Workhorse inks purchase agreements totaling up to $70 million

By William Gullotti

Buffalo, N.Y., Dec. 12 – Workhorse Group Inc. entered into a securities purchase agreement for up to $20 million green senior secured convertible notes and another purchase agreement for up to $50 million in shares of common stock on Tuesday, according to an 8-K filing with the Securities and Exchange Commission.

Green notes, warrants

The purchase agreement for the secured convertibles was signed with High Tail Special Situations LLC for up to $20 million of the notes that will be convertible into shares of Workhorse common stock at a price of $0.5178, as well as warrants to purchase 25,601,639 shares of the stock with an exercise price equal to 115% of the Nasdaq minimum price.

No interest will be paid on the convertibles, with the exception of the 15% fixed default interest rate.

The secured convertibles will be issued with a 12.5% discount, resulting in $17.5 million of proceeds before fees and expenses.

Holders will be able to put up to 12.5% of the notes at par on the 1st and 15th day of each month, starting Jan. 1, 2024. The notes will become putable at a premium equal to the greater of 115% of the conversion value and 105% of the outstanding principal plus accrued/unpaid default interest upon a change of control or other fundamental change. In the event of default, the put premium will be the greater of 115% of the conversion value and 115% of the outstanding principal plus accrued/unpaid default interest.

Workhorse may also force conversion if the daily volume weighted average price of Workhorse’s common stock exceeds 175% of the conversion price for 20 consecutive trading days.

Closing is expected on or before Dec. 28, and the convertibles mature Oct. 1, 2026.

The agreement includes the option to issue up to $20 million more of the secured convertibles, which may be split between two subsequent closings.

Additional issuances will include an additional warrant to purchase a number of shares of common stock equal to 50% of the principal amount of additional convertibles issued divided by the Nasdaq minimum price at the time of issue. Additional warrants would be subject to substantially the same terms as the warrants from the initial transaction, with an exercise price equal to the greater of 115% of the Nasdaq minimum price on the date of the transaction and the Nasdaq minimum price on the date of the agreement.

Any such additional notes issued will be convertible into common stock at a conversion price equal to the greater of 115% of the Nasdaq minimum price and the minimum amount necessary to exempt such additional issuances from requiring stockholder approval.

The agreement requires that Workhorse maintain a minimum liquidity at the lesser of $10 million and the outstanding principal of convertibles in a deposit account with the collateral agent.

The company is further required to reserve a number of unissued shares to be issued upon total conversion and warrant exercise, as well as maintain certain levels of cash and cash equivalents.

In addition, if Workhorse consummates a sale and leaseback transaction for its Union City plant, the investor may, at its option, require the company to use up to half of the proceeds received to redeem outstanding convertibles.

Stock purchase agreement

The stock purchase agreement, also entered Dec. 12, is with Lincoln Park Capital Fund, LLC. The agreement permits the sale of up to $50 million of common stock over a period of up to 24 months.

The agreement grants Workhorse the right, but not the obligation, to require the investor purchase up to 1 million shares of common stock on any business day that the per-share price is above a calculated purchase floor.

The required purchase amount will step up to 1.25 million shares if the closing price of the common stock is greater than or equal to $0.40 per share and to 1.5 million if the price is greater than or equal to $0.50.

The agreement also includes provisions for accelerated and additional accelerated purchase requirements, as well as customary caps and adjustments.

Workhorse may terminate the agreement at its sole discretion, without any cost or penalty.

As a fee for its entry into the agreement, Lincoln Park will be issued 3,775,105 shares.

The Loveland, Ohio, company makes and sells medium-duty trucks with powertrain components under the Workhorse Chassis brand.

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