agreement (following adjustment in connection with our 2024 Reverse Stock Split and our 2025 Reverse Stock Split).

On February 12, 2025. we issued a 2024 Note in aggregate principal amount of $35.0 million (the “Tenth Additional 2024 Note”) which is governed by a lockbox letter agreement entered into between the Company and the Investor (the “Lockbox Letter”). Pursuant to the Lockbox Letter, the net proceeds of $30.6 million, after a 12.5% original issue discount and related fees and expenses, were deposited into a lockbox account under the control of the collateral agent under the 2024 Securities Purchase Agreement. Funds may 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 we satisfy the conditions of a Market Release Event (as defined in the Lockbox Letter), including minimum Common Stock price and trading volume conditions; or (iii) otherwise, with the consent of the Investor. As of November 7, 2025, approximately $15.8 million of the gross proceeds of the Tenth Additional 2024 Note had been released from the lockbox account. 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. Furthermore, there is no assurance that we will receive any additional proceeds beyond those from the Tenth Additional 2024 Note under the 2024 Securities Purchase Agreement.

As of September 30, 2025, $24.1 million aggregate principal amount remained outstanding under the 2024 Notes, andno shares had been issued pursuant to the 2024 Warrants. Upon our filing of one or more additional prospectus supplements, and our satisfaction of certain other conditions, as of September 30, 2025, the 2024 Securities Purchase Agreement contemplates additional closings of 2024 Notes of up to $61.5 million in aggregate principal amount of additional 2024 Notes and corresponding 2024 Warrants.

On August 15, 2025, the Company entered into the Repayment Agreement (as defined below), pursuant to which it agreed to repay its outstanding obligations under the 2024 Notes in connection with the Merger and exchange all of the Investor’s 2024 Warrants for rights to acquire shares of the Company’s Common Stock. In addition, the Investor waived its right to effect additional closings (as defined in the 2024 Securities Purchase Agreement). For more information, see “Recent Developments—Waiver, Repayment and Exchange Agreement” below.

Recent Developments

Merger Agreement with Motiv Power Systems, Inc.

On August 15, 2025, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among Workhorse, Omaha Intermediate 2, Inc., a Delaware corporation and wholly-owned subsidiary of Workhorse, Omaha Intermediate, Inc., a Delaware corporation and wholly-owned subsidiary of Intermediate Parent (“Intermediate Parent”), Omaha Merger Subsidiary, Inc., a Delaware corporation and wholly-owned subsidiary of Intermediate (“Merger Subsidiary”), and Motiv Power Systems, Inc., a Delaware of corporation (“Motiv”), pursuant to which, and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Merger Subsidiary will merge with and into Motiv (the “Merger”). Upon consummation of the Merger, Merger Sub will cease to exist and Motiv will become a direct, wholly-owned subsidiary of Intermediate and an indirect, wholly-owned subsidiary of Workhorse.

Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger, Motiv’s investors will receive a number of shares of Workhorse’s Common Stock, based on a ratio calculated in accordance with the Merger Agreement (the “Merger Consideration”). Upon closing of the Merger (the “Closing”), all of the issued and outstanding shares of Motiv’s common stock and preferred stock will be cancelled, and Workhorse will be the ultimate indirect parent of 100% of Motiv. In addition, all of the financial indebtedness of Motiv will be cancelled with the holders of such indebtedness receiving Workhorse Common Stock as Merger Consideration.

Upon the Closing and issuance of the Merger Consideration, on a pro forma basis and based upon the number of shares of Workhorse Common Stock expected to be issued in the Merger, pre-Merger Motiv investors will own approximately 62.5%, Workhorse stockholders, as of immediately prior to Closing, will own approximately 26.5%, and the 2024 Note Holder (as defined below) will own Rights (as defined below) to receive Workhorse Common Stock representing approximately 11% of Workhorse, in all cases, on a fully-diluted basis prior to giving effect to (i) the Equity Financing (as defined below), and (ii) the Convertible Financing (as defined below). Under certain circumstances further described in the Merger Agreement, the ownership percentages may be adjusted.

Merger Closing Financing

The Merger Agreement includes a condition to closing that entities affiliated with Motiv’s largest investor (the “Motiv Investor”) provide Workhorse with up to $20 million in debt financing (the “Closing Debt Financing”) at the Closing. Under the Closing Debt Financing, approximately $10 million is to be made available after the Closing for general corporate purposes pursuant to a revolving credit facility, and $10 million is to be made available after the Closing to fund vehicle manufacturing upon the receipt of confirmed purchase orders pursuant to an ABL facility. The terms of the Closing Debt Financing have not been finalized, but the parties expect that it will contain customary terms, conditions, including borrowing conditions, and covenants for similar transactions. The Closing Debt Financing will be guaranteed by Workhorse’s subsidiaries and secured by substantially all non-real estate assets of Workhorse and its subsidiaries. In addition, Workhorse and Motiv have agreed to use their commercially reasonable best efforts to effect an equity financing for Workhorse on terms mutually acceptable to the parties (the “Equity Financing”).

Sale Leaseback of Union City, IN Facility

On August 15, 2025, in connection with the sale and leaseback transaction (the “Sale Leaseback”), a subsidiary of Workhorse, Workhorse Motor Works Inc., entered into a Purchase and Sale Agreement with an affiliate of the Motiv Investor (the “Property Purchaser”) for the sale of its Union City, Indiana manufacturing facility and campus (the “Property”), excluding any equipment and any fixtures solely used in the production of vehicles, to the Property Purchaser for a purchase price, before fees and expenses, of $20.0 million. The Company recognized a gain of $13.8 million, recorded in Gain on sale of assets in the Condensed Consolidated Statements of Operations. Upon commencement of the lease, the Company recognized an operating right-of-use asset and corresponding lease liability of $16.8 million. Workhorse plans to use the proceeds for the Repayment (as defined below), to pay transaction expenses, and for general corporate purposes.

On August 15, 2025, Workhorse issued to an affiliate of the Motiv Investor (the “Convertible Note Holder”) a Subordinated Secured Convertible Note (the “Motive Convertible Note”) with an aggregate original principal amount of $5.0 million (the “Convertible Financing”). The Motive Convertible Note was issued without original issue discount, and Workhorse received $5.0 million in proceeds, prior to fees and expenses, which Workhorse plans to use for the Repayment and other general corporate purposes. The Motive Convertible Note bears interest at a rate of 8.0% per annum, subject to adjustment as set forth in the Motive Convertible Note, compounded quarterly and increasing the principal outstanding under the Motive Convertible Note. The Motive Convertible Note is a secured obligation of Workhorse, ranking junior to the 2024 Notes (as defined below) and senior to all other indebtedness and, subject to certain limitations, is unconditionally guaranteed by each of Workhorse’s subsidiaries, pursuant to the terms of a certain Subsidiary Guarantee and secured by substantially all of the assets of Workhorse and its subsidiaries pursuant to a certain Security Agreement.

Workhorse’s obligations under the Motive Convertible Note mature on the earliest of (i) the date a termination fee is due to Motiv under the Merger Agreement, (ii) the date that isthree months following the termination of the Merger Agreement pursuant to certain provisions of the Merger Agreement, and (iii) the date that is 24 months after the date of issuance. Following the Closing of the Merger, the Motive Convertible Note will be automatically convertible into a number shares of Workhorse stock equal to the principal amount then outstanding divided by 90% of the price per share paid by investors in the Equity Financing.

As of September 30, 2025, the estimated fair value of the Motive Convertible Note was $5.1 million and $5.0 million in aggregate principal amount remained outstanding under the Motive Convertible Note.

Waiver, Repayment and Exchange Agreement

On August 15, 2025, Workhorse entered into a Waiver, Repayment and Exchange Agreement (the “Repayment Agreement”) by and among Workhorse and the investors party thereto (collectively, the “2024 Note Holder”).

Upon entry into the Repayment Agreement, Workhorse deposited approximately $9.9 million (the “Cash Collateral”) into the previously disclosed Lockbox Account (the “Lockbox”), with such Cash Collateral to be released to the 2024 Note Holder in connection with the Closing. The Cash Collateral will bear interest at a rate equal to 5% per annum. The amount of Cash Collateral released to the 2024 Note Holder in connection with the Closing will be reduced by the aggregate principal amount of 2024 Notes converted before the Closing and increased by the amount of interest accrued on the Cash Collateral before the Closing. In connection with the Closing, Workhorse will redeem all of its then outstanding obligations under the 2024 Notes at 100% of the face amount, plus accrued interest (the “Repayment”). Upon making such Repayment, Workhorse shall have no outstanding obligations under the 2024 Notes.

In addition, Workhorse will issue the 2024 Note Holder rights (the “Rights”) to acquire shares of Workhorse Common Stock in exchange (the “Warrant Exchange”) for the cancellation of all of the Warrants issued to the 2024 Note Holder. The Warrant Exchange would be for a number of Rights exercisable for shares of Workhorse Common Stock equal to 30% of fully diluted shares of Workhorse Common Stock then outstanding immediately prior to the Closing. The Exchange will occur on the Closing Date, after which there will no longer be any outstanding 2024 Warrants or 2024 Notes. The Rights are exercisable at the discretion of the holder at any time to the extent the number of shares of Workhorse Common Stock held by the holder does not exceed 9.99% of the then outstanding shares of Workhorse Common Stock.

In addition, the Repayment Agreement amended certain provisions of the Securities Purchase Agreement, by and among Workhorse and the 2024 Note Holder (the “2024 Securities Purchase Agreement”). The 2024 Note Holder also waived its right to effect and agreed not to request any Additional Closing (as defined in the 2024 Securities Purchase Agreement), effective as of the date of Closing or the abandonment of the Merger. The 2024 Note Holder also consented to the issuance of the Motive Convertible Note, including the Security Agreement and the Subsidiary Guarantee, the Sale Leaseback, and the Merger and related transactions.

The Merger, the Sale Leaseback, the Convertible Financing, and the Repayment, the Warrant Exchange, and the related transactions contemplated thereby are collectively referred to herein as the “Recent Transactions.”

Cost-saving Measures

As previously disclosed, a key part of management’s plan to improve liquidity and meet working capital needs involves reducing operating costs to lower cash usage and ease pressure on available liquidity. Many of the cost-saving measures implemented in 2024 have continued to yield benefits through the period ended September 30, 2025. In addition, we significantly reduced other operating costs during the first nine months of 2025 compared to the prior year period including, but not limited to, reductions in third-party consulting arrangements, lower research and development activities and associated internal and external costs related to new vehicle program development, consolidation of activities within back-office functions to take advantage of associated personnel attrition and other cost control actions.

We also substantially decreased the procurement of raw materials for future commercial vehicle production, which has notably affected the near-term production and availability of our W56 vehicle platform. Additionally, we are overdue on payments to certain suppliers for outstanding accounts payable. Certain purchased components for our trucks have supplier long-lead times of up to 24 weeks. While we are focused on the sale of existing inventory on hand, in the event of an increase in market demand for our W56 vehicle, we may not have sufficient cash resources to fund working capital requirements without support from our customer and supplier base, or the availability of additional third-party financing arrangements. We are currently working with certain of our suppliers to extend or restructure the payment terms of its outstanding accounts payable as well as terms and conditions related to the purchase of materials necessary for future production.

Management plans to continue to seek additional opportunities to reduce costs and, in particular, cash expenditures, in a manner intended to minimize their adverse impact on our core operations. Management intends to continue to maintain significantly reduced capital expenditures and only allocate capital for manufacturing equipment and tooling, as needed for future production to support firm orders. There can be no assurance that the measures described above, or any other cost-saving measures we may implement in the future will be sufficient to address our immediate or longer-term liquidity and working capital needs. Moreover, it is possible that such measures will have an adverse effect on our operations and product plans.

Aero Drone Design and Manufacturing Operations

Management’s plan also included a decision to cease the production operations of our drone design and manufacturing business and transition exclusively to operating as a Drones as a Service business, as previously disclosed in our 2024 Form 10-K. On June 6, 2024, the Company completed the previously disclosed divestiture of its Aero business (the “Aero Divestiture”) to a third party, to concentrate on its commercial electric vehicle business. The Aero Divestiture has provided an estimated monthly cost savings of approximately $0.4 million. Under the agreement’s earn-out provisions, the Company was eligible to receive a portion of the proceeds if the Aero business realized positive net cash flow however, it has been determined that Aero did not have positive net cash flow, and therefore no payments will be received under the earn-out. The loss on the Aero Divestiture was $0.7 million of which $0.4 million was included in Selling, general and administrative expenses and $0.3 million in Cost of sales in the 2024 Consolidated Statement of Operations for the year ended December 31, 2024.

NASDAQ Listing Requirements and Reverse Stock Split

On March 17, 2025, we effectuated a 1-for-12.5 reverse stock split of our authorized shares and outstanding shares of Common Stock (the “2025 Reverse Stock Split”). We adjusted the exercise price, number of shares issuable on exercise or vesting and/or other terms of our outstanding stock options, warrants, restricted stock, and restricted stock units to reflect the effects of the 2025 Reverse Stock Split. The 2025 Reverse Stock Split was intended to allow us to regain compliance with the Nasdaq’s $1.00 minimum bid price requirement (the “Minimum Bid Price Requirement”). We received notification from Nasdaq Capital Markets on April 1, 2025, that we had regained compliance with the Minimum Bid Price Requirement. As of September 30, 2025 and through the date of this filing, we were in compliance with the Minimum Bid Price Requirement.

In addition, Nasdaq has recently adopted new rules that could hinder our ability to cure any future deficiency and maintain the continued listing of our Common Stock. These new rules, which became effective in January 2025: (i) provide for the immediate delisting with no grace period of any listed company that falls out of compliance with the Minimum Bid Price Requirement for the second time in a twelve-month period, (ii) provide for immediate delisting if a listed company effects a reverse stock split that causes it to fall out of compliance with certain other listing requirements, and (iii) limit the ratio of reverse stock splits used to regain compliance with the Minimum Bid Price Requirement to a cumulative ratio of 1-to-250 in any two-year period. These Nasdaq rules limit our ability to effect a subsequent reverse stock split, including in the event our Common Stock fails to comply with the $1.00 Minimum Bid Price Requirement in the future.

In connection with the Merger Agreement, we agreed to effect a reverse split of our Common Stock to comply with the listing standards of Nasdaq applicable to the Merger, including Nasdaq Listing Rule 5505. In our Definitive Proxy Statement on Schedule 14A filed with the SEC on October 8, 2025, we included a proposal seeking stockholder approval of a reverse split of our Common Stock at a ratio of any whole number between 1-for-8 and 1-for-12, at any time prior to June 30, 2026, at the discretion of our Board of Directors. Whether we effect such a reverse stock split, and the terms of such a reverse stock split, including the ratio at which it is effected, are subject to various factors, including obtaining stockholder approval, most of which are outside our control. We therefore cannot provide assurances about the ultimate outcome of a reverse stock split effected pursuant to the terms of the Merger Agreement or any other future reverse stock split.

Basis of Presentation and Consolidation

The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of Workhorse Group Inc. and its subsidiaries, with all intercompany transactions and balances having been eliminated. The Company prepared the Condensed Consolidated Financial Statements in accordance with United States generally accepted accounting principles (“GAAP”) and the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) and, in the Company’s opinion, reflect all necessary adjustments, including normal recurring items that are necessary.

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.

These Condensed Consolidated Financial Statements and the notes thereto for the periods presented have been adjusted to reflect the Company’s June 17, 2024 1-for-20 reverse stock split (the “2024 Reverse Stock Split”) and the 2025 Reverse Stock Split, a 1-for-12.5 reverse stock split effective March 17, 2025, in each case of its issued and outstanding shares of Common Stock.

The Company has elected the fair value option for its convertible debt and associated warrants. This election was made to align the measurement of these financial instruments with their market values and simplify the accounting for the components. Changes in fair value of convertible debt and warrants are recognized in the Condensed Consolidated Statements of Operations.

In the opinion of our management, the unaudited Condensed Consolidated Financial Statements have been prepared on a basis consistent with the audited Consolidated Financial Statements and include all adjustments necessary for the fair presentation of Workhorse’s financial condition, results of operations and cash flows for the interim periods presented. Such adjustments are of a normal, recurring nature. The results of operations and cash flows for the interim periods presented may not necessarily be indicative of full-year results. Reference should be made to the Consolidated Financial Statements contained in our 2024 Form 10-K.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures in the accompanying notes.

Reclassifications

The Company reclassified certain prior-period amounts in the Condensed Consolidated Financial Statements to conform to the current-period presentation. These reclassifications had no impact on net loss, total assets, total liabilities or stockholders' equity.

2. INVENTORY, NET

Inventory, net consisted of the following:

We reserve inventory for any excess or obsolete inventory or when we believe the net realizable value of inventory is less than the carrying value. As of September 30, 2025 and December 31, 2024, we carried inventory reserves of $16.1 million and $11.6 million, respectively. The increase in inventory reserves was primarily attributable to excess inventory due to slower than anticipated truck sales, offset by our efforts to convert our on-hand inventory into finished goods, as well as sell and dispose of inventory that has been fully reserved.

During the three months ended September 30, 2025 and 2024, we recorded net reserve adjustments of $2.1 million (expense) and $0.5 million (gain), respectively, in Cost of sales in the Condensed Consolidated Statements of Operations. During the nine months ended September 30, 2025 and 2024, we recorded net reserve adjustments of $6.7 million (expense) and $4.0 million (expense), respectively, in Cost of sales in the Condensed Consolidated Statements of Operations.

3. CONTRACT MANUFACTURING SERVICES AND INVESTMENT IN TROPOS

We have a minority ownership investment in Tropos Technologies, Inc. (“Tropos”). The investment was acquired 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. The $5.0 million non-cash consideration was recorded as deferred revenue and is recognized as revenue over time as assembly service performance obligations are satisfied.

We recorded our investment at cost less impairment, if applicable. In accordance with FASB ASC Topic 321, Investments - Equity Securities, we assessed our investment for impairment at each reporting period to determine if the fair value declined below its cost basis and if the impairment is other than temporary.

During the third quarter of 2023, we concluded that our investment in Tropos was impaired due to economic conditions and uncertainties that had materially impacted Tropos’ performance and financial position. The impairment was deemed other-than-temporary, as the decline in the investment’s fair value is not expected to recover in the foreseeable future. We recorded an impairment charge of $10.0 million, representing the difference between the investment’s original cost and its fair value on the assessment date. This loss was recognized in “Other (loss) income” in our Consolidated Statements of Operations for the year ended December 31, 2023. The impairment did not relieve the Company of its obligation to provide assembly services under the Assembly Services Agreement. Accordingly, we continued to carry related obligations in Deferred revenue in the Condensed Consolidated Balance Sheets.

During the three months ended September 30, 2025, the Company terminated its Assembly Services Agreement with Tropos because Tropos was in material default under the Assembly Services Agreement. Accordingly, the Company is no longer obligated to perform assembly services, and the corresponding Deferred Revenue balance was removed. Tooling-related assets of $0.1 million were also removed, resulting in a gain of $4.8 million, which was recognized within “Other income” in our Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2025. As of September 30, 2025 and December 31, 2024, Deferred revenue related to the Assembly Services Agreement was $0 million and $4.7 million, respectively.

4. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following:

Prepaid purchases consist of deposits made to our suppliers for non-recurring engineering costs and production parts. As of September 30, 2025 and December 31, 2024, net prepaid purchases primarily consisted of deposits for direct materials associated with our W4 CC and W750 trucks.

5. REVENUE

The following table provides a summary of sales activity for the periods indicated:

Vehicles

Revenue is recognized when the Company transfers promised goods or services to customers in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under the agreement, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including any constraints on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. The Company only applies the five-step model to contracts when it is probable that it will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.

Services, Parts and Accessories

Services, parts and accessories revenue consists of non-warranty after-sales vehicle services, body shop and parts, and assembly services. It also includes revenue generated from operating our Stables by Workhorse route, and other service revenue. We recognize revenue related to sales of service, parts and other accessories when we transfer control of the items. For the majority of vehicles, parts, and accessories, we transfer control and recognize a sale when we ship the product from our manufacturing facility to our customer (dealers and distributors). We recognize service revenue upon the transfer of control to the customer, which is generally at the time the service is completed.

For the three months ended September 30, 2025 and 2024, three entities and two entities each represented 10% or more of our total revenues, respectively. For the nine months ended September 30, 2025 and 2024, two entities and four entities each represented 10% or more of our total revenues, respectively.

Deferred Revenue

Deferred revenue related to our Assembly Services Agreement with Tropos Technologies, Inc (which was terminated during the three months ended September 30, 2025) and sales of select vehicles consisted of the following:

6. ACCRUED AND OTHER CURRENT LIABILITIES

Accrued and other current liabilities consisted of the following:

Warranty Liability

We generally provide a manufacturer’s warranty on all new vehicles we sell. We record a warranty liability for the products sold by us, which includes our best estimate of the projected costs to repair or replace items under warranties and recalls if identified. The amount of warranty liability accrued reflects management’s best estimate of the nature, frequency, and costs of future claims. Historically, the cost of fulfilling the warranty obligations has principally involved replacement parts, towing and transportation costs, labor and sometimes travel for any field retrofit campaigns. Our estimates are based on historical experience, the extent of pre-production testing, the number of units involved, and the extent of features/components included in product models.

Although we believe the estimates and judgments discussed herein are reasonable, actual results could differ, and we may be exposed to increases or decreases in our warranty liability accrual that could be material. The change in the Warranty liability consisted of the following:

(1)The negative provision for the nine months ended September 30, 2024 was a result of the expiration of the warranty liability related to non-current truck models.

7. DEBT

A reconciliation of the fair value of convertible notes is as follows:

(1) The Company recognizes changes in fair value of convertible notes for Common Stock, net in the Condensed Consolidated Statements of Operations.

Senior Secured Convertible Notes

2024 Securities Purchase Agreement

On March 15, 2024, we entered into the 2024 Securities Purchase Agreement with the Investor under which the Company 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) 2024 Notes for up to an aggregate principal amount of $139.0 million that will be convertible into shares of the Company’s Common Stock and (ii) 2024 Warrants to purchase shares of Common Stock.

The 2024 Notes include an alternate conversion feature allowing the Investor, at their option, to convert all or a portion of the outstanding principal and accrued interest into Common Stock at an Alternate Conversion Price. This conversion right may be exercised either at the Holder’s discretion or upon the occurrence of certain defined events of default.

As of June 30, 2025, the Company recognized a $2.0 million payable to the Investor related to the Alternate Conversion provisions, primarily driven by the application of a “floor price” condition. This amount was recorded within Accrued liabilities and other current liabilities in the Condensed Consolidated Balance Sheets as of June 30, 2025 and has been settled through a combination of cash payments and/or issuance of shares pursuant to the terms of the 2024 Notes as of September 30, 2025.

As of September 30, 2025, the Company had issued and sold to the Investor $77.5 million in the original principal amount of 2024 Notes and Warrants to purchase up to 5.7 million shares of Common Stock, subject to adjustments following the Company’s 2024 and 2025 Reverse Stock Splits. As of September 30, 2025, $27.1 million aggregate principal amount of the 2024 Notes remained outstanding at fair value, and no shares had been issued upon exercise of the Warrants.

The 2024 Notes and Warrants contain beneficial ownership limitations prohibiting conversion or exercise to the extent that such action would cause the Holder to beneficially own more than 9.99% of the Company’s outstanding Common Stock immediately following such conversion or exercise.

2024 Notes

The 2024 Notes were issued with original issue discount of 12.5%, resulting in $67.8 million of net proceeds to the Company before fees and expenses as of September 30, 2025. The 2024 Notes are or will be senior, secured obligations of the Company, ranking senior to all other unsecured indebtedness, subject to certain limitations and are unconditionally guaranteed by each of the Company’s subsidiaries, pursuant to the terms of a certain security agreement and subsidiary guarantee. The 2024 Notes are issued pursuant to the Company’s Indenture with U.S. Bank Trust Company, National Association, as trustee, and supplemental indentures thereto.

Each 2024 Notes bears interest at a rate of 9.0% per annum, payable in arrears on the first trading day of each calendar quarter, at the Company’s option, either in cash or in-kind by compounding and becoming additional principal. Upon the occurrence and during the continuance of an event of default, the interest rate will increase to 18.0% per annum. Unless earlier converted or redeemed, each 2024 Notes will mature on the one-year anniversary of the date of issuance, subject to extension at the option of the holders in certain circumstances as provided therein.

All amounts due under any 2024 Notes are convertible at any time, in whole or in part, at the option of the Investors into shares of Common Stock at a conversion price equal to the applicable Reference Price set forth in such 2024 Note or (b) the greater of (x) the applicable Floor Price set forth in such 2024 Notes and (y)87.5% of the volume weighted average price of the Common Stock during theten trading days ending and including the trading day immediately preceding the delivery or deemed delivery of the applicable conversion notice, as elected by the converting holder. The Reference Price and Floor Price are subject to customary adjustments upon any stock split, stock dividend, stock combination, recapitalization or similar event. The Reference Price is also subject to full-ratchet adjustment in connection with a subsequent offering at a per share price less than the Reference Price then in effect. Subject to the rules and regulations of Nasdaq, we have the right, at any time, with the written consent of the Investor, to lower the reference price to any amount and for any period of time deemed appropriate by our board of directors. Upon the satisfaction of certain conditions, we may prepay any 2024 Notes upon 15 business days’ written notice by paying an amount equal to the greater of (i) the face value of the 2024 Notes at premium of 25% (or 75% premium, during the occurrence and continuance of an event of default, or in the event certain redemption conditions are not satisfied) and (ii) the equity value of the shares of Common Stock underlying the 2024 Notes. The equity value of our Common Stock underlying the 2024 Notes is calculated using the two greatest volume weighted average prices of our Common Stock during the period immediately preceding the date of such redemption and ending on the date we make the required payment.

The 2024 Notes contain customary affirmative and negative covenants, including certain limitations on debt, liens, restricted payments, asset transfers, changes in the business and transactions with affiliates. The 2024 Notes require the Company to maintain minimum liquidity on the last day of each fiscal quarter in the amount of $4.0 million. The 2024 Notes also contain customary events of default.

Under certain circumstances, including a change of control, the Investor may cause us to redeem all or a portion of the then-outstanding amount of principal and interest on any 2024 Notes in cash at the greater of (i) the face value of the amount of 2024 Notes to be redeemed at a 25% premium or 10% premium with respect to amounts held in the lockbox account (or at a 75% premium, if certain redemption conditions are not satisfied or during the occurrence and continuance of an event of default), (ii) the equity value of our Common Stock underlying such amount of 2024 Notes to be redeemed and (iii) the equity value of the change of control consideration payable to the holder of our Common Stock underlying such 2024 Notes.

In addition, during an event of default, the Investor may require us to redeem in cash all, or any portion, of any outstanding 2024 Notes at the greater of (i) the face value of our Common Stock underlying such 2024 Notes at a 75% premium and (ii) the equity value of our Common Stock underlying such 2024 Notes. In addition, during a bankruptcy event of default, we shall immediately redeem in cash all amounts due under the 2024 Notes at a 75% premium unless the Investor of such 2024 Notes waives such right to receive payment. Further, upon the sale of certain assets, the Investor may cause a redemption at a premium, including upon consummation of the Sale Leaseback if the redemption conditions are not satisfied. The 2024 Notes also provide for purchase and participation rights in the event of a dividend or other purchase right being granted to the holders of Common Stock.

As of September 30, 2025, $24.1 million in aggregate principal amount remained outstanding under the 2024 Notes. Of this amount, $17.0 million is considered restricted cash, resulting in a net outstanding aggregate principal amount of $7.1 million.

During the three and nine months ended September 30, 2025, the Investor converted $19.0 million and $38.3 million fair value of principal into Common Stock, respectively, and we recorded a $1.4 million fair value net loss and $8.5 million fair value net gain in the Condensed Consolidated Statements of Operations, respectively.

As of September 30, 2025, the estimated fair value of the 2024 Notes totaled $27.1 million. The fair value was computed using a Monte Carlo Simulation Model which incorporates significant inputs that are not observable in the market and thus represents a Level 3 fair value measurement. The unobservable inputs utilized for measuring the fair value of the 2024 Notes reflect our assumptions about the assumptions that market participants would use in valuing the 2024 Notes as of the issuance date and subsequent reporting period.

On August 15, 2025, Workhorse entered into a Waiver, Repayment and Exchange Agreement (the “Repayment Agreement”) by and among Workhorse and the investors party thereto (collectively, the “2024 Note Holder”). Upon entry into the Repayment Agreement, Workhorse deposited approximately $9.9 million (the “Cash Collateral”) into the previously disclosed Lockbox Account (the “Lockbox”), with such Cash Collateral to be released to the 2024 Note Holder in connection with the Closing of the Merger. The Cash Collateral will bear interest at a rate equal to 5.0% per annum. The amount of Cash Collateral released to the 2024 Note Holder in connection with the Closing will be reduced by the aggregate principal amount of 2024 Notes converted before the Closing and increased by the amount of interest accrued on the Cash Collateral before the Closing. In connection with the Closing, Workhorse will redeem all of its then outstanding obligations under the 2024 Notes, at 100% of the face amount, plus accrued interest (the “Repayment”). Upon making such Repayment, Workhorse shall have no outstanding obligations under the 2024 Notes.

We determined the fair value by using the following key inputs to the Monte Carlo Simulation Model:

On August 15, 2025, Workhorse entered into a Subordinated Secured Convertible Note agreement (the “Motive Convertible Note” or “Convertible Note - Long-Term”) with Motive GM Holdings II LLC in connection with the execution of the Merger. The Motive Convertible Note was issued without original issue discount, and Workhorse received $5.0 million in proceeds, prior to fees and expenses, which Workhorse plans to use for the Repayment and other general corporate purposes. The Motive Convertible Note bears interest at a rate of 8.0% per annum, subject to adjustment as set forth in the agreement, compounded quarterly and increasing the principal outstanding under the Motive Convertible Note. The Motive Convertible Note is a secured obligation of Workhorse, ranking junior to the 2024 Notes and senior to all other indebtedness and, subject to certain limitations, is unconditionally guaranteed by each of Workhorse’s subsidiaries, pursuant to the terms of a certain Subsidiary Guarantee and secured by substantially all of the assets of Workhorse and its subsidiaries pursuant to a certain Security Agreement.

Workhorse’s obligations under the Motive Convertible Note mature on the earliest of (i) the date a termination fee is due to Motive under the Merger Agreement, (ii) the date that isthree months following the termination of the Merger Agreement pursuant to certain provisions of the Merger Agreement, and (iii) the date that is 24 months after the date of issuance. Following the Closing of the Merger, the Motive Convertible Note will be automatically convertible into a number shares of Workhorse stock equal to the principal amount then outstanding divided by 90% of the price per share paid by investors in the Equity Financing.

During the three and nine months ended September 30, 2025, there wereno conversions of principal to Common Stock. As of September 30, 2025, the estimated fair value of the Motive Convertible Note was $5.1 million and the aggregate principal amount outstanding was $5.0 million.

The fair value of the Motive Convertible Note was estimated using a scenario-based valuation approach that incorporated a discount rate of 9.9%, with a 30% probability assigned to an equity financing event occurring in December 2026 and a 70% probability that the note will be held to maturity in August 2027.

As of September 30, 2025, the Company was in compliance with the debt terms and associated covenants under the 2024 Notes and the Motive Convertible Note.

Warrants Exercisable

During the nine months ended September 30, 2025, the Company issued 2024 Warrants to purchase 4.4 million shares of Common Stock at an exercise price of $8.75 per share (following adjustment in connection with the Company’s 2024 Reverse Stock Split and 2025 Reverse Stock Split). No warrants were issued during the three months ended September 30, 2025. The exercise price of the outstanding 2024 Warrants is subject to adjustment to a price based on the then-current market price of the Common Stock upon the occurrence of certain Stock Combination Events, including, without limitation, a reverse split of the Common Stock. We expect that such an adjustment may be required as a result of the 2025 Reverse Stock Split and that any such adjustment would affect the fair value of the 2024 Warrants. As of September 30, 2025, no shares had been issued pursuant to the 2024 Warrants.

Under the 2024 Warrants, the Investor has 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 Common Stock, allowing the Investor to acquire, on the terms and conditions applicable to such purchase rights, the aggregate purchase rights which the holder would have been able to acquire if the holder held the number of shares of Common Stock acquirable upon exercise of the 2024 Warrants.

In the event of a Fundamental Transaction (as defined in the 2024 Warrants) that is not a change of control or corporate event as described in the 2024 Warrants, the surviving entity would be required to assume the Company’s obligations under the 2024

Warrants. In addition, if the Company engages in certain transactions that result in the holders of the Common Stock receiving consideration, a holder of the 2024 Warrants will have the option to either (i) exercise the 2024 Warrants 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 2024 Warrants for its then Black-Scholes Value (as defined in the 2024 Warrants).

As of September 30, 2025, the estimated fair value of the 2024 Warrants as of each respective issuance date totaled $10.0 million. For the three months ended September 30, 2025 and 2024, we recorded a net fair value loss of $6.8 million and $2.6 million, respectively, and for the nine months ended September 30, 2025 and 2024, we recorded a net fair value loss of $4.2 million and $7.1 million, respectively, in Change in fair value of warrants in the Condensed Consolidated Statements of Operations related to the 2024 Warrants.

On August 15, 2025, we entered into the Repayment Agreement, providing for the Exchange of the 2024 Warrants in

connection with the Closing of the Merger. See “Note 1, Waiver, Repayment and Exchange Agreement” for more information.

The outstanding warrants will be exchanged for rights to acquire a number of shares equal to 30% of the total outstanding shares of Workhorse Common Stock immediately prior to the Closing of the Merger.

The fair value of the 2024 Warrants was initially estimated using the Black-Scholes option pricing model. In connection with the anticipated settlement of the warrants as part of the Merger, the Company determined that a Monte Carlo Simulation model was more appropriate for estimating fair value as of September 30, 2025. The change in methodology reflects the shift in the warrants’ economic substance following the merger announcement in August 2025.

Under ASC 820, fair value measurements must reflect the assumptions market participants would use, considering all relevant facts and circumstances as of the valuation date. The Black-Scholes model was initially appropriate given the warrants’ standard option-like terms (fixed strike price and maturity). However, after the merger announcement, the warrants’ payoff structure changed—upon the expected closing of the merger in December 2025, the warrants will be terminated and exchanged for a fixed percentage (30%) of WKHS’ outstanding common shares. This introduces path dependency and uncertainty regarding future stock price movements and share issuances from convertible note conversions, which the Black-Scholes model cannot adequately capture.

The Monte Carlo Simulation approach enables modeling of the expected distribution of potential outcomes under the revised terms, incorporating variability in the Company’s stock price and share count. This methodology more accurately reflects market participant assumptions and complies with ASC 820 by capturing the current contractual and economic characteristics of the warrants.

Both the Black-Scholes and Monte Carlo Simulation models utilize significant unobservable inputs and are therefore classified as Level 3 fair value measurements under ASC 820. The Monte Carlo Simulation model estimates the number of common shares expected to be issued to the lender upon conversion of the Note through the Merger closing. At the Note’s maturity date of December 12, 2025 (which is expected to coincide with the Merger closing date), the model aggregates the projected conversion shares, applies a 30% adjustment to determine the total number of warrant-equivalent shares, and multiplies this amount by the closing stock price on that date. The resulting value is then discounted using an appropriate risk-free rate to determine the fair value of the Warrants.

The key assumptions used in the Monte Carlo Simulation model were as follows:

•Stock price:$1.10

•Risk-free interest rate:3.99%

•Expected volatility (annual):120%

•Expected dividend yield (annual):0%

The Company determines the accounting classification of warrants it issues as either liability or equity classified by first assessing whether the warrants meet liability classification in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (“ASC 480”), then in accordance with ASC 815-40, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock (“ASC 815”). In order for a warrant to be classified in stockholders’ equity (deficit), the warrant must be (i) indexed to the Company’s equity and (ii) meet the conditions for equity classification.

If a warrant does not meet the conditions for stockholders’ equity (deficit) classification, it is carried in the Condensed Consolidated Balance Sheets as a warrant liability measured at fair value, with subsequent changes in the fair value of the warrant recorded in other non-operating losses (gains) in the Condensed Consolidated Statements of Operations. If a warrant meets both conditions for equity classification, the warrant is initially recorded, at its relative fair value on the date of issuance, in stockholders’ equity (deficit) in the Condensed Consolidated Balance Sheets, and the amount initially recorded is not subsequently remeasured at fair value.

8. LEASES

We have entered into various operating and finance lease agreements for offices, manufacturing and warehouse facilities. We determine if an arrangement is a lease, or contains a lease provision, at inception and record the leases in our financial statements upon lease commencement, which is the date when the underlying asset is made available for our use by the lessor.

We have elected not to record in the Condensed Consolidated Balance Sheets leases with a lease term of 12 months or less at lease inception that do not contain a purchase option or renewal term provision we are reasonably certain to exercise. All other lease right-of-use assets and lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. Because most of our leases do not provide an implicit rate of return, we used our incremental borrowing rate based on the information available at lease commencement date in determining the present value of lease payments.

Our leases may include options to extend the lease term for up to 5 years. Some of our leases also include options to terminate the lease prior to the end of the agreed upon lease term. For the purpose of calculating lease liabilities, lease terms include options to extend or terminate the lease when it is reasonably certain we will exercise such options.

Lease expense for operating leases is recognized on a straight-line basis over the lease term as either cost of sales or operating expenses, depending on the nature of the leased asset. In connection with the Aero Divestiture, we entered into an agreement for an operating lease associated with the Aero business whereby the buyer agreed to reimburse the Company for the monthly operating lease payment of approximately $52,000 per month. In connection with the Waiver, we agreed to waive the buyer’s obligation to reimburse these amounts going forward and, accordingly, we will not realize these savings in future periods through the remaining term of the lease.

On August 15, 2025, in connection with the sale and leaseback transaction (the “Sale Leaseback”), a subsidiary of Workhorse, Workhorse Motor Works Inc., entered into a Purchase and Sale Agreement with an affiliate of the Motiv Investor (the “Property Purchaser”) for the sale of its Union City, Indiana manufacturing facility and campus (the “Property”), excluding any equipment and any fixtures solely used in the production of vehicles, to the Property Purchaser for a purchase price, before feesand expenses, of $20.0 million. The transaction met the requirements for sale recognition under ASC 842-40. The Company recognized a gain of $13.8 million, recorded in Gain on sale of assets in the Condensed Consolidated Statements of Operations. Simultaneously with the sale of the Property, the Company entered into a 20-year leaseback arrangement classified as an operating lease under ASC 842. The lease provides for six renewal options of five years each, at market-based rental rates. The lease includes an annual rent payment of $2.1 million with annual 3% escalations. Upon commencement of the lease, the Company recognized an operating right-of-use asset and corresponding lease liability of $16.8 million.

Lease right-of-use assets consisted of the following:

Lease liabilities consisted of the following:

During the nine months ended September 30, 2025, the Company reassessed the classification of a previously reported financing lease in accordance with ASC 842 and determined that the lease should be reclassified as an operating lease due to changes in the underlying lease terms. The reclassification resulted in a decrease in lease liabilities and right-of-use assets associated with financing leases and a corresponding increase in those associated with operating leases.

9. FAIR VALUE MEASUREMENTS

We estimate the fair value of the 2024 Notes, Motive Convertible Note, and 2024 Warrants using commonly accepted valuation methodologies upon issuance and at each reporting date. Considerable judgment was required in interpreting market data to develop the estimates of fair value. Accordingly, the Company’s estimates are not necessarily indicative of the amounts that the Company, or holders of the instruments, could realize in a current market exchange. Significant assumptions used in the fair value model included estimates of the redemption dates, credit spreads and the market price and volatility of the Company’s Common Stock. The use of different assumptions and/or estimation methodologies could have a material effect on the estimated fair values. The following table presents the estimated fair values:

The following table presents a roll-forward of the fair value of the convertible notes payable, derivative liability, derivative asset and warrant liability that will continue to be measured at fair value on a recurring basis for which fair value is determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy as of September 30, 2025.

The fair value of the 2024 Warrants was initially measured using the Black-Scholes model approach. Given the expectation of the settlement of warrants in connection with the Merger, the Company determined that the Monte Carlo Simulation model was appropriately suited to determine the fair value of the 2024 Warrants as of September 30, 2025. Both models incorporate significant inputs that are not observable in the market and thus represents a Level 3 measurement.

As of September 30, 2025, there have been no changes to valuation methodologies (other than described above) and in the classification of our Level 1 and Level 3 fair value measurements. The Company continues to utilize consistent approaches in determining the fair value of assets and liabilities categorized within these levels, in accordance with ASC 820.

10. STOCK-BASED COMPENSATION

We maintain, as approved by the board of directors and the stockholders, the 2017 Incentive Stock Plan, the 2019 Incentive Stock Plan, and 2023 Long-Term Incentive Plan (collectively, the “Plans”) providing for the issuance of stock-based awards to employees, officers, directors or consultants of the Company. Non-qualified stock options may only be granted with an exercise price equal to the market value of our Common Stock on the grant date. The Plans collectively authorize the Company to issue up to 1.4 million shares of Common Stock. Total shares remaining available for stock incentive grants under the Plans totaled approximately 0.2 million as of September 30, 2025. We have granted stock options, restricted stock awards (“RSAs”), restricted stock units (“RSUs”), and performance share units (“PSUs”) under the Plans.

The Company effected the 2024 Reverse Stock Split on June 17, 2024, and the 2025 Reverse Stock Split on March 17, 2025. While the 2024 Reverse Stock Split did not impact the authorized number of shares of Common Stock, the 2025 Reverse Stock Split resulted in a reduction in the number of authorized shares by a factor of 12.5.

The Company adjusted the exercise price, number of shares issuable on exercise or vesting and/or other terms of its outstanding stock options, warrants, restricted stock, and restricted stock units to reflect the effects of the 2024 Reverse Stock Split and 2025 Reverse Stock Split. The number of shares of Common Stock available for issuance under the Company’s equity incentive plans was not affected.

Stock-based compensation expense

The following table summarizes stock-based compensation expense for the periods indicated:

Stock options

A summary of stock option activity for the nine months ended September 30, 2025 is as follows:

As of September 30, 2025, there wasno unrecognized compensation expense for unvested options.

Restricted stock awards

A summary of RSA activity for the nine months ended September 30, 2025 is as follows:

Restricted stock units

A summary of RSU activity for the nine months ended September 30, 2025 is as follows:

As of September 30, 2025, unrecognized compensation expense was $1.0 million for unvested RSA and RSU which is expected to be recognized over the next 0.1 years.

Performance share units

As of September 30, 2025, the number of unvested PSUs was 5,876 shares. The vesting of PSUs is conditioned upon achievement of certain performance objectives over a performance period ending December 31, 2024, and 2025 and 2026 as defined in each award agreement. For the PSUs issued in 2022 and 2023 with a performance period ending December 31, 2024 and 2025,50% of the PSUs vest based upon the Company’s total shareholder return as compared to a group of peer companies (“TSR PSUs”), and 50% of the PSUs vest based upon our performance on certain measures including a cumulative adjusted EBITDA target (“EBITDA PSUs”). For the PSUs issued in 2024 with a performance period ending December 31, 2026, one hundred percent of the PSUs vest based upon our performance on a cumulative revenue target (“Revenue PSUs”). Depending on the actual achievement on the performance objectives, the grantee may earn between 0% and 200% of the target PSUs.

A summary of the activity for PSU awards with total shareholder return performance objectives for the nine months ended September 30, 2025, is as follows:

As of September 30, 2025, unrecognized compensation expense was $0.1 million performance measures are expected to be met and vest and be recognized over the next 0.1 years.

A summary of the PSU awards with cumulative adjusted EBITDA targets for the nine months ended September 30, 2025 is as follows:

The fair value of PSUs is calculated based on the stock price on the date of grant. The stock-based compensation expense recognized each period is dependent upon our estimate of the number of shares that will ultimately vest based on the achievement of EBITDA-based performance conditions. Future stock-based compensation expense for unvested EBITDA PSUs will be based on the fair value of the awards as of the grant date. During the quarter ended September 30, 2025, we recorded an expense of $0.1 million related to unvested 2022 issued EBITDA PSUs. This expense reflects the fair value of the EBITDA PSUs that is expected to vest based on the achievement of the established performance targets. The future stock-based compensation expense for the 2023 issued unvested revenue PSUs will be based on the fair value of the awards as of the grant date which has not yet occurred, as the cumulative adjusted EBITDA target condition is not yet defined.

As of September 30, 2025, there were no PSU awards expensed as cumulative revenue targets have yet to be determined. The stock-based compensation expense recognized each period is dependent upon our estimate of the number of shares that will ultimately vest based on the achievement of revenue-based performance conditions. Future stock-based compensation expense for unvested revenue PSUs will be based on the fair value of the awards as of the grant date, which has not yet occurred, as the cumulative adjusted revenue target condition is not yet defined.

11. STOCKHOLDERS’ EQUITY

Common Stock

We haveone class of Common Stock, par value $0.001 per share. Each share of our Common Stock is entitled toone vote on all matters submitted to stockholders. The Company effected the 2024 Reverse Stock Split and 2025 Reverse Stock Split of the Company’s then issued and outstanding shares of Common Stock. The 2025 Reverse Stock Split did affect the number of authorized shares of Common Stock for issuance, and, as of September 30, 2025, our authorized shares of Common Stock for issuance was 36.0 million.

At-The-Market Sales Agreement

On March 10, 2022, we established an at-the-market equity program through our ATM Agreement. 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.

During the three and nine months ended September 30, 2025, no shares were issued under the ATM Agreement. During the nine months ended September 30, 2024, we issued 0.5 million shares under the program, generating net proceeds of $2.7 million. As of September 30, 2025, approximately $95.0 million remains available under the ATM Agreement. Certain of our other existing financing arrangements place certain conditions and restrictions on the use of our ATM Agreement.

Lincoln Park Capital Purchase Agreement

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.

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 thethree lowest closing sale prices for the Common Stock during theten 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.

During the three and nine months ended September 30, 2025, the Company didnot sell any shares of Common Stock pursuant to the ELOC Purchase Agreement. As of September 30, 2025, the Company has 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. The Company does not expect to issue and sell additional shares under the ELOC due to restrictions contained in its other financing arrangements.

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, and concluded that it is an equity-linked contract that does not qualify for equity classification, and therefore requires fair value accounting as a derivative asset (liability). The Company has analyzed the terms of the freestanding purchased put right and has concluded that it had insignificant value as of September 30, 2025.

Preferred Stock

Workhorse has authorized 75.0 million shares of Series A Preferred Stock, par value $0.001 per share. Our certificate of incorporation provides that shares of preferred stock may be issued from time to time in one or more series. Our Board of Directors is authorized to fix the voting rights, if any, designations, powers, preferences, qualifications, limitations and restrictions thereof, applicable to the shares of preferred stock. As of September 30, 2025, there wereno shares of Series A Preferred Stock issued and outstanding.

Warrants

In connection with the issuance of debt and Common Stock, we issued warrants to purchase shares of our Common Stock that have been classified as liabilities in the Condensed Consolidated Financial Statements. As of September 30, 2025, there were approximately 5.7 million Warrants outstanding.

12. INCOME TAXES

As of September 30, 2025 and December 31, 2024, our net deferred tax liability waszero. Cumulative deferred tax assets are fully reserved as there is not sufficient evidence to conclude it is more likely than not the deferred tax assets are realizable. No current liability for federal or state income taxes has been included in these Condensed Consolidated Financial Statements due to the loss for the periods.

13. LOSS PER SHARE

Basic loss per share of Common Stock is calculated by dividing net loss by the weighted-average shares outstanding for the period. Potentially dilutive shares, which are based on the weighted-average shares of Common Stock underlying outstanding stock-based awards and warrants using the treasury stock method, and convertible notes using the if-converted method, are included when calculating the diluted net loss per share of Common Stock when their effect is dilutive.

The following table presents the potentially dilutive shares that were excluded from the computation of diluted net loss per share of Common Stock, because their effect was anti-dilutive:

• Periods presented have been adjusted to reflect the 2024 reverse stock split (1-for-20), which was effective June 17, 2024 and the 2025 reverse stock split (1-for-12.5) which was effective March 17, 2025. Additional information regarding the reverse stock splits may be found in Note 1 – Summary of Business and Significant Accounting Principles to this Quarterly Report on Form 10-Q.

14. RECENT ACCOUNTING PRONOUNCEMENTS

Adoption of New Accounting Standards

ASC 280, Segment Reporting. The Company operates as a single reporting segment under ASC 280, which encompasses the design, manufacture, and distribution of all-electric vehicles as an Original Equipment Manufacturers (OEMs). The Chief Executive Officer (CEO), as the Company’s Chief Operating Decision Maker (CODM), evaluates financial performance and allocates resources based on consolidated financial information, including total revenues, operating income, and profitability for the business as a whole. As such, segment information has been presented at the consolidated level, as there are no additional reportable segments in the context of ASC 280.

Accounting Standards Updates ("ASU") Issued But Not Yet Adopted

ASU 2023-09, Improvements to Income Tax Disclosures. In December 2023, the FASB issued ASU 2023-09 to enhance the transparency and decision usefulness of income tax disclosures. The new standard is effective for fiscal years beginning after December 15, 2024, with retrospective application permitted. We are assessing the effect on our annual consolidated financial statement disclosures; however, adoption is not expected to have an impact on our Consolidated Balance Sheets or Consolidated Statements of Operations.

ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. In November 2024, the FASB issued ASU 2024-03, which requires public business entities to disclose additional information about certain natural expense categories included in each relevant expense caption on the income statement. The ASU affects only disclosure and does not change the recognition, measurement, or presentation of expenses. It is effective for annual reporting periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of this ASU and does not expect it to have a material effect on its consolidated financial position, results of operations, or cash flows.

All other ASUs issued but not yet adopted were assessed and determined to be not applicable or are not expected to have a material impact on our Consolidated Financial Statements or financial statement disclosures.

15. COMMITMENTS AND CONTINGENCIES

General Matters

The Company is party to various negotiations and legal proceedings arising in the normal course of business. The Company provides reserves for these matters when a loss is probable and reasonably estimable. The Company does not disclose a range of potential loss because the likelihood of such a loss is remote. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s financial position, results of operations, cash flows or liquidity.

Legal Proceedings

CSI Litigation

On April 19, 2024, Coulomb Solutions Inc. (“CSI”), a supplier to the Company of certain of the batteries used in its vehicles, filed a complaint against the Company in United States District Court for the Eastern District of Michigan (Case No. 2:24-cv-11048). In its complaint, CSI assertstwo claims – a breach of contract claim and an alternative unjust enrichment claim – that are both based upon Workhorse’s alleged failure to pay amounts due under several invoices. CSI seeks to recover damages in excess of $4 million, including alleged past due amounts, interest, and collection costs. Workhorse filed its answer to the complaint on June 4, 2024. Discovery has closed. On November 27, 2024, CSI filed a motion for summary judgment. On September 30, the court granted in part and denied in part CSI’s motion for summary judgment. The court granted summary judgment as to CSI’s claim for $2.95 million, but the court denied summary judgment on CSI’s remaining claims. The court has set a mandatory settlement conference for December 8, 2025. As of September 30, 2025, the Company has accrued $1.0 million in connection with this dispute along with the outstanding trade amounts.

16. SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date the accompanying condensed consolidated financial statements were filed. There were no events that occurred after the balance sheet date that would require additional disclosure in or adjustment to these financial statements.

17. SUPPLEMENTAL CASH FLOW INFORMATION

During the nine months ended September 30, 2025, the Company extinguished $29.4 million in principal on the 2024 Notes through the issuance of 17.2 million shares of Common Stock upon Investor conversion, compared to $22.9 million through the issuance of 1.3 million shares during the same period in 2024 (following adjustment in connection with the 2024 Reverse Stock Split and the 2025 Reverse Stock Split). This non-cash debt-to-equity transaction reduced short-term debt and increased stockholders’ equity (deficit), as reflected in the Condensed Consolidated Balance Sheets.

During the nine months ended September 30, 2025, the Company entered into a sale leaseback agreement, resulting in the recognition of a right-of-use asset and corresponding lease liability of approximately $16.8 million. This transaction did not result in any cash inflows or outflows at inception and is therefore reported as a noncash investing and financing activity