Workhorse Group Inc. (NASDAQ:WKHS), a manufacturer of electric vehicles with a market capitalization of $41 million, has entered into an agreement to issue $3.5 million in senior secured convertible notes to an institutional investor, the company announced today.
According to InvestingPro analysis, the company has been quickly burning through cash, with revenue declining by 25% over the last twelve months to $9.1 million. The latest transaction, part of a series of financings under a previously disclosed securities purchase agreement, is aimed at bolstering the company's capital structure.
The new note, issued on Monday, December 16, 2024, is convertible into shares of Workhorse's common stock and does not come with warrants, a right the investor waived. This note follows the March 15, 2024, agreement where Workhorse agreed to sell convertible notes and warrants in multiple tranches, with the potential for up to $139 million in principal amount of notes.
The Eighth Additional Note carries a 9% annual interest rate, payable quarterly, and matures one year after issuance. It can be converted into common stock at a price lower of $0.5983 or a calculated amount based on recent trading prices, subject to adjustments and a Beneficial Ownership Cap of 9.99%. The note is secured by the company's assets and guaranteed by its subsidiaries.
Workhorse has already sold $35,485,714 in notes and warrants to purchase up to 15,640,900 shares of common stock under this agreement. As of December 15, 2024, $5,600,000 in principal amount of notes remains outstanding. The company may issue additional notes and corresponding warrants up to $100,014,286 in principal amount under certain conditions.
The note's terms include standard covenants and event of default provisions. Workhorse must maintain a minimum liquidity level, which varies depending on whether a specific sale leaseback transaction has been completed. InvestingPro data shows the company's current ratio stands at 1.16, while total debt reached $20.84 million as of the latest quarter.
InvestingPro subscribers have access to 18 additional key insights about Workhorse's financial position. The note also grants the holder redemption rights in certain scenarios, including change of control or default events.
The issuance is part of Workhorse's shelf registration statement and was made under a prospectus supplement filed on the same day. This move is seen as part of Workhorse's broader strategy to finance its operations and growth initiatives.
InvestingPro's comprehensive analysis indicates a WEAK overall Financial Health Score of 1.41, though the stock appears undervalued based on their Fair Value model. For detailed insights and a complete financial health assessment, investors can access the full Pro Research Report, available exclusively to InvestingPro subscribers.
This information is based on a press release statement and provides an overview of the key financial details of the transaction without speculation on its potential impact.
In other recent news, Workhorse Group, an Ohio-based electric vehicle manufacturer, is facing changes and challenges. The company's independent accounting firm, Grant Thornton LLP, declined to stand for reappointment, ending its tenure as the company's auditor since 2018. Workhorse Group reported negative EBITDA of -$85.13 million in the last twelve months, with revenue declining by 25% during this period.
Despite these financial concerns, the company secured additional financing through several agreements totaling $8.6 million, and it has also obtained an additional $1.2 million through a senior secured convertible note.
Workhorse Group has been warned by the Nasdaq Stock Market about potential delisting due to its stock trading below the $1.00 threshold for 30 consecutive days. The company has until March 31, 2025, to regain compliance. TD (TSX:TD) Cowen, in its recent analysis, maintained a Hold rating on the company’s stock while increasing the price target to $1.25 from $0.25.
The company reported sales of $2.5 million and a cash reserve of $3.2 million. Despite these financial challenges, the company achieved important certifications for its 208-inch W56 step-van and reported the completion and sale of 15 W56 step vans, marking progress in product certification and significant operational milestones. These are the recent developments in Workhorse Group's journey.
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