Workhorse Group Inc.

Notes to Consolidated Financial Statements

1. SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING PRINCIPLES

Overview

Workhorse Group Inc. (“Workhorse”, the “Company”, “we”, “us”, or “our”) is a North American manufacturer of medium-duty electric trucks and buses. 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 that these vehicles operate. The Company’s best-in-class vehicles are designed for last-mile delivery, medium-duty operations, and a growing range of specialized applications.

Reverse Merger Transaction

On December 15, 2025 (the “Closing Date”), we completed our merger with Motiv Power Systems, Inc. (“Motiv”), pursuant to which Motiv became our indirect, wholly-owned subsidiary (the “Merger”). Following the Merger, the Company has continued to operate under the legal name Workhorse Group Inc., which remains the registrant for the United States Securities and Exchange Commission ("SEC") reporting purposes, and Workhorse’s common stock continues to be listed on The Nasdaq Stock Market LLC under the ticker symbol “WKHS.” The Merger was accounted for as a reverse acquisition, with Motiv being treated as the acquirer for accounting purposes, in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 805, Business Combinations. Accordingly, the consolidated assets, liabilities and results of operations of Motiv became the historical consolidated financial statements of the combined company, and Workhorse’s assets, liabilities and results of operations were consolidated with those of Motiv beginning on the acquisition date. Operations prior to the Merger are presented as those of Motiv in this and future reports. Workhorse’s assets and liabilities were measured and recognized at their fair values as of the closing of the Merger. References to “Workhorse”, the “Company”, “we”, “us”, or “our”, when used in the Consolidated Financial Statements incorporate the operations of Motiv unless otherwise indicated or the context requires otherwise. See further discussion of the transactions in connection with the Merger in Note 2, Merger and Related Transactions.

Basis of Presentation

The 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 Consolidated Financial Statements in accordance with United States generally accepted accounting principles (“GAAP”) and the rules and regulations of the SEC and, in the Company's opinion, reflect all necessary adjustments, including normal recurring items that are necessary.

Since Motiv was determined to be the accounting acquirer in connection with the Merger, for periods prior to the Merger, the Consolidated Financial Statements were prepared on a stand-alone basis for Motiv and do not include the combined entities' activity or financial position. Subsequent to the Merger, the Consolidated Financial Statements as of and for the year ended December 31, 2025 include assets and liabilities at their acquisition date fair value and then adjusted to reflect Workhorse's activity from December 15, 2025 through December 31, 2025.

Going Concern and Liquidity

The accompanying Consolidated Financial Statements have been prepared in accordance with GAAP applicable to a going concern. The going concern basis of presentation assumes that the Company will continue in operation for at least one year after the date these 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 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 FASB ASC 205-40, Presentation of Financial Statements - Going Concern, (“ASC 205-40”), management must evaluate whether there are conditions or 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 these Consolidated Financial Statements are issued. In accordance with ASC 205-40, management’s analysis can only include the potentially 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, net of returns and allowances of $21.2 million, incurred a net loss of $64.1 million and used $35.6 million of cash and cash equivalents in operating activities for the year ended December 31, 2025. As of December 31, 2025, the Company had net working capital of $21.0 million, including $12.9 million of cash and cash equivalents, and an accumulated deficit of $319.0 million.

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

It is essential that we have access to capital as we bring our existing line of vehicles to market, scale up production and sales of such vehicles and continue to develop additional variations of our existing vehicles and our next generation of vehicles. 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 Consolidated Financial Statements, and, accordingly, our ability to continue as a going concern depends on our ability to obtain and receive proceeds from external financing. We currently expect that our primary source of financing will be the Credit Agreements (as defined below in Note 2, Merger and Related Transactions) and a potential equity or equity-linked financing.

Because the public float of our Common Stock is currently less than $75.0 million, the SEC’s “baby shelf” rules will limit the amount of securities we can offer and sell on Form S-3, including 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 is substantially limited.

Subject to certain conditions, the Credit Agreements permit the Company to raise funds through an equity or equity-linked financing; however, the consummation of such a transaction is not probable as of the issuance date of the accompanying Consolidated Financial Statements.

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 Consolidated Financial Statements.

In order to manage liquidity and operating capital, the Company entered into certain of the transactions described above, including the Convertible Financing and the Sale-Leaseback transaction, pursuant to which the Company received gross proceeds of $25.0 million. As of December 31, 2025, there was $5.0 million in principal outstanding under the A&R Note (as defined below in Note 8, Debt). Additionally, the Company has access to the Customer Order Credit Agreement and the Cash Flow Credit Agreement. The Customer Order Credit Agreement provides Workhorse with up to $40.0 million to fund vehicle manufacturing in connection with Qualified Purchase Orders (as defined in the Customer Order Credit Agreement). The Cash Flow Credit Agreement provides Workhorse with a line of credit with borrowing capacity of up to $10.0 million to fund its working capital requirements, including costs related to the Merger, and its general corporate purposes. As of December 31, 2025, the Company hadno outstanding borrowings and remaining availability of $40.0 million under the Customer Order Credit Agreement. As of December 31, 2025, the Company had $10.0 million in outstanding borrowings andno remaining availability under the Cash Flow Credit Agreement.

The Company is actively working to evaluate financing alternatives; however, as noted above, as of the issuance date of the accompanying Consolidated Financial Statements, it is not probable that a potential equity or equity-linked financing transaction will be consummated.

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 is 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.

NASDAQ Listing Requirements and Reverse Stock Splits

Pre-Merger, Workhorse Common Stock had been listed on The Nasdaq Stock Market LLC (“Nasdaq”) under the symbol “WKHS.” Post-Merger, Workhorse filed an application and was approved for the combined company to continue to be listed on Nasdaq and traded under the ticker symbol "'WKHS". These Consolidated Financial Statements and the notes thereto for the years ended 2025 and 2024 have been adjusted to reflect the following reverse stock splits of its issued and outstanding shares of Common Stock (together, the "Reverse Stock Splits"):

•June 17, 2024 1-for-20 reverse stock split (the “2024 Reverse Stock Split”)

•March 17, 2025 1-for-12.5 reverse stock split (the “2025 Reverse Stock Split”)

•December 8, 2025 1-for-12 reverse stock split (the "2025 Merger Reverse Stock Split")

The 2024 Reverse Stock Split and the 2025 Reverse Stock Split were effected to regain compliance with Nasdaq Rule 5550(a)(2) requiring Nasdaq-listed companies to maintain a $1.00 minimum bid price (the “Minimum Bid Price Requirement”). The 2025 Merger Reverse Stock Split was effected to comply with Nasdaq Rule 5110(a) requiring Nasdaq-listed companies to file an initial listing application and comply with its initial listing standards for change of control transactions that will result in a non-Nasdaq-listed company controlling the existing listed company. Nasdaq considered the Merger to be a change of control and required Workhorse to apply for initial listing of the combined company after Merger Closing. One of the initial listing standards was a minimum share price of $4 per share. As a result, Workhorse effected a reverse stock split to meet such initial listing standard and attain Nasdaq approval for continued listing of the combined company after Merger Closing.

The authorized number of shares of Common Stock was not affected by the Reverse Stock Splits. The number of shares of Common Stock available for issuance under the Company’s equity incentive plans was reduced proportionally. The Company adjusted the exercise price, number of shares issuable on exercise or vesting and/or other terms of its then outstanding stock options, warrants, restricted stock, and restricted stock units to reflect the effects of the Reverse Stock Splits. As of December 31, 2025 and through the date of this filing, we were in compliance with the Minimum Bid Price Requirement.

In addition, Nasdaq has 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.

Motiv Reverse Stock Split

On June 14, 2024, Motiv effected a 10-for-1 reverse stock split (the "Motiv Reverse Stock Split") for each share of its then outstanding common stock. Pre-merger affected equity instruments and amounts have been adjusted to reflect the effect of the Motiv Reverse Stock Split, as well as the exercise price, number of shares issuable on exercise or vesting and/or other terms of its then outstanding stock options, warrants, preferred stock and common stock.

Use of Estimates

The preparation of the consolidated 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. These estimates include, but are not limited to, sales return reserves, income taxes, accounts receivable collectibility, inventory valuation, warranties, leases, and the fair value of long-lived assets, financial instruments, convertible notes, and fair value assessments made as part of our preliminary assessment of the purchase price allocation as a result of the Merger.

Reclassifications

The Company reclassified certain prior-period amounts on the Consolidated Balance Sheets to conform to the current-period presentation. These reclassifications had no impact on net income (loss), total assets, or total liabilities.

Segment Reporting

The Company operates as a single reporting segment under ASC 280, Segment Reporting, which encompasses the design, manufacture, and distribution of all-electric vehicles. The Company’s operations are conducted within the United States, and revenues or long-lived assets attributable to foreign countries were not material for the periods presented. 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. The significant expenses regularly reviewed by the CODM to evaluate segment performance are the expenses presented in the Consolidated Statement of Operations, and no further disaggregation is provided for segment review purposes. As such, segment information has been presented at the consolidated level, as there are no additional reportable segments in the context of ASC 280.

Cash and Cash Equivalents

Cash and cash equivalents are defined as short-term, highly-liquid investments with original maturities of three months or less.

Restricted Cash

Cash and cash equivalents subject to contractual restrictions and not readily available are classified as restricted cash. Our restricted cash is comprised primarily of cash held as collateral for real estate leases. We record restricted cash in the Consolidated Balance Sheets and determine current or non-current classification based on the expected duration of the restriction.

Our total cash, cash equivalents, and restricted cash, as presented in the Consolidated Financial Statements, was as follows:

Accounts Receivable and Allowance for Credit Losses

Accounts receivable primarily consists of amounts that are due and payable from our customers for the sale of vehicles, parts, and services. We evaluate the collectibility of these receivables by considering the number of days outstanding, prevailing economic conditions, and reasonable, supportable forecasts that may affect recoverability. Additions to the allowance are charged to bad debt expense reported in selling, general and administrative expenses.

Concentration of Risk

Credit Risk

Financial instruments that potentially subject us to a concentration of credit risk consist of cash and cash equivalents, restricted cash, and accounts receivable. Our cash balances are primarily on deposit at high credit quality financial institutions or invested in money market funds. These deposits are typically in excess of insured limits. As of December 31, 2025, three customers accounted for 85% of our total accounts receivable balance, and as of December 31, 2024, one customer accounted for approximately 93% of the total accounts receivable balance. The loss of these customers would have a significant impact on the Company’s operations.

Supply Risk

We depend on our suppliers, including single source suppliers, and the inability of these suppliers to deliver necessary components of our products in a timely manner at prices, quality levels and volumes acceptable to us, or our inability to efficiently manage these components from these suppliers, could have a material adverse effect on our business, prospects, financial condition and operating results.

For the years ended December 31, 2025 and 2024, the Company had two suppliers that accounted for approximately 29% and 30%, respectively, of the total procurement. For the years ended December 31, 2025 and 2024, the Company had one supplier that accounted for 25% and two suppliers that accounted for 35%, respectively, of the total accounts payable.

Inventory

Inventory is stated at the lower of cost or net realizable value. Inventory cost includes cost of raw material, labor and certain overhead costs. Manufactured inventories are valued at standard cost, which approximates actual costs on a first-in, first-out basis. We record inventory write-downs for excess or obsolete inventories based on assumptions about current and future demand forecasts. If inventory on-hand is in excess of our future demand forecast, the excess amounts are included in our inventory reserve.

We also 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 vehicles less the estimated cost to convert the inventory on-hand into a finished product. 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.

Should our estimates of future inventory usage or selling prices change, additional and potentially material increases to this reserve may be required. A small change in our estimates may result in a material charge to our reported financial results.

Property, Plant and Equipment, Net

Property, plant and equipment, net, including leasehold improvements, are recognized at cost less accumulated depreciation. Depreciation is generally computed using the straight-line method over the estimated useful lives of the respective assets, as follows:

Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the term of the related leases.

Upon the retirement or sale of our property, plant and equipment, the cost and associated accumulated depreciation are removed from the Consolidated Balance Sheets, and the resulting gain or loss is reflected on the Consolidated Statements of Operations. Maintenance and repair expenditures are expensed as incurred while major improvements that increase the functionality, output or expected life of an asset are capitalized and depreciated ratably over the identified useful life.

Impairment of Long-Lived Assets

We review long-lived assets, such as property, plant, and equipment, for potential impairment whenever events or changes in circumstances indicate the carrying amount of an asset or asset group may not be fully recoverable. Events that trigger a test for recoverability include material adverse changes in projected revenues and expenses, present cash flow losses combined with a history of cash flow losses or a forecast that demonstrates significant continuing losses, significant negative industry or economic trends, a current expectation that a long-lived asset group will be disposed of significantly before the end of its useful life, a significant adverse change in the manner in which an asset group is used or in its physical condition, or when there is a change in the asset grouping. When an indicator of impairment is present, the Company assesses the risk of impairment based on an estimate of the undiscounted cash flows at the lowest level for which identifiable cash flows exist against the carrying value of the asset group. Impairment exists when the carrying value of the asset group exceeds the estimated future undiscounted cash flows generated by those assets. The Company records an impairment charge for the difference between the carrying value of the asset group and its estimated fair market value. Depending on the asset, estimated fair market value may be determined either by use of a discounted cash flow model or by reference to estimated selling values of assets in similar condition.

During 2025 and 2024, we identified triggering events under ASC 360, Impairment and Disposal of Long-Lived Assets, 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, in order to determine if an additional impairment was required to the carrying values of the long-lived assets.

As a result of these assessments, no impairment was recognized for the year ended December 31, 2025. During the year ended December 31, 2024, management determined the Argo project that was previously designed and developed was no longer technologically feasible and all related investments as of December 31, 2024 were written down to zero as there is no alternative use for the inventory or fixed assets and all non-cancelable purchase commitments were accrued as a liability as they are of no value to the company upon receipt. $4.7 million of fixed assets was written off in connection with the Argo project impairment during the year ended December 31, 2024.

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.

Capitalization of Software Costs

We capitalize costs incurred in the development of internal use software, during the application development stage to property, plant and equipment, net on the Consolidated Balance Sheets. Costs related to preliminary project activities and post-implementation activities are expensed as incurred. Such costs are amortized on a straight-line basis over their estimated useful life ofthree tofive years.

We evaluate the useful lives of these assets on an annual basis, and we test for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. For the years ended December 31, 2025 and 2024, no impairments of capitalized software costs have been recognized.

Goodwill

We recognized goodwill as a result of the Merger on December 15, 2025 (see Note 2, Merger and Related Transactions, for additional details) and represents the excess of the purchase price over the fair value of the identifiable net assets acquired in a business combination. Goodwill is recorded in accordance with ASC 805, Business Combinations. Goodwill is not amortized, but is tested for impairment at least annually, or more frequently if events or changes in circumstances indicate that goodwill may be impaired, in accordance with ASC Topic 350, Intangibles—Goodwill and Other.

We perform our annual goodwill impairment test at the reporting unit level during the fourth quarter of each year. We may first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment indicates potential impairment, or if we elect to bypass the qualitative assessment, a quantitative impairment test is performed to (a) calculate the fair value of the reporting unit and compare it to its carrying value, and (b) if the carrying value exceeds its fair value, to measure an impairment loss. As a result of these assessments, no impairment was recognized for the year ended December 31, 2025.

Intangible Assets

Intangible assets acquired in a business combination are recognized separately from goodwill and recorded at their estimated fair values as of the acquisition date in accordance with ASC 805. We determined the fair value of identifiable intangible assets using valuation techniques appropriate for the specific asset, including the relief-from-royalty method and multi-period excess earnings method.

Our identifiable intangible assets primarily consist of trade names, proprietary technology, and customer relationships acquired in connection with the Merger completed on December 15, 2025.

Customer relationships represent the estimated fair value of relationships with existing Workhorse customers at the acquisition date, primarily related to relationships with Workhorse dealers. Proprietary technology represents the fair value of Workhorse Connect™, the acquired remote data management system that tracks the performance of all legacy Workhorse vehicles. The trade name represents the fair value associated with the acquired brand and market recognition of the Workhorse® trade name.

Our finite-lived intangible assets consist primarily of proprietary technology and customer relationships. Finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives, which reflect the period over which the assets are expected to contribute to future cash flows. We evaluate the remaining useful lives of finite-lived intangible assets each reporting period to determine whether events or circumstances warrant a revision to the remaining amortization period. The estimated useful lives of our identifiable intangible assets are as follows:

The Workhorse trade name was determined to have an indefinite useful life as management expects the trade name to contribute to cash flows indefinitely and there are no legal, regulatory, contractual, competitive, economic, or other factors that limit its useful life. Accordingly, the trade name is not amortized but is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired.

Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is assessed by comparing the carrying value of the asset group to the estimated undiscounted future cash flows expected to result from the use and eventual disposition of the asset group. If the carrying amount exceeds the undiscounted cash flows, an impairment loss is recognized for the excess of carrying value over fair value.

Leases

We have entered into various operating lease agreements for offices, manufacturing and warehouse facilities. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the Consolidated Statement of Operations. 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. The Company’s lease arrangements are operating leases which are capitalized on the Consolidated Balance Sheet as right-of-use (“ROU”) assets and obligations. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. These are recognized at the lease commencement date based on the present value of payments over the lease term. If leases do not provide for an implicit rate, we use our incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term as the lease payments. 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. Leases with an initial term of 12 months or less ("short term leases") are not recorded on the Consolidated Balance Sheet. The Lease expense on short-term leases is recognized on a straight-line basis over the lease term.

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. Accrued warranty activity consisted of the following:

The current portion of warranty liability is included within Accrued liabilities and other current liabilities on the Consolidated Balance Sheets, and the long-term portion of warranty liability is included within Other long-term liabilities on the Consolidated Balance Sheets.

Fair Value Measurements

We follow the accounting guidance in ASC 820, Fair Value Measurement, ("ASC 820") for our fair value measurements of financial assets and liabilities measured at fair value on a recurring basis. A three-level valuation hierarchy, based upon observable and unobservable inputs, is used for fair value measurements. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions based on the best evidence available. These two types of inputs create the following fair value hierarchy: Level 1 – Quoted prices for identical instruments in active markets; Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations whose significant inputs are observable; and Level 3 – Instruments whose significant inputs are unobservable. See Note 8, Debt, for further details on fair value.

Income Taxes

We account for income taxes in accordance with ASC 740, Income Taxes, ("ASC 740") which requires deferred income tax assets and liabilities to be recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. Authoritative guidance also requires deferred income tax assets, which include federal and state tax credit carryforwards, operating loss carryforwards and deductible temporary differences, be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred income tax assets will not be realized.

We evaluate the likelihood of realizing our deferred income tax assets by assessing our valuation allowance and by adjusting the amount of such allowance, if necessary. The factors used to assess the likelihood of realization include our forecast of future taxable income, the projected reversal of temporary differences and available tax planning strategies that could be implemented to realize the net deferred income tax assets.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities. The determination is based on the technical merits of the position and presumes that each uncertain tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information. Although management believes the estimates are reasonable, no assurance can be given that the final outcome of these matters will not be different than what is reflected in the historical income tax provisions and accruals.

Revenue Recognition

The following table disaggregates our revenue by major source:

Vehicles

Revenue is recognized when we transfer promised goods or services to customers in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. In determining the appropriate amount of revenue to be recognized as we fulfill our obligations under the agreement, we perform the following steps: (i) identify the promised goods or services in the contract; (ii) determine whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measure the transaction price, including any constraints on variable consideration; (iv) allocate the transaction price to the performance obligations; and (v) recognize revenue when (or as) we satisfy each performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer.

We generate vehicle revenue through the sale of electric commercial vehicles. We review the performance obligations in our agreements, which are our promise to transfer our product to customers based on the performance of services, transfer of title or shipping terms in the arrangement and any other variable considerations. The revenue is allocated based on our performance obligation, and an estimate of Sales returns and allowances are recognized. We offer concessions to certain customers and estimates the variable consideration based on historical sales activity. In addition, we consider the extent to which revenue should be recognized such that there is not a significant reversal of revenue in the future.

Revenue is recognized when obligations under the terms of a contract with our customer are satisfied; generally this occurs when we satisfy our performance obligations and transfer control of our vehicles. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods. For the majority of vehicles, we transfer control and recognize a sale when we ship the product from our manufacturing facility to our customer (dealers and distributors) or when we complete our performance obligation to the customer and ship the vehicle to the next step in the production process (i.e., to the upfitter). The amount of consideration we receive and revenue we recognize varies with changes in incentives. We receive cash equal to the invoice price for most vehicle sales and we generally do not offer extended payment terms as payment is received at or shortly after the point of sale.

Our agreements do not allow customers to return products. However, under certain conditions, such as defects or non-compliance with specifications, or other allowances, we may elect to allow limited returns in special situations. To account for these returns, we estimate and record a sales returns allowance as a reduction of gross revenue. This allowance is based on historical return rates and expectations of future returns, adjusted for any known factors that may affect return rates, such as changes in product quality or customer mix.

We provide for the estimated cost of product warranties at the time revenue is recognized. While we engage in product quality programs and processes, including quality control test driving vehicles, the warranty obligation is calculated by an estimation of warranty costs per vehicle. Should actual costs differ from our estimates, revisions to increase or decrease the estimated warranty liability may be required.

Sales and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. The expected costs associated with our base warranties and field service actions are recognized as expense when the products are sold (see Note 7, Accrued Liabilities and Other Current Liabilities). We have elected to recognize the cost for freight and shipping when control over vehicles, parts, or accessories has transferred to the customer as an expense in Cost of sales.

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.

Extended Warranty Revenue

We also provide extended warranty services to customers. Revenue related to these services is recognized over time as the services are provided.

For the year ended December 31, 2025, four entities represented 68% of our total revenues, and for the year ended December 31, 2024, two entities represented 69% of our total revenues.

Deferred Revenue

Deferred revenue related to the sales of select vehicles consisted of the following:

The current portion of deferred revenue is included within Accrued liabilities and other current liabilities on the Consolidated Balance Sheets.

Cost of Sales

Cost of sales include direct and indirect materials, labor costs, manufacturing overhead, including depreciation costs of tooling and machinery, shipping and logistics costs, and reserves for estimated warranty expenses. Cost of sales also includes charges to write down the carrying value of our inventory when it exceeds its estimated net realizable value and to provide for obsolete and on-hand inventory in excess of forecasted demand.

Research and Development Costs

Research and development ("R&D") costs consist primarily of personnel costs for our teams in engineering and research, prototyping expense, contract and professional services, and amortized equipment expense. R&D costs are expensed as incurred, and for the years ended December 31, 2025 and 2024 were $13.2 million and $12.9 million, respectively.

Advertising Costs

Advertising costs are recorded in Selling, general, and administrative in the Consolidated Statements of Operations as they are incurred. For the years ended December 31, 2025 and 2024, advertising costs were $0.8 million and $1.3 million, respectively.

Stock-Based Compensation

We account for stock options issued to employees under ASC 718 Share-Based Payments. Under ASC 718, share-based compensation cost to employees is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense ratably on a straight-line basis over the requisite vesting period. The standard vesting period is 4-years, with a 1-year cliff. The fair value of each stock option or warrant award is estimated on the grant date.

The calculation of share-based compensation expense requires that we make assumptions and judgments about the variables used in the Black-Scholes model, including the expected term, expected volatility of the underlying common stock, risk-free interest rate and dividends are derived from 409A valuation.

We recognize forfeitures as they occur rather than applying a prospective forfeiture rate in advance (see Note 12).

As of December 15, 2025, the expiration date of all outstanding Motiv stock options were amended to be the Merger date. There have been no replacement awards issued, and this amendment was treated as a settlement for no consideration and all remaining unrecognized compensation cost was accelerated, totaling $0.4 million. There wereno Motiv stock options outstanding as of December 31, 2025.

All pre-Merger Workhorse stock-based compensation awards were settled at the Merger date, under the change in control provisions for those awards. As of the Merger date, there were no Workhorse stock-based compensation awards assumed. There were no Workhorse stock-based compensation awards outstanding as of December 31, 2025.

Defined Contribution Plan

Motiv has a 401(k) savings plan that is intended to qualify as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. Motiv matches 50% of employee contributions up to the first $5,000 contributed, resulting in a maximum employer match of $2,500 per employee. Workhorse also has a 401(k) savings plan that is intended to qualify as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. At the time of the Merger, Workhorse did not have a 401(k) match in effect.

In connection with the Merger, both Motiv and Workhorse continue to sponsor their respective 401(k) plans. The two plans continue to operate separately as of December 31, 2025. For the years ended December 31, 2025 and 2024, we recognized $0.2 million and $0.2 million, respectively, of expenses related to employer contributions for the 401(k) savings plans.

Net Loss per Share of Common Stock

Basic loss per share of Common Stock is calculated by dividing net loss by the weighted-average shares of Common Stock outstanding for the period. Potentially dilutive shares, which are based on the weighted-average shares of Common Stock underlying outstanding stock rights using the treasury stock method or the if-converted method, as applicable, 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:

Restatement

Subsequent to the issuance of the Company’s financial statements for the year ended December 31, 2024, management identified an error in the calculation of the weighted average number of shares outstanding on a basic and diluted basis, which also resulted in an error in the calculation of net loss per share attributable to common stockholders on a basic and diluted basis. Specifically,8.5 million common shares issued during 2024 were not properly weighted for the portion of the year outstanding.

The error resulted in an overstatement of basic and diluted loss per share for the year ended December 31, 2024. The error did not affect previously reported net income, total equity, cash flows, or total assets and liabilities.

Management evaluated the materiality of the error in accordance with ASC 250, Accounting Changes and Error Corrections, and concluded that the error was material to the previously issued financial statements for the year ended December 31, 2024. Accordingly, the accompanying financial statements have been Restated to correct the error.

The following tables present the effects of the Restatement on the Company’s previously reported Condensed Consolidated Unaudited Statement of Operations:

2. MERGER AND RELATED TRANSACTIONS

As described in Note 1, Motiv merged with a wholly owned subsidiary of Workhorse on December 15, 2025. The Merger was accounted for as a business combination in accordance with Accounting Standards Codification Topic 805, Business Combinations. While the legal acquirer in the Merger was Workhorse, for financial accounting and reporting purposes under U.S. GAAP, Motiv was the accounting acquirer and the Merger was accounted for as a reverse acquisition for accounting purposes. Motiv was determined to be the accounting acquirer primarily based on the facts that (i) Motiv’s investors will own a substantial majority of the voting rights in the combined company; (ii) Motiv will designate a majority (five of seven) of the initial members of the board of directors of the combined company; and (iii) Motiv’s senior management will hold most key positions in senior management of the combined company. Accordingly, the consolidated assets, liabilities and results of operations of Motiv became the historical consolidated financial statements of the combined company, and Workhorse’s assets, liabilities and results of operations were consolidated with those of Motiv beginning on the acquisition date. Operations prior to the Merger are presented as those of Motiv in this and future reports.

Prior to the Closing Date of the Merger, Motive GM Holdings II LLC (“MGMH”), a Delaware limited liability company, was Motiv’s controlling stockholder and largest creditor, with all financial indebtedness of Motiv beneficially owned by MGMH or one if its affiliates. In connection with the closing of the Merger, MGMH received 6,629,800 shares of Common Stock (the “Merger Consideration”) in partial satisfaction of the financial indebtedness of Motiv beneficially owned by MGMH or one of its affiliates, with any remaining indebtedness cancelled for no consideration, which resulted in MGMH owning 68.3% of the issued and outstanding of our Common Stock. All outstanding preferred and common shares of Motiv were cancelled for no consideration. In addition, pursuant to the Merger agreement, all unexercised and outstanding Workhorse stock options were cancelled for no consideration, and all other awards under Workhorse’s equity incentive plans that were unvested immediately prior to the Merger were accelerated in full, with performance deemed achieved at target level for performance share units.

Repayment and Exchange

On August 15, 2025, in connection with the Merger Agreement, 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”) to (i) redeem all of Workhorse’s outstanding obligations under the notes issued to the 2024 Note Holder (the “2024 Notes”) and (ii) cancel the warrants issued to the 2024 Note Holder (the “2024 Warrants”) on the Closing Date.

In addition, in accordance with the terms of the Repayment Agreement, Workhorse issued to the 2024 Note Holder rights (the “Rights”) to acquire 1,193,364 shares of Common Stock in exchange for the cancellation of the 2024 Warrants (the “Exchange”). Upon completing the Repayment and the Exchange, Workhorse had no outstanding obligations under the 2024 Notes, all of the 2024 Notes and 2024 Warrants were cancelled, and all collateral, including the Cash Collateral, securing the 2024 Notes was released. Following the Repayment and the Exchange effective December 15, 2025, the parties thereto terminated the Securities Purchase Agreement, by and between Workhorse and the 2024 Note Holder (the “Securities Purchase Agreement”).

Closing Debt Financing

On December 15, 2025, Workhorse entered into a (i) Credit Agreement (Customer Orders) (the “Customer Order Credit Agreement”) and (ii) Credit Agreement (Cash Flow) (the “Cash Flow Credit Agreement” and together with the Customer Order Credit Agreement, the “Credit Agreements” and such transactions, collectively, the “Closing Debt Financing”), each by and among Workhorse, as borrower, certain subsidiaries of Workhorse, as guarantors, and MGMH as lender.

The Customer Order Credit Agreement provides Workhorse with up to $40.0 million to fund vehicle manufacturing in connection with Qualified Purchase Orders (as defined in the Customer Order Credit Agreement). Under the Customer Order Credit Agreement, a Qualified Purchase Order includes purchase orders entered into between Workhorse and/or one or more of its subsidiaries and a customer made on terms approved by MGMH or substantially similar to terms previously approved by MGMH pursuant to a master purchase agreement or other standard terms and conditions approved by MGMH. The amount of funds advanced by MGMH upon the receipt of an acceptable purchase order will be determined by MGMH but will not exceed 70% of the purchase price for the ordered vehicles without MGMH’s consent. The Cash Flow Credit Agreement provides Workhorse with a line of credit with borrowing capacity of up to $10.0 million to fund its working capital requirements, including costs related to the Merger, and its general corporate purposes.

Workhorse’s outstanding obligations under each Credit Agreement bear interest at a reference rate equal to the term Secured Overnight Financing Rate for a three-month tenor (“SOFR”) plus an applicable margin of 5.00%. If SOFR is unavailable pursuant to the terms of the Credit Agreements, the reference rate will be the prime rate of interest per annum last quoted by The Wall Street Journal, and the applicable margin will be 2.50% per annum. Workhorse’s obligations under the Credit Agreements mature on December 15, 2028. MGMH’s obligation to advance additional funds under the Cash Flow Credit Agreement will terminate and thereafter be at the discretion of MGMH upon the consummation of a PIPE (as defined in the Credit Agreements) to the extent such PIPE occurs prior to the maturity date of the Cash Flow Credit Agreement. Both Credit Agreements contain customary representations and warranties, affirmative and negative covenants, and events of default, and provide for customary acceleration and remedy rights for MGMH upon the occurrence of an event of default by Workhorse.

Workhorse’s obligations under the Credit Agreements are senior secured obligations of Workhorse, ranking senior to all other indebtedness and, subject to certain limitations, are unconditionally guaranteed by each of Workhorse’s subsidiaries, pursuant to the terms of the Credit Agreements and secured by substantially all of the assets of Workhorse and its subsidiaries pursuant to a certain Security Agreement (the “Security Agreement”). Payments under the Cash Flow Credit Agreement are effectively subordinated to payments under the Customer Order Credit Agreement pursuant to the waterfall in the Security Agreement.

Purchase Price Allocation

Under reverse acquisition accounting, the assets and liabilities of Workhorse were recorded at their fair value. For additional details on the fair value measurement of the acquired assets and liabilities, including the valuation techniques used, please refer to Note 11, Fair Value Measurements.

The following table summarizes the fair value of purchase consideration for the Merger and the preliminary allocation of the purchase price to the identifiable assets acquired and liabilities assumed, based on their estimated fair values as of the acquisition date:

The allocation of the purchase price is preliminary and subject to adjustment during the measurement period, not to exceed one year from the acquisition date, as we finalize the valuations for tangible and intangible assets.

The results of Workhorse's operations have been included in our consolidated financial statements since the Closing Date of the Merger. For the year ended December 31, 2025, Workhorse contributed approximately $0.6 million in revenue and $1.4 million in net loss.

The following unaudited pro forma summary presents consolidated information of the Company as if the business combination had occurred on January 1, 2024.

The unaudited pro forma financial information includes adjustments for 1) interest expense of new debt (Convertible Note and Cash Flow Credit Agreement), 2) interest expense for historical debt that was forgiven as part of the Merger, 3) stock-based compensation expense for accelerated vesting of Workhorse stock options, issuance of director grants, and the cancellation of Motiv shares, 4) acquisition-related costs (discussed further below), and 5) the sale and leaseback transaction, including the gain on sale of assets, depreciation expense of assets prior to sale, and new lease expense.

General and administration expenses on the consolidated statement of operations for the year ended December 31, 2025 includes $6.5 million of acquisition-related costs. The supplemental pro forma net loss for the year ended December 31, 2025 was adjusted to exclude the acquisition-related costs, and instead, these costs are reflected in pro forma net loss for the year ended December 31, 2024.

The unaudited pro forma financial information is provided for illustrative purposes only and does not necessarily reflect the results of operations that would have occurred had the acquisition taken place on that date.

3. INVENTORY

Our inventory consisted of the following:

1 Finished goods inventory includes new vehicles available for sale.

We reserve inventory for any excess or obsolete inventories or when we believe the net realizable value of inventories is less than the carrying value. As of December 31, 2025 and 2024, we carried inventory reserves of $19.0 million and $5.8 million, respectively. The increase in inventory during the year was primarily due to the Merger, which increased gross inventory balances by $35.6 million and increased inventory reserves by $10.9 million. The remainder of the increase in inventory reserves is primarily due to planned changes in the product lineup as a result of the Merger.

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 December 31, 2025 and 2024, prepaid purchases, net primarily consisted of deposits for direct materials associated with the manufacture of our vehicles.

The year-over-year increase to prepaid purchases reserves was primarily driven by the recognition of assets acquired in the Merger and increased reserves related to our vehicle programs.

5. PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net consists of the following:

Construction in progress is primarily comprised of equipment and tooling related to the manufacturing of our products, and construction and expansion of our facilities. Completed assets are transferred to their respective asset classes, and depreciation begins when an asset is ready for its intended use.

Depreciation expense during the years ended December 31, 2025 and 2024 was $1.2 million and $0.8 million, respectively.

6. GOODWILL AND INTANGIBLE ASSETS

The Company recognized goodwill as a result of the Merger on December 15, 2025. The goodwill represents the excess of the purchase price over the fair value of net assets acquired and is attributable to expected synergies and the assembled workforce. The goodwill is not deductible for tax purposes.

Changes in the carrying value of goodwill consist of the following:

As of December 31, 2025, our assessment didnot result in any impairment of goodwill.

We acquired identifiable intangible assets as a result of the Merger on December 15, 2025. The fair values and estimated useful lives of the acquired intangible assets were determined in accordance with ASC 805. As of December 31, 2025, the weighted-average remaining amortization period of the acquired definite-lived intangible assets is 13.0 years.

Intangible assets consist of the following:

Amortization expense for the years ended December 31, 2025 and 2024 was $18 thousand and $0, respectively. As of December 31, 2025 and 2024, our assessment didnot result in any impairment of intangible assets.

Estimated future amortization expense is as follows:

7. ACCRUED LIABILITIES AND OTHER CURRENT LIABILITIES

Accrued liabilities and other current liabilities consisted of the following:

8. DEBT

A reconciliation of debt is as follows:

Pre-Merger Note Payable

Motiv had a Senior Secured Promissory Note (the “A&R Senior Note") through which it was provided loan advances at an interest rate of 20% per annum, compounded monthly, by MGMH. Prior to 2024, Motiv had amended and restated the A&R Senior Note to provide advances totaling $20.0 million. On January 25, 2024, March 1, 2024, April 5, 2024, May 30, 2024, and July 29, 2024, we further amended and restated the A&R Senior Note to provide for additional $5.0 million loan advances. On August 30, 2024 and November 22, 2024, we further amended and restated the A&R Senior Note to provide for additional $10.0 million loan advances, with the same interest rate of 20% per annum, compounded monthly. Total aggregated principal and compounded interest balance of the A&R Senior Note at December, 31 2024 was $68.4 million.

During the year ended December 31, 2025, we further amended and restated the A&R Senior Note to provide for an additional $22.0 million in loan advances. As of the closing of the Merger, the aggregate outstanding principal and accrued compounded interest related to the A&R Senior Note of $107.7 million was fully forgiven as part of the Merger transaction.

Credit Facilities

On December 15, 2025, Workhorse entered into a (i) Credit Agreement (Customer Orders) (the “Customer Order Credit Agreement”) and (ii) Credit Agreement (Cash Flow) (the “Cash Flow Credit Agreement” and together with the Customer Order Credit Agreement, the “Credit Agreements” and such transactions, collectively, the “Closing Debt Financing”), each by and among Workhorse, as borrower, certain subsidiaries of Workhorse, as guarantors, and MGMH as lender.

The Customer Order Credit Agreement provides Workhorse with up to $40.0 million to fund vehicle manufacturing in connection with Qualified Purchase Orders (as defined in the Customer Order Credit Agreement). Under the Customer Order Credit Agreement, a Qualified Purchase Order includes purchase orders entered into between Workhorse and/or one or more of its subsidiaries and a customer made on terms approved by MGMH or substantially similar to terms previously approved by MGMH pursuant to a master purchase agreement or other standard terms and conditions approved by MGMH. The amount of funds advanced by MGMH upon the receipt of an acceptable purchase order will be determined by MGMH but will not exceed 70% of the purchase price for the ordered vehicles without MGMH’s consent. The Cash Flow Credit Agreement provides Workhorse with a line of credit with borrowing capacity of up to $10.0 million to fund its working capital requirements, including costs related to the Merger, and its general corporate purposes.

Workhorse’s outstanding obligations under each Credit Agreement bear interest at a reference rate equal to the term Secured Overnight Financing Rate for a three-month tenor (“SOFR”) plus an applicable margin of 5.00%. If SOFR is unavailable pursuant to the terms of the Credit Agreements, the reference rate will be the prime rate of interest per annum last quoted by The Wall Street Journal, and the applicable margin will be 2.50% per annum. Workhorse’s obligations under the Credit Agreements mature on December 15, 2028. MGMH’s obligation to advance additional funds under the Cash Flow Credit Agreement will terminate and thereafter be at the discretion of MGMH upon the consummation of a PIPE (as defined in the Credit Agreements) to the extent such PIPE occurs prior to the maturity date of the Cash Flow Credit Agreement. Both Credit Agreements contain customary representations and warranties, affirmative and negative covenants, and events of default, and provide for customary acceleration and remedy rights for MGMH upon the occurrence of an event of default by Workhorse.

Workhorse’s obligations under the Credit Agreements are senior secured obligations of Workhorse, ranking senior to all other indebtedness and, subject to certain limitations, are unconditionally guaranteed by each of Workhorse’s subsidiaries, pursuant to the terms of the Credit Agreements and secured by substantially all of the assets of Workhorse and its subsidiaries pursuant to a certain Security Agreement (the “Security Agreement”). Payments under the Cash Flow Credit Agreement are effectively subordinated to payments under the Customer Order Credit Agreement pursuant to the waterfall in the Security Agreement.

As of December 31, 2025, we hadno outstanding borrowings and remaining availability of $40.0 million under the Customer Order Credit Agreement, and we had $10.0 million in outstanding borrowings andno remaining availability under the Cash Flow Credit Agreement.

As of December 31, 2025, we were in compliance with the debt terms and associated covenants under the Customer Order Credit Agreement and the Cash Flow Credit Agreement.

Convertible Note

In connection with the Merger, we assumed an outstanding unsecured convertible note issued to MGMH, with an aggregate principal balance of $5.0 million (the “Convertible Note”). The Convertible Note is subordinated to the Closing Debt Financing. The 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 Convertible Note. The Convertible Note matures August 15, 2027. Following the Closing of the Merger, the 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.

On December 15, 2025, the parties to the Convertible Note entered into an Amended and Restated Convertible Note (the “A&R Note”) to make the obligations under the Convertible Note, as amended, unsecured obligations of Workhorse and each guarantor party thereto. As a result, the Convertible Note Security Agreement was terminated on the Closing Date. The Convertible Note Subsidiary Guaranty was amended and restated (the “A&R Convertible Note Subsidiary Guaranty”) to incorporate the termination of the Convertible Note Security Agreement.

The A&R Note was recognized at fair value on the Closing Date of the Merger in the amount of $5.3 million and $0.1 million of paid-in-kind interest accrued. The fair value was determined using scenario-based valuation approach that incorporated a discount rate of 8.9%, 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.

During the year ended December 31, 2025, there wereno conversions of principal to Common Stock. As of December 31, 2025, the estimated fair value of the A&R Note was $5.3 million with $0.1 million of paid-in-kind interest accrued and the aggregate principal amount outstanding was $5.0 million.

The fair value of the A&R Note as of December 31, 2025 was estimated using a scenario-based valuation approach that incorporated a discount rate of 8.9%, 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 December 31, 2025, we were in compliance with the debt terms and associated covenants under the A&R Note.

9. LEASES

We have entered into various operating lease agreements for offices, manufacturing and warehouse facilities. We determine if an arrangement is a lease, or contains a lease, 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 recognize in the 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 (“ROU”) 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 purposes of calculating lease liabilities, lease terms include options to extend or terminate the lease when it is reasonably certain that we will exercise such options.

Lease expense for operating leases is recognized on a straight-line basis over the lease term as cost of sales or operating expenses depending on the nature of the lease right-of-use asset.

In connection with the Merger, we recognized operating lease ROU assets of approximately $21.7 million and corresponding operating lease liabilities of approximately $22.1 million, consisting of $3.0 million classified as current and $19.1 million classified as noncurrent, related to acquired leases from Workhorse. The leases primarily relate to offices, manufacturing and warehouse facilities. The lease liabilities were measured at the present value of the remaining lease payments as of the merger date using an appropriate incremental borrowing rate. The ROU assets were initially measured at an amount equal to the lease liabilities, adjusted for any prepaid or accrued lease payments and any favorable or unfavorable lease terms identified as of the acquisition date. Subsequent to the Merger, these leases are accounted for in accordance with ASC 842 and are included in our consolidated lease disclosures.

We assess the carrying value of our ROU assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Such indicators may include, but are not limited to, significant underperformance relative to historical or projected future operating results, changes in the business climate or legal factors, and changes in the expected use of the leased asset. The assessment of whether a ROU asset is impaired involves management's judgment, including considerations of future cash flows, market conditions, and other relevant factors.

If impairment indicators are identified, we estimate the future cash flows expected to result from the use and eventual disposition of the leased asset. These estimates consider factors such as anticipated future operating results, market conditions, and other relevant factors. If the sum of the expected future cash flows is less than the carrying amount of the ROU asset, an impairment loss is recognized for the difference between the carrying amount and the fair value of the ROU asset. The fair value is determined based on various valuation techniques, including discounted cash flow analysis, market comparable transactions, and other appropriate methods.

Impairment losses are recognized in the Consolidated Statements of Operations. We determine the level at which the impairment loss is recognized based on whether we expect to retain or dispose of the ROU asset. If we expect to retain the ROU asset, the impairment loss is recognized as an adjustment to the carrying amount of the ROU asset, with a corresponding adjustment to accumulated depreciation and amortization. If we expect to dispose of the ROU asset, the impairment loss is recognized in Selling, general and administrative expense in the Consolidated Statements of Operations. During the years ended December 31, 2025 and 2024, we did not identify any indicators of impairment, and no impairment losses were recognized during the periods.

The components of lease expense are as follows in our Consolidated Statements of Operations:

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

Lease liabilities consisted of the following:

Other information related to leases is as follows:

Supplemental cash flow information related to leases where we are the lessee is as follows:

As of December 31, 2025, the maturities of our operating lease liabilities (excluding short-term leases) are as follows:

10. INCOME TAXES

During the years ended December 31, 2025 and 2024, we had taxable losses primarily due to operations and thusno current federal tax expense was recorded. We continue to record a valuation allowance against our net deferred tax assets as of December 31, 2025.

The U.S. components of loss before income taxes and reconciles the statutory federal income tax rate to the provision for income taxes:

The table below provides the updated requirements of ASU 2023-09 for 2025. See Note 13 -New Accounting Standardsfor additional details on the adoption of ASU 2023-09.

The reconciliation of taxes at the federal statutory rate to our provision for income taxes was as follows (in thousands, except percentages):

As previously disclosed for the year ended December 31, 2024, prior to the adoption of ASU 2023-09, the effective income tax rate differs from the statutory federal income tax rate as follows (in thousands):

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. When realization of the deferred tax asset is more likely than not to occur, the benefit related to the deductible temporary differences attributable to operations is recognized as a reduction of income tax expense. As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of December 31, 2025 and 2024, our ability to realize our net deferred tax asset is not more likely than not to occur and the valuation allowance reduces the net deferred tax asset tozero.

Significant components of our deferred tax assets and liabilities are as follows:

As of December 31, 2025 and 2024, we had $4.2 million and $4.2 million, respectively, of federal net operating loss (“NOL”) carryforward deferred tax assets which expire through 2038 and approximately $22.1 million and $19.2 million, respectively, of state and local NOL carryforward deferred tax assets which expire through 2045. Additionally, as of December 31, 2025 and 2024, we had approximately $152.7 million and $34.7 million, respectively, of federal NOL deferred tax assets that carryforward indefinitely. The NOL carryforwards may be limited in certain circumstances, including ownership changes.

Under the provisions of the Internal Revenue Code, the net operating loss and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. Certain tax attributes are subject to an annual limitation as a result of certain cumulative changes in ownership interest of significant shareholders which could constitute a change of ownership as defined under Internal Revenue Code Section 382. We completed a full analysis of historical ownership changes and determined that a portion of the NOLs to-date have a limitation on future deductibility. As of 12/15/25, the company had $86.0 million of federal net operating losses that were incurred prior to 2018. $81.6 million of this amount will be unable to offset future taxable income and should be considered lost and have been removed from deferred tax assets, due to estimated federal annual limited utilization amount of $0.4 million.

The following table presents a reconciliation of unrecognized tax benefits:

We will not recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2025, due to ownership change and the 382 limitation on the credit carryovers, no amounts of interest and penalties have been recognized in the Consolidated Statements of Operations.

We file income tax returns in the U.S. federal jurisdiction, various state jurisdictions and local jurisdictions. Generally, our 2022 through 2025 tax years remain open and subject to examination by federal, state and local taxing authorities. However, federal, state, and local net operating losses from 2009 through 2025 are subject to review by taxing authorities in the year utilized.

11. FAIR VALUE MEASUREMENTS

We estimate the fair value of the A&R Note using commonly accepted valuation methodologies upon acquisition and at each reporting date, with changes in fair value recognized in the consolidated statements of operations. Considerable judgment was required in interpreting market data to develop the estimates of fair value. Accordingly, our estimates are not necessarily indicative of the amounts that we, or holders of the instruments, could realize in a current market exchange. Significant assumptions used in the fair value model for convertible debt included estimates of the redemption dates, discount rates, and the market price 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 rights liability is measured at fair value upon acquisition and at each reporting date, with changes in fair value recognized in the consolidated statements of operations. The fair value of the rights liability is determined using the quoted market price of the Company’s Common Stock as of the measurement date. Because the valuation is based on unadjusted quoted prices for the Company’s Common Stock in an active market, the rights liability is classified within Level 1 of the fair value hierarchy. Changes in the fair value of the rights liability are primarily driven by fluctuations in the Company’s stock price.

In connection with the Merger on December 15, 2025, we measured the identifiable assets acquired and liabilities assumed at fair value in accordance to ASC 820-10. The fair value of property and equipment and inventory acquired were measured using the cost and market approaches and considered them to be Level 2 measurements as observable inputs from comparable sales were used. The fair value of identifiable intangible assets, including trade name, proprietary technology, and customer relationships, was determined using income-based valuation approaches that incorporate significant unobservable inputs and are therefore classified within Level 3 of the fair value hierarchy. Trade name and proprietary technology were valued using the relief-from-royalty method with the following significant assumptions used: royalty rate of 0.5%, discount rate of 30%, and remaining economic life of 5 years (proprietary technology) and indefinite life (trade name). Customer relationships were valued using the multi-period excess earnings method with the following significant assumptions used: customer attrition rate of 5%, discount rate of 25%, and remaining economic life of 25 years. The fair value of debt assumed in the Merger was estimated using scenario-based valuation approach. See discussion of assumptions used in determining the fair value of debt as of the Merger date in Note 8, Debt.

The fair values of working capital items, including cash, accounts receivable, accounts payable, and accrued expenses, approximated their carrying values at the acquisition date due to their short-term nature. See discussion of the fair value of right-of-use assets acquired and operating lease liabilities assumed in Note 9, Leases. These items are not presented in the table below.

The following table presents the estimated fair values:

The following table presents a roll-forward of the fair value of the convertible notes payable 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 December 31, 2025.

As of December 31, 2025, there have been no changes in the valuation methodologies or classification of our fair value measurements. We continue to utilize consistent approaches in determining the fair value of assets and liabilities categorized within these levels, in accordance with ASC 820.

12. STOCK-BASED COMPENSATION

Incentive Stock Plans

Motiv adopted a Stock Plan in 2010 and an Equity Incentive Plan in 2020, which provided for the grant of equity awards to its employees, outside directors and consultants, including stock options, rights to purchase restricted stock and units of Motiv common stock. Up to 38,189,962 shares of Motiv common stock may be issued pursuant to awards granted under the Stock Plan. The Stock Plan was administered by our Board of Directors and expiredten years after adoption, unless terminated earlier or extended by the Board. Options may be granted at an exercise price per share of not less than 100% of the fair value at the date of grant. If an incentive stock option was granted to a stockholder holding 10% of the Company’s outstanding capitalization, then the purchase or exercise price per share must not be less than 110% of the fair market value per share of common stock on the grant date. Options granted were exercisable over a maximum term of 10 years from the date of grant and generally vest over a period offour years. Upon exercise, we issued common stock from authorized shares.

On June 14, 2024, our 2020 Equity Incentive Plan was amended to increase the maximum number of shares of common stock that may be issued or subject to stock options issued under the Plan to a new aggregate total of 20,486,031 shares of common stock (which 18,323,996 shares of common stock of the unallocated portion of the Plan represented approximately 24.5% of the fully diluted post-closing capitalization of the Company).

As of December 15, 2025, the expiration date of all outstanding Motiv stock options were amended to be the Merger date. There have been no replacement awards issued, and this amendment was treated as a settlement for no consideration and all remaining unrecognized compensation cost was accelerated, totaling $0.4 million. There wereno Motiv stock options outstanding as of December 31, 2025.

All pre-Merger Workhorse stock-based compensation awards were settled at the Merger date, under the change in control provisions for those awards. As of the Merger date, there were no Workhorse stock-based compensation awards assumed, and there were no Workhorse stock-based compensation awards outstanding as of December 31, 2025.

Stock-Based Compensation Expense

Total stock-based compensation expense for employees and non-employees recognized in the Consolidated Statements of Operations was as follows:

Stock Options

During 2025, activity for stock options was as follows:

As of December 31, 2025, there wasno unrecognized compensation expense for unvested options.

Stock options granted to employees, outside consultants and non-employees from our Stock Plan generally had afour-year vesting period and expire inten years. The fair value of options granted was approximately $0.06 per share for each of the years ended December 31, 2025 and 2024.

The stock options were valued using the Black-Scholes option valuation model which requires the use of highly subjective assumptions to determine the fair value of stock-based awards. The assumptions used in our option-pricing model represent management’s best estimates. These estimates were complex, involve a number of variables, uncertainties and assumptions and the application of management’s judgment. The assumptions and estimates that we used in the Black-Scholes model were as follows:

Fair Value of Common Stock. The estimated fair value of the common stock underlying our stock options was determined at each grant date. All options to purchase shares of our common stock were intended to be exercisable at a price per share not less than the per-share fair value of the Company’s common stock underlying those options on the date of grant. In the absence of a public trading market for Motiv common stock pre-Merger, on each grant date, we developed an estimate of the fair value of our common stock based on the information known to us on the date of grant, upon a review of any recent events and their potential impact on the estimated fair value per share of the common stock and in part on input from an independent third-party valuation. Accordingly, the fair value of common stock used for grants was $0.06 per share for grants in 2025 and 2024, respectively.

Risk-Free Interest Rate. The risk-free interest rate assumption for options granted was based upon observed interest rates on the United States government securities appropriate for the expected term of our employee stock options.

Expected Term. The expected term represented the period that tour stock-based awards were expected to be outstanding. Because of the limitations on the sale or transfer of Motiv common stock as a privately held company pre-Merger, we did not believe our historical exercise pattern was indicative of the pattern we would experience as a publicly traded company. We consequently used the Staff Accounting Bulletin 110, or SAB 110, simplified method to calculate the expected term, which was the average of the contractual term and vesting period.

Volatility. We determined the expected volatility assumption for options granted using the historical volatility of comparable public companies' common stock.

Dividend Yield. The dividend yield assumption for options granted was based on our history and expectation of dividend payouts. We have never declared or paid any cash dividends on our common stock, and we did not anticipate paying any cash dividends in the foreseeable future, and therefore we used an expected dividend yield of zero.

13. NEW ACCOUNTING STANDARDS

Adoption of New Accounting Standards

ASC 280, Segment Reporting. We operate 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 Update ("ASU") 2023-09, Improvements to Income Tax Disclosures. On December 14, 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures ("ASU 2023-09"). ASU 2023-09 amends ASC 740, Income Taxes to expand income tax disclosures and requires that we disclose (i) the income tax rate reconciliation using both percentages and reporting currency amounts; (ii) specific categories within the income tax rate reconciliation; (iii) additional information for reconciling items that meet a quantitative threshold; (iv) the composition of state and local income taxes by jurisdiction; and (v) the amount of income taxes paid disaggregated by jurisdiction. We early adopted ASU 2023-09 for the year ended December 31, 2025 on a prospective basis. See Note 10, Income Taxes for additional information.

Accounting Standards Issued But Not Yet Adopted

ASU 2024-03, Disaggregation of Income Statement Expenses. In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, an update that improves income statement expense disclosure requirements. Under ASU 2024-03, issuers will be required to incorporate new tabular disclosures disaggregating prescribed expense categories within relevant income statement captions in the notes to their financial statements. These categories include purchases of inventory, employee compensation, depreciation and intangible asset amortization. The amendments are effective for fiscal years beginning after December 15, 2026 and should be applied prospectively. The adoption of ASU 2024-03 will require us to provide additional disclosures related to certain income statement expenses, but otherwise will not materially impact our Consolidated Financial Statements.

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.

14. STOCKHOLDERS' EQUITY

Rights

On December 15, 2025, in connection with the Merger Agreement, we issued rights to acquire 1,193,364 shares of Workhorse Common Stock (the "Rights") in exchange for the cancellation of pre-merger debt. The Rights are subject to the so-called "baby-shelf" rules under Form S-3 and as such, we expect the Rights to be converted during 2026 as allowable. See Note 11, Fair Value Measurement, for more information on the fair value of the Rights.

Pre-Merger Motiv Stock

Common Stock

Pre-Merger, Motiv had authorized 82,520,000 shares of common stock, at a par value of $0.001 per share. There were 0 and 9,328,417 shares of Motiv common stock issued and outstanding at December 31, 2025 and 2024, respectively.

Preferred Stock

Voting

The holder of each share of preferred stock was entitled to one vote for each share of common stock into which such preferred stock could then be converted and, with respect to such vote, such holder had full voting rights and powers equal to the voting rights and powers of the holders of Motiv common stock and was entitled to notice of any stockholders’ meeting in accordance with Motiv's bylaws. The holders of shares of Series A preferred stock & common stock were entitled to elect three of the Motiv directors each. In addition, one independent director was designated by mutual agreement of the other members of the Board. Motiv had a total of seven director positions pre-Merger.

Conversion

Each share of Preferred Stock was convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable shares of Motiv common stock as was determined by dividing the applicable Original Issue Price by the applicable Conversion Price in effect at the time of conversion.

The “Conversion Price” of the Series A Preferred Stock was initially equal to the Original Issue Price. The applicable Conversion Price, and the rate at which shares of Preferred Stock could be converted into shares of Motiv common stock, were subject to adjustment.

The conversion price of the convertible preferred stock was initially set at an amount equal to the issue price. The preferred stock conversion price was subject to adjustment for stock dividends, stock splits, recapitalization and upon the occurrence of certain triggering events related to anti-dilution protection rights. In the event that a future preferred stock financing had occurred at a price lower than the last preferred financing round, the conversion ratios of the existing preferred stock were changed to protect the ownership position of existing investors.

Redemption

Pre-Merger, Motiv was required to redeem its Series A preferred stock in the case of a deemed liquidation event which includes (a) a merger or consolidation in which: (i) Motiv was a constituent party, or (ii) a subsidiary of Motiv was a constituent party and Motiv issued shares of its capital stock pursuant to such merger or consolidation; except any such merger or consolidation involving Motiv or a subsidiary in which the shares of capital stock of Motiv outstanding immediately prior to such merger or consolidation continued to represent, or were converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of (1) the surviving or resulting corporation; or (2) if the surviving or resulting corporation was a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation; or (b) (i) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by Motiv or any subsidiary of Motiv of all or substantially all of the assets of Motiv and its subsidiaries taken as a whole, or (ii) the sale or disposition (whether by merger, consolidation or otherwise, and whether in a single transaction or a series of related transactions) of one or more subsidiaries of Motiv if substantially all of the assets of Motiv and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition was to a wholly owned subsidiary of Motiv. However, in such an event all classes of shareholders would be entitled to receive the same type of consideration. Consequently, Series A preferred was classified as permanent equity on our Consolidated Balance Sheet. There were no dividends declared on Series A preferred shares.

As of December 31, 2024 and 2023, Motiv had the following series of convertible preferred stock authorized and outstanding.

Series C-3 convertible preferred stock –21,410,000 shares authorized;0 and 18,060,201 shares issued and outstanding as of December 31, 2024 and 2023, respectively

Series C-2 convertible preferred stock –4,771,156 shares authorized;0 and 4,771,156 shares issued and outstanding as of December 31, 2024 and 2023, respectively

Series C-1 convertible preferred stock –2,861,739 shares authorized;0 and 2,861,739 shares issued and outstanding as of December 31, 2024 and 2023, respectively

Series B convertible preferred stock –13,000,000 shares authorized;0 and 13,000,000 shares issued and outstanding as of December 31, 2024 and 2023, respectively

Series A-2 convertible preferred stock –37,482,042 shares authorized;0 and 37,482,042 shares issued and outstanding as of December 31, 2024 and 2023, respectively

Series A-1 convertible preferred stock –9,187,014 shares authorized;0 and 9,187,014 shares issued and outstanding as of December 31, 2024 and 2023, respectively

On June 14, 2024, Motiv and certain holders of its Series A-1 and A-2 redeemable convertible preferred stock (“Series A”), Series B redeemable convertible preferred stock (“Series B”), and Series C-1, C-2, and C-3 redeemable convertible preferred stock (“Series C”) agreed to convert their securities into shares of the Motiv’s common stock, par value $0.001 per share (collectively, the “Equity Conversion”). Such conversions were accomplished pursuant to a stockholder resolution approving the Equity Conversion. Shares of Series A, Series B, and Series C preferred stock were converted based on conversion rates of 1 share of common stock (pre-split) per one share of Series A, Series B, and Series C preferred stock, respectively. All outstanding shares of Series A (46,669,056 shares), Series B (13,000,000 shares), and Series C (25,693,096 shares) preferred stock were converted and a total of 8,536,215 shares of common stock were issued in connection with the Equity Conversion.

On October 4, 2024, Motiv issued 223,214 shares of Series A Preferred Stock at a conversion price of $1.12 per share to an existing common stock holder. As of December 31, 2025 and 2024, there were 0 shares and 44,866,071 shares of Series A Preferred Stock issued and outstanding, respectively.

All pre-Merger Motiv common and preferred stock were cancelled on the Merger date as a result of the Merger transaction.

Post-Merger Workhorse Stock

Common Stock

Workhorse hasone class of Common Stock, par value $0.001 per share. Each share of Workhorse Common Stock is entitled toone vote on all matters submitted to stockholders. There were 9,699,858 shares of Workhorse Common Stock issued and outstanding at December 31, 2025.

Preferred Stock

Workhorse has authorized 75,000,000 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, qualification, limitations and restrictions thereof, applicable to the shares of preferred stock. As of December 31, 2025, there were 0 shares of Series A Preferred Stock issued and outstanding.

15. RELATED PARTIES

We have evaluated our transactions for related party involvement in accordance with applicable accounting standards and SEC regulations.

Pre-Merger Sale Leaseback

On August 15, 2025, in connection with the sale and leaseback transaction described herein (the “Sale Leaseback”), a subsidiary of Workhorse, Workhorse Motor Works Inc, entered into a Purchase and Sale Agreement (the “Purchase and Sale Agreement”) with an affiliate of the MGMH (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.

Pursuant to the Purchase and Sale Agreement, Workhorse and the Property Purchaser entered into a Lease at closing (the “Lease”), pursuant to which Workhorse agrees to lease the Property from the Property Purchaser for an initial term of 20 years. Workhorse will have the option to renew the Lease for six additional 5-year renewal terms, subject to the terms of the Lease.

After the conclusion of thesix-month abatement period, Workhorse will pay base annual rent of $2.1 million for the Property, subject to an annual increase of 3% during the initial term of the Lease and certain additional increases during any renewal term. In addition to rent, Workhorse will be responsible for all costs and expenses related to the Property, including, without limitation, all costs and expenses for maintenance, operation, repair and replacement of buildings and improvements, utility charges, insurance premiums and real estate taxes and assessments; provided, that Workhorse is not obligated to make any capital replacements or repairs during the last year of the lease term.

During the period from the Merger date to December 31, 2025, Workhorse madeno rent payments to MGMH related to the Union City lease.

Credit Facilities and Convertible Note

On December 15, 2025, the Company entered into credit arrangements with MGMH, a controlling stockholder of the Company, and therefore a related party. The arrangements consist of (i) a customer order–based credit facility with total commitments of up to $40.0 million and (ii) a revolving credit facility with total commitments of up to $10.0 million (collectively, the “Related-Party Credit Facilities”). Additional information regarding the interest rates, maturities, collateral, covenants, and other significant terms is included in Note 8 -Debt. As of December 31, 2025, the Company hadno outstanding borrowings and remaining availability of $40.0 million under the Customer Order Credit Agreement, and the Company had $10.0 million in outstanding borrowings andno remaining availability under the Cash Flow Credit Agreement. For the year ended December 31, 2025, the Company recognized $37.9 thousand of interest expense andno interest payments were made to MGMH related to the Related-Party Credit Facilities.

On August 15, 2025, the Company entered into a Convertible Note agreement (the “Convertible Note”) with MGMH in connection with the execution of the Merger. As part of the Merger, the Company assumed a convertible note issued to MGMH, a controlling stockholder of the Company, with an aggregate original principal amount of $5.0 million. Additional information regarding the interest rates, maturity date, collateral, covenants, and other significant terms is included in Note 8 -Debt. As of December 31, 2025, the estimated fair value of the Convertible Note was $5.3 million. For the year ended December 31, 2025, the Company recognized $17.0 thousand of interest expense andno interest payments were made to MGMH related to the Convertible Note.

On December 15, 2025, the parties to the Convertible Note entered into an Amended and Restated Convertible Note to make the obligations under the Convertible Note, as amended, unsecured obligations of Workhorse and each guarantor party thereto. As a result, the Convertible Note Security Agreement was terminated on the Closing Date. The Convertible Note Subsidiary Guaranty was amended and restated (the “A&R Convertible Note Subsidiary Guaranty”) to incorporate the termination of the Convertible Note Security Agreement.

The Related-Party Credit Facilities and the Convertible Note were entered into in the ordinary course of business, and the Company believes the terms are no less favorable than those that could have been obtained from unaffiliated third parties at the time the agreements were executed.

16. COMMITMENTS AND CONTINGENCIES

General Matters

We are party to various negotiations and legal proceedings arising in the normal course of business. We provide reserves for these matters when a loss is probable and reasonably estimable. We do 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 our financial position, results of operations, cash flows or liquidity.

Legal Proceedings

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 $4.0 million, including alleged past due amounts, interest, and collection costs. As of December 31, 2025, the Company has accrued $1.0 million in connection with this dispute along with the outstanding trade amounts.

On November 6, 2025, CMD Global Partners (USA), LLC ("CMD"), filed a complaint against the Company in the United States District Court for the Southern District of New York (Case No. 1:25-cv-09298). In its complaint, CMD seeks to recover success fees pursuant to a signed engagement letter for investment banking services for the Workhorse Aero divestiture transaction. The amount sought is $0.7 million plus attorney's fees and costs. The Company has accrued $0.7 million in connection with this dispute.

17. SUBSEQUENT EVENTS

We have evaluated subsequent events through March 31, 2026, the date these financial statements were issued.

We issued 250,000 and 500,000 shares of Common Stock on January 22, 2026 and March 10, 2026, respectively, to the 2024 Note Holder upon conversion of a portion of the stock Rights liability recognized in connection with the Merger. Following these issuances,443,364 shares remain issuable under the stock Rights liability.

Further, in March 2026, we borrowed $5.0 million under the Customer Order Credit Agreement. As of the filing date, there is remaining availability of $35.0 million under the Customer Order Credit Agreement.

Lastly, on March 30, 2026, we announced a purchase order for 100 fully-electric step vans from Purolator, a leading Canadian integrated freight, package and logistics solutions provider.