For the Years Ended December 31,
2020 2019
Net sales (Note 4) $ 1,392,519 $ 376,562
Cost of sales 13,067,108 5,844,891
Gross loss (11,674,589) (5,468,329)
Operating expenses
Selling, general and administrative 20,157,658 10,199,534
Research and development 9,148,931 8,199,074
Total operating expenses 29,306,589 18,398,608
Other income (Note 3, Note 14) 323,111,944 15,849,800
Income (loss) from operations 282,130,766 (8,017,137)
Interest expense, net 190,520,337 29,145,690
Income (loss) before provision for income taxes 91,610,429 (37,162,827)
Provision for income taxes (Note 8) 21,833,930 0
Net income (loss) $ 69,776,499 $ (37,162,827)
Net income (loss) attributable to common stockholders per share - basic $ 0.75 $ (0.58)
Net income (loss) attributable to common stockholders per share - diluted $ 0.70 $ (0.58)
Weighted average number of common shares outstanding - basic 92,871,936 64,314,756
Weighted average number of common shares outstanding - diluted 99,949,868 64,314,756

See accompanying notes to the consolidated financial statements.

F-6

Workhorse Group Inc.

Consolidated Statements of Stockholders’ Equity ~~(Deficit)~~

~~For the Years Ended December 31, 2020 and 2019~~


	Common Stock			Series A Preferred Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Number of Shares	Amount		Number of Shares	Amount
Balance as of December 31, 2021	151,915,455	$	151,916	—	$	—	$	686,318,201	$	(510,374,844)	$	(1,402,500)	$	174,692,773
Issuance of common stock under ATM Agreement	4,889,986	4,890		—	—		12,879,353		—		—		12,884,243
Issuance of common stock for service providers	244,035	244		—	—		599,738		—		—		599,982
Issuance of common stock for equity incentive awards*	722,213	721		—	—		(560,358)		—		—		(559,637)
Conversion of convertible notes	7,833,666	7,834		—	—		25,373,243		—		—		25,381,077
Stock-based compensation	—	—		—	—		11,460,211		—		—		11,460,211
Net loss for the year ended December 31, 2022	—	—		—	—		—		(117,274,218)		—		(117,274,218)
Other comprehensive income	—	—		—	—		—		—		1,402,500		1,402,500
Balance as of December 31, 2022	165,605,355	165,605		—	—		736,070,388		(627,649,062)		—		108,586,931

Issuance of common stock under ATM Agreement	89,256,062	89,256		—	—		63,553,863		—		—		63,643,119
Settlement of securities litigation	25,380,711	25,381		—	—		19,974,619		—		—		20,000,000
Issuance of common stock under ELOC Purchase Agreement	3,775,105	3,775		—	—		1,470,781		—		—		1,474,556
Issuance of common stock for service providers	344,997	345		—	—		399,655		—		—		400,000
Issuance of common stock for equity incentive awards*	1,618,613	1,619		—	—		(497,000)		—		—		(495,381)

Stock-based compensation	—	—		—	—		13,422,135		—		—		13,422,135
Net loss for the year ended December 31, 2023	—	—		—	—		—		(123,919,189)		—		(123,919,189)


Balance as of December 31, 2023	285,980,843	$	285,981	—	$	—	$	834,394,441	$	(751,568,251)	$	—	$	83,112,171

Common Stock Series A
Preferred Stock Additional
Paid-in
Capital Accumulated
Deficit Total
Stockholders’
Equity
(Deficit)
Number
of Shares Amount Number
of Shares Amount
Balance as of December 31, 2018 58,270,934 $ 58,271 0 $ 0 $ 126,076,782 $ (141,557,496) $ (15,422,443)
Issuance of common stock 7,183,488 7,184 — — 5,921,051 — 5,928,235
Stock options and warrants exercised, and vesting of restricted shares 630,141 630 — — 34,676 — 35,306
Reclassification of warrants to equity — — — — 857,072 — 857,072
Deemed dividend 116,496 116 — — 86,091 (86,207) 0
Value of warrants issued with Series B Preferred Stock 0 0 — — 6,709,961 — 6,709,961
Value of warrants issued with convertible notes — — — — 430,000 — 430,000
Common stock issued for preferred stock dividends 718,755 719 — — 1,166,052 — 1,166,771
Conversion of convertible notes 185,186 185 — — 564,632 — 564,817
Stock-based compensation — — — — 1,979,998 — 1,979,998
Net loss for the year ended December 31, 2019 — — — — — (37,162,827) (37,162,827)
Balance as of December 31, 2019 67,105,000 67,105 0 0 143,826,315 (178,806,530) (34,913,110)
Stock options and warrants exercised, and vesting of restricted shares 33,932,827 33,933 — — 82,059,699 — 82,093,632
Common stock issued for preferred stock dividends 920,901 922 — — 1,490,938 — 1,491,860
Conversion of convertible notes 19,605,013 19,605 — — 270,775,079 — 270,794,684
Common stock issued for interest on convertible notes 358,791 358 — — 1,939,606 — 1,939,964
Stock-based compensation — — — — 4,020,805 — 4,020,805
Net income for the year ended December 31, 2020 — — — — — 69,776,499 69,776,499
Balance as of December 31, 2020 121,922,532 $ 121,923 0 $ 0 $ 504,112,442 $ (109,030,031) $ 395,204,334
* Net of tax payments related to shares withheld for option exercises and vested stock.

See accompanying notes to the consolidated financial statements.

F-7

Workhorse Group Inc.

Consolidated Statements of Cash Flows

For the Years Ended December 31,
2020 2019
Cash flows from operating activities:
Net income (loss) $ 69,776,499 $ (37,162,827)
Adjustments to reconcile net income (loss) to net cash used in operations:
Depreciation 809,645 388,401
Tooling expense 350,500 0
Amortization of discount and debt issuance costs on convertible notes and long-term debt 6,550,212 3,518,356
Amortization of discount and loss on redemption of mandatorily redeemable Series B preferred stock 5,857,092 852,869
Change in fair value of convertible notes and loss on conversion to common stock 160,749,118 1,064,817
Change in fair value of warrant liability 12,176,690 15,369,253
Change in fair value of investment in LMC and fair value of anti-dilution shares (318,361,944) 0
Dividends for mandatorily redeemable Series B preferred stock paid in common stock 1,491,860 1,166,771
Interest on convertible notes paid in common stock 1,939,964 0
Stock-based compensation 4,020,805 1,979,998
Write down of inventory 0 694,448
Gain on divestiture 0 (3,655,000)
Investment received from license of intellectual property 0 (12,194,800)
Loss on sale of fixed assets 0 19,367
Effects of changes in operating assets and liabilities:
Accounts and lease receivable (961,966) 76,163
Inventory (13,668,866) 41,022
Prepaid expenses (27,947,128) (4,367,928)
Accounts payable and accrued liabilities 5,499,464 (3,605,682)
Warranty liability (601,864) (1,056,905)
Other long-term liabilities 207,040 0
Deferred tax liability 21,833,930 0
Net cash used in operating activities (70,278,949) (36,871,677)
Cash flows from investing activities:
Capital expenditures (5,728,130) (2,005,498)
Net proceeds received on divestiture 0 3,655,000
Proceeds from sale of fixed assets 0 5,000
Net cash (used in) provided by investing activities (5,728,130) 1,654,502
Cash flows from financing activities:
Proceeds from notes payable 0 5,854,140
Payments on notes payable 0 (5,854,140)
(Redemption of), proceeds from issuance of mandatorily redeemable Series B preferred stock (25,000,000) 25,000,000
Proceeds from issuance of convertible notes 262,374,788 38,950,000
Repayment of Duke financing obligation 0 (1,340,700)
Proceeds from PPP Term Note 1,411,000 0
Payments on long-term debt 0 (10,000,000)
Proceeds from issuance of common stock 0 5,928,235
Proceeds from exercise of warrants and options 53,581,942 35,306
Net cash provided by financing activities 292,367,730 58,572,841
Change in cash, cash equivalents and restricted cash 216,360,651 23,355,666
Cash, cash equivalents and restricted cash, beginning of the year 24,868,416 1,512,750
Cash, cash equivalents and restricted cash, end of the year $ 241,229,067 $ 24,868,416


	For the Years Ended December 31,
	2023		2022
Cash flows from operating activities:
Net loss	$	(123,919,189)	$	(117,274,218)
Adjustments to reconcile net loss to net cash used in operations:
Depreciation	4,063,175		1,945,212


Change in fair value of convertible notes and warranty liability, and loss on conversion to common stock	8,285,425		1,769,857


Deferred revenue	(180,000)		500,000

Gain on sale of property, plant & equipment	—		379,406

Stock-based compensation	13,422,135		11,460,211
Impairment of investment in Tropos	10,000,000		—
Reserve of inventory and prepaid purchases	8,798,690		17,716,995



Non-cash lease expense	1,506,310		1,092,473

Other non-cash items	(1,934,310)		599,982
Effects of changes in operating assets and liabilities:
Accounts receivable	(349,512)		(16,929,567)
Inventory	(39,294,091)		(16,629,172)
Prepaid expenses and other current assets	(890,626)		(9,665,250)
Other assets	—		(84,401)
Accounts payable and accrued liabilities	(2,227,029)		33,676,050
Warranty liability	(305,027)		(2,376,242)

Net cash used in operating activities	(123,024,049)		(93,818,664)
Cash flows from investing activities:
Capital expenditures	(18,687,451)		(17,496,795)
Investment in Tropos	—		(5,000,000)
Proceeds from sale of property, plant & equipment	—		2,477,276

Net cash used in investing activities	(18,687,451)		(20,019,519)
Cash flows from financing activities:
Proceeds from convertible notes	17,500,000		—


Proceeds from issuance of common stock	62,155,939		12,884,243
Exercise of warrants and options and restricted share award activity	(495,381)		(559,637)
Payments on finance lease	(879,444)		(857,516)
Net cash provided by financing activities	78,281,114		11,467,090
Change in cash, cash equivalents and restricted cash	(63,430,386)		(102,371,093)
Cash, cash equivalents and restricted cash, beginning of the year	99,276,301		201,647,394
Cash, cash equivalents and restricted cash, end of the year	$	35,845,915	$	99,276,301

See accompanying notes to the consolidated financial statements.

F-8

During the year ended December 31, 2020, cash paid for interest was approximately $12.7 million, which consisted of $7.6 million of direct costs incurred in connection with the issuance of our convertible notes, $4.7 million loss on redemption of our Series B Preferred Stock, and $0.4 million of financing fees.

~~During the year ended December 31, 2019, cash paid for interest was approximately $7.2 million, which consisted primarily of contractual interest on long-term debt.~~

~~The following table provides a reconciliation of Cash and Cash Equivalents, and Restricted Cash Held in Escrow to the amounts reported within the Consolidated Balance Sheets:~~

December 31
2020 2019
Cash and cash equivalents $ 46,817,825 $ 23,868,416
Restricted cash held in escrow 194,411,242 1,000,000
Total cash, cash equivalents and restricted cash held in escrow $ 241,229,067 $ 24,868,416

~~Supplemental disclosure of non-cash activities:~~

During the year ended December 31, 2020, the Company issued approximately 19.6 million shares of common stock in connection with the conversion of the Convertible Notes, which were valued at approximately $270.8 million. The Company recognized the conversion as an adjustment to Additional Paid-In Capital, with the offset as a reduction to the fair value of the Convertible Notes.

During the year ended December 31, 2019, the Company issued warrants to purchase common stock in connection with the issuance of our Series B Preferred Stock, which were valued at approximately $6.7 million. The Company recorded Additional Paid-In Capital, with the offset as a discount on the Series B Preferred Stock.

~~See accompanying notes to the consolidated financial statements.~~

~~F-9~~

Workhorse Group Inc.

Notes to Consolidated Financial Statements

1. OVERVIEW AND SUMMARY OF ~~BUSINESS AND~~ SIGNIFICANT ACCOUNTING PRINCIPLES

~~Nature of operations and basis of presentation~~Overview

Workhorse Group Inc. (“Workhorse”, the “Company”, “we”, “us”, or “our”) is aan American technology company ~~focused on providing sustainable~~with a vision to pioneer the transition to zero-emission commercial vehicles. We design, develop, manufacture and ~~cost-effective solutions to the commercial transportation sector. As an American manufacturer, we create all-electric delivery trucks~~sell fully electric ground and ~~drone systems, including the technology that optimizes the way these mechanisms operate. We are last-mile delivery’s first purpose-built~~air-based electric ~~mobility solution and we are currently focused on our core competency~~vehicles.

Basis of ~~bringing the C-Series electric delivery trucks to market and fulfilling our existing backlog of orders. The consolidated financial statements are prepared in conformity with U.S. GAAP.~~Presentation

~~Principles of consolidation~~

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 ~~Company~~United States Securities and ~~its wholly-owned subsidiaries. All significant intercompany balances~~Exchange Commission (the “SEC”) and, ~~transactions~~in the Company's opinion, reflect all adjustments, including normal recurring items that are necessary.

Going Concern and Liquidity

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

We had sales of $13.1 million, incurred a net loss of $123.9 million and used $123.0 million of cash in operating activities during the year ended December 31, 2023. As of December 31, 2023, the Company had total working capital of $40.5 million, including $25.8 million of unrestricted cash and cash equivalents, and an accumulated deficit of $751.6 million.

As a result of our recurring losses from operations, accumulated deficit, projected capital needs, and delays in bringing our vehicles to market and lower than expected market demand, substantial doubt exists regarding our ability to continue as a going concern within one year after the issuance date of the accompanying 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 the Company’s liquidity and working capital, which includes, but is not limited to:

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

•Reducing expenses and limiting non-contracted capital expenditures.

•Raising capital to fund operations through the issuance of debt or equity securities, including through our At-the-Market Sales Agreement (“ATM Agreement”), the sale of assets, or other strategic transactions.

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 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.

F-9

To the extent revenues from operations are insufficient to meet our liquidity requirements, our ability to continue as a going concern will be dependent on effectively raising capital through private or public placement of our equity securities, including the continued use of the ATM Agreement (as further described below), for which there can be no assurance we will be successful in such efforts. We will also rely on debt financing or other sources of capital funding such as through the sale of assets to obtain sufficient financial resources to fund our operating activities. If we are unable to maintain sufficient financial resources, our business, financial condition and results of operations, as well as our ability to continue to develop, produce and market our new vehicle programs and satisfy our obligations as they become due, will be materially and adversely affected. This could affect future vehicle program production and sales. Failure to obtain additional financing will have a material, adverse impact on our business operations. There can be no assurance that we will be able to obtain the financing needed to achieve our goals on acceptable terms or at all. Additionally, any equity or equity linked financings would likely have a dilutive effect on the holdings of our existing stockholders. The Company’s current level of cash and cash equivalents are not sufficient to execute our business plan. For the foreseeable future, we will incur significant operating expenses, capital expenditures and working capital funding that will deplete our cash on hand. These conditions raise substantial doubt regarding the Company’s 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.

Our ability to obtain additional financing is extremely limited under current market conditions including the significant amount of capital required, the Nasdaq Listing Requirements, the market price of our stock and potential dilution from the issuance of any additional securities. If we are unable to identify other sources of funding, we may need to further adjust our operations 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.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures in the accompanying notes. The estimates used for, but not limited to, sales return reserves, income taxes, the collectability of accounts receivable, inventory valuation, warranties, leases, fair value of long-lived assets and fair value of financial instruments.

Reclassifications

Certain ~~reclassifications were made to the~~ prior ~~year consolidated financial statements~~period balances have been reclassified to conform to the current ~~year presentation. These reclassifications had no effect on previously reported results of operations or stockholders’ equity.~~period presentation in the consolidated financial statements and the accompanying notes.

Cash and Cash Equivalents

Cash and cash equivalents

~~Cash includes cash equivalents which~~ are ~~highly liquid~~defined as short-term, highly-liquid investments ~~that are readily convertible to cash. A cash equivalent is a highly liquid investment that at the time of acquisition has a maturity~~with original maturities of three months or less.

Restricted ~~cash~~Cash

~~We maintain certain~~Cash and cash ~~balances~~equivalents subject to contractual restrictions and not readily available are classified as restricted ~~as to withdrawal or use.~~cash. Our restricted cash is comprised primarily of cash ~~received through financing transactions that have not been released for use by us and~~held to service certain payments under secured debt facilities. In addition, restricted cash includes cash held as collateral for ~~certain payments.~~real estate leases. We record restricted cash in the ~~Consolidated Balance Sheets~~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 statements of cash flows, was as follows:


	December 31,
	2023		2022
Cash and cash equivalents	$	25,845,915	$	99,276,301
Restricted cash	10,000,000		—
Total as presented in the consolidated statements of cash flows	$	35,845,915	$	99,276,301

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 collectability of receivables each reporting period and record an allowance for credit losses to

F-10

present the net amount expected to be collected on our receivables. Additions to the allowance are charged to bad debt expense reported in selling, general and administrative expense.

Concentration of Risk

Credit Risk

Financial instruments

~~The carrying amounts~~ that potentially subject us to a concentration of ~~financial instruments including~~credit risk consist of cash and cash equivalents, restricted cash, ~~inventory,~~ and accounts ~~payable approximate fair value because~~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, 2023, no entity represented 10% or more of our total receivables balance. As of December 31, 2022, one entity represented 10% or more of our total receivables balance.

Supply Risk

We are dependent on our suppliers, including single source suppliers, and the ~~relatively short maturity~~inability of these ~~instruments.~~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.

~~Accounts receivable~~Inventories

Accounts receivable consists of collectible amounts for products and services rendered. The Company carries its accounts receivable at invoice amount less an allowance for credit losses. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for credit losses based on a history of past write-offs, collections, and current and future credit conditions.

~~Inventory, net~~

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

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~~Plant and ~~equipment, net~~

Equipment, Net

Property, plant and equipment, net, ~~is stated~~including leasehold improvements, are recognized at cost less accumulated depreciation. ~~Major renewals and improvements are capitalized while replacements, maintenance and repairs, which do not improve or extend~~Depreciation is generally computed using the straight-line method over the estimated useful lives of the respective assets, ~~are expensed~~ as ~~incurred. When property, plant and equipment is retired or otherwise disposed of, a gain or loss is realized for the~~

~~F-10~~

~~difference between the net book value of the asset and the proceeds realized thereon. Depreciation is calculated using the straight-line method, based upon the following estimated useful lives:~~follows:


Buildings and improvements			15 - 39 years
Land improvements			15 years
Equipment and vehicles			3 - 67 years
Tooling			5 years
Computer equipment and software			3 - 5 years

~~Impairment~~Leasehold improvements are depreciated on a straight-line basis over the shorter of ~~long-lived assets~~their estimated useful lives or the term of the related leases.

~~Long-lived~~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.

F-11

Impairment of Long-Lived Assets

We review long-lived assets, such as property, plant, and equipment, ~~are reviewed~~ for potential impairment whenever events or changes in circumstances indicate ~~that~~ the carrying amount of an asset or asset group may not be fully recoverable. ~~Recoverability~~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 ~~assets to~~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 ~~held and~~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 ~~measured by~~ a ~~comparison~~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 ~~carrying amount of an asset or asset group to estimated~~ undiscounted ~~future~~ cash flows ~~expected to be generated by~~at the lowest level for which identifiable cash flows exist against the carrying value of the asset ~~or asset~~ group. IfImpairment exists when the carrying ~~amount~~value of ~~an asset or~~the asset group exceeds ~~its~~the estimated future undiscounted ~~future~~ cash flows generated by those assets. The Company records an impairment charge ~~is recognized by~~for the ~~amount by which~~difference between the carrying ~~amount~~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 2023, we identified triggering events related to certain asset groups. In each situation in which we experienced a triggering event during the year, we tested our long-lived assets for impairment using our internal economic and business projections, and determined that the carrying values of the long-lived assets were recoverable. If, in future quarters, our economic or business projections were to change as a result of an update to our plans, a deterioration of the economic or business environment, a significant adverse change in the extent or manner in which a long-lived asset is being used, or an expectation that a long-lived asset group ~~exceeds~~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. For the years ended December 31, 2023 and 2022, we have recognized no impairments 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 of three to five 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, 2023 and 2022, we have recognized no impairments of capitalized software costs.

Investment

As permitted under ASC 321, Equity Securities, werecorded our investment in Tropos, an equity investment without a readily determinable fair value, at cost minus impairment. We assessed our investment for impairment each reporting period to determine if the fair value of the ~~asset or asset group.~~

~~Valuation of~~ investment declined below its cost basis and if the impairment was other-than-temporary.

~~In October~~For the years ended December 31, 2023 and 2022, we have recognized impairment losses of ~~2020, we began measuring our investment in Lordstown Motor Corp. (“LMC”) at fair value as permitted under Accounting Standards Codification (“ASC”) 820,~~ ~~Fair Value Measurement. On October 26, 2020, LMC shares of Class A Common Stock began trading on~~$10.0 million and zero, respectively. For additional information regarding the Nasdaq Global Select market under the ticker symbol “RIDE.” Therefore, the carrying value of our investment is equal to the quote market price of LMC's common stock. If the price of LMC's common stock decreases, we would record a decrease in the value of our investment and ~~a charge~~related impairment, see to ~~earnings. We have classified the LMC investment as non-current within the accompanying Consolidated Balance Sheets due to our intention to hold this investment for purposes of continued affiliation~~Note 5, Contract Manufacturing Services and ~~business advantage.~~

~~We previously elected the measurement alternative allowed under generally accepted accounting principles (“GAAP”) for our investment~~Investment in LMC, which, prior to October 2020, did not have a readily determinable fair value. Under the measurement alternative, we measured this investment at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions in an identical or similar investment in LMC.

~~Accrued Liabilities~~

~~Accrued liabilities consist of the following:~~

Tropos
.

December 31,
2020 2019
Accrued payroll and taxes $ 2,537,353 $ 954,225
Loan interest payable 1,711,111 112,750
Customer allowance accrual 1,412,500 1,412,500
Other 334,338 928,709
Total accrued liabilities $ 5,995,302 $ 3,408,184

Warranty Liability

We generally ~~offer~~provide a manufacturer's warranty ~~coverage~~on all new vehicles we sell. We record a warranty liability for the products sold by us, which includes our ~~products. We accrue warranty related~~best estimate of the projected costs to repair or replace items under ~~standard warranty terms~~warranties and ~~for certain claims outside the contractual obligation period that we choose to pay as accommodations to our customers.~~

~~Provisions for estimated assurance warranties are recorded at the time of sale and are periodically adjusted to reflect actual experience.~~recalls if identified. The amount of warranty liability accrued reflects management’s best estimate of the ~~expected~~nature, frequency, and costs of future ~~cost of honoring Company obligations under the warranty plans.~~claims. Historically, the cost of fulfilling the ~~Company’s~~ warranty obligations has principally involved replacement parts, towing and transportation costs, labor and sometimes travel for any field retrofit campaigns. ~~The Company’s~~Our estimates are based on historical experience, the extent of pre-production testing, the number of

~~F-11~~

units involved and the extent of features/components included in product models. ~~The Company reviews actual warranty claims experience to determine if there are systemic defects that would require a field campaign.~~

F-12

Although we believe ~~that~~ 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:

~~Activity for the Company's warranty accrual is as follows:~~


		December 31,
		2020		2019
	December 31,						December 31,
	2023					2023		2022
Balance, beginning of year	Balance, beginning of year	$	6,001,864	$	7,058,769
Accrual for warranty (1)	Accrual for warranty (1)	2,115,762		92,191
Warranty costs incurred	Warranty costs incurred	(2,717,626)		(1,149,096)
Balance, end of year	Balance, end of year	$	5,400,000	$	6,001,864

(1)The ~~increase~~decrease to the warranty liability accrual in ~~2020 primarily~~2022 primary relates to a ~~change in estimate in the amount~~decreased volume of ~~labor required~~vehicles covered under warranty as well as a lower liability per vehicle as compared to ~~maintain our current warranty program with our 2016 and 2017 E-Series trucks. The expense includes estimated costs for labor and transportation and excludes any contribution from vendors.~~2021.

Fair ~~value option~~Value Measurements

~~As permitted under~~The Company follows the accounting guidance in ASC ~~825,~~ ~~Financial Instruments, the Company has elected the~~Topic 820 for its fair value ~~option to account for its convertibles notes. In accordance with ASC 825, the Company records its convertible notes~~measurements of financial assets and liabilities measured at fair value ~~with changes in~~on a recurring basis. A three-level valuation hierarchy, based upon observable and unobservable inputs, is used for fair value ~~recorded in Interest Expense in~~measurements. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions based on the ~~Consolidated Statement~~best evidence available. These two types of ~~Operations. As a result of applying~~inputs create the following fair value ~~option, direct costs~~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 ~~fees related to the convertible notes were recognized in earnings as incurred~~model-derived valuations whose significant inputs are observable; and ~~were not deferred.~~

~~Common stock~~

~~On May~~Level 3 ~~2019, the Company filed an amendment to its Articles of Incorporation to increase the authorized number of shares of common stock from 100,000,000 to 250,000,000.~~– Instruments whose significant inputs are unobservable.

Income ~~taxes~~Taxes

~~We file a consolidated U.S. federal income tax return and separate state and local income tax returns.~~ We account for income taxes under ~~the asset and liability method. Deferred~~a method that requires deferred income tax assets and liabilities ~~are~~to be recognized using enacted tax rates for the ~~future tax consequences attributable to~~effect of temporary differences between the ~~financial statement carrying amounts~~book and tax bases of ~~existing~~recorded assets and ~~liabilities and their respective tax bases and tax benefit carryforwards. Deferred~~liabilities. Authoritative guidance also requires deferred income tax assets, which include state tax credit carryforwards, operating loss carryforwards and ~~liabilities at the end of each period are determined using enacted tax rates. A~~deductible temporary differences, be reduced by a valuation allowance ~~is established or maintained when, based on currently available information,~~if it is more likely than not that some portion or all ~~or a portion~~ of athe deferred income tax ~~asset~~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 ~~claimed or expected to be claimed on a tax return~~ only if it is more likely than not that the tax position will be sustained on examination by the taxing ~~authorities,~~authorities. The determination is based on the technical merits of the ~~position. The~~position and presumes that each uncertain tax ~~benefits recognized~~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 ~~Consolidated Financial Statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement.~~historical income tax provisions and accruals.

~~Research and development costs~~

The Company expenses research and development costs as they are incurred. Research and development costs consist primarily of personnel costs for engineering and research, prototyping costs, and contract and professional services.

~~Basic and diluted earnings (loss) per share~~

Basic earnings (loss) per share is computed by dividing net earnings (loss) available to common stockholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted earnings per share are calculated using the treasury stock method, on the basis of the weighted average number of shares outstanding plus the dilutive effect, if any, of stock options, unvested restricted stock and warrants. The if converted method is used for determining the impact of the convertible notes.

~~F-12~~

Revenue Recognition

The following table ~~shows the computation of basic and diluted earnings per share:~~

Years Ended December 31,
2020 2019
Net income (loss) $ 69,776,499 $ (37,162,827)
Deemed dividends 0 86,207
Net income (loss) attributable to common stockholders $ 69,776,499 $ (37,249,034)
Basic weighted average shares outstanding 92,871,936 64,314,756
Dilutive effect of options and warrants 1,410,605 0
Dilutive effect of convertible notes 5,667,327 0
Diluted weighted average shares outstanding 99,949,868 64,314,756
Anti-dilutive options and warrants excluded from diluted average shares outstanding 1,041,531 36,021,502
disaggregates our revenue by major source:

Approximately 13.3 million shares of common stock representing the conversion of the High Trail Convertible Note (as defined in Note 6) were excluded from basic and diluted weighted average shares outstanding in the table above for the year ended December 31, 2019. As the High Trail Convertible Note was fully converted during the year, the number of shares issued upon conversion is included in the basic weighted average shares outstanding for the year ended December 31, 2020.


	Years Ended December 31,
	2023		2022
Vehicles	$	11,327,702	$	4,385,975
Services, parts and accessories	1,767,050		637,097
Total revenues	$	13,094,752	$	5,023,072

~~Stock-based compensation~~

The Company recognizes in its Consolidated Statements of Operations the grant-date fair value of share-based awards issued to employees and non-employees over the awards' vesting period which equals the service period. Forfeitures are recognized as they occur. The fair value of restricted stock awards is the price of our common stock on the date of the award.

The fair value for stock options is estimated on the grant date using a Black-Scholes valuation model that uses the assumptions of expected volatility, expected term, and the expected risk-free rate of return. The expected volatility was estimated by management as 50% based on results from other public companies in our industry. The expected term of the awards granted was assumed to be the contract life of the option as determined in the specific arrangement. The risk-free rate of return was based on market yields in effect on the date of each grant for United States Treasury debt securities with a maturity equal to the expected term of the award.

~~Use of estimates~~

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses for the periods presented. Significant estimates and assumptions are used for, but are not limited to warranty liability, warrant liability, fair value of the convertible notes and litigation-related accruals. Actual results could differ from our estimates.

~~Impact of COVID-19 Pandemic~~

In December 2019, a novel coronavirus disease (“COVID-19”) was reported. On January 30, 2020, the World Health Organization (“WHO”) declared COVID-19 a Public Health Emergency of International Concern. On February 28, 2020, the WHO raised its assessment of the COVID-19 threat from high to very high at a global level due to the continued increase in the number of cases and affected countries, and on March 11, 2020, the WHO characterized COVID-19 as a pandemic.

As of December 31, 2020, our locations and primary suppliers continue to operate. However, during the fourth quarter of 2020, the Company experienced an outbreak of COVID-19 cases amongst our employees. Approximately 40% of our production employees tested positive for COVID-19. Additionally, several of our suppliers experienced capacity constraints due to the pandemic, which has limited their shipment volumes. As a result, we experienced a significant reduction to our planned production volume in the fourth quarter of 2020. See Risk Factors for further discussion of the possible impact of the COVID-19 pandemic on our business.

F-13

Vehicles

2. ~~INVENTORY, NET~~

~~Inventory, net consists of the following:~~

December 31,
2020 2019
Raw materials $ 16,759,232 $ 3,741,097
Work in process 422,176 422,176
Finished goods 277,419 0
17,458,827 4,163,273
Less: inventory reserve (1,991,815) (2,365,127)
Inventory, net $ 15,467,012 $ 1,798,146

3. ~~INVESTMENT IN LMC~~

The Company has an approximate 10 percent ownership interest in Lordstown Motors Corp. with a fair value of $330.6 million and $12.2 million as of December 31, 2020 and December 31, 2019, respectively.

~~The following table sets forth a reconciliation of the Investment in LMC:~~

December 31,
2020 2019
Balance, beginning of year $ 12,194,800 $ 0
Initial fair value of ownership interest (1)
0 12,194,800
Change in fair value of investment (2)
317,497,044 0
Fair value of anti-dilution shares (3)
864,900 0
Balance, end of year $ 330,556,744 $ 12,194,800

~~(1)~~ ~~Represents the Company's ownership interest in the common stock of LMC obtained pursuant to the LMC Transaction (as described below). The initial fair value of the LMC ownership interest received~~Revenue is ~~recorded in Other Income on the Consolidated Statements of Operations for the year ended December 31, 2019.~~

~~(2)~~ The Company obtained approximately 16.5 million shares of Class A Common Stock in connection with the LMC Merger (as described below), which were valued at $20.06 per share as of December 31, 2020. The change in fair value of the investment is recorded in Other Income on the Consolidated Statements of Operations for the year ended December 31, 2020.

~~(3)~~ During the three months ended March 31, 2020, the Company received additional shares as part of its anti-dilution feature with LMC, which were valued at approximately $0.9 million. The change in fair value of the investment related to the anti-dilution shares is recorded in Other Income on the Consolidated Statements of Operations for the year ended December 31, 2020.

~~LMC Merger~~

On August 1, 2020, LMC entered into an Agreement and Plan of Merger (the “Merger Agreement”) with DiamondPeak Holdings Corp., in which LMC agreed to merge with and into a subsidiary of DiamondPeak (the “LMC Merger”). The stockholders of LMC in the aggregate received 58% of the issued and outstanding shares of Class A Common Stock of DiamondPeak as of the closing of the LMC Merger. Further, on August 1, 2020, DiamondPeak entered into subscription agreements with certain investors in which DiamondPeak agreed to issue and sell an aggregate of 50.0 million shares of Class A Common Stock for $10.00 per share.

In connection with the LMC Merger, the Company and LMC entered into an Agreement on August 1, 2020, which confirmed that the Company will own 9.99% of DiamondPeak and no longer have anti-dilution rights or similar protections following the

~~F-14~~

closing of the merger. The Agreement also defined the Royalty Advance as approximately $4.8 million, which is recorded in Other Income in the Consolidated Statements of Operations for the year ended December 31, 2020. Further, DiamondPeak has agreed to register the Company’s shares of Class A Common Stock held in DiamondPeak. The Company has agreed, subject to certain exceptions, to not sell any of its shares of Class A Common Stock for a period of six months ending April 23, 2021, following the closing of the LMC Merger.

On October 23, 2020, DiamondPeak announced the completion of its merger with LMC and on October 26, 2020, the LMC shares of Class A Common Stock began trading on the Nasdaq Global Select market under the ticker symbol “RIDE.” Following the merger, the entity now operates under the name Lordstown Motors Corp.

~~LMC Transaction~~

On November 7, 2019, the Company entered into a transaction with LMC (the “LMC Transaction”). LMC will endeavor to, among other things, raise sufficient third-party capital for the acquisition, retrofitting, and restart of the Lordstown Assembly Complex, and the ongoing operating costs, which amounts are expected to be significant (the “Capital Raise”). In connection with the LMC Transaction, the Company granted LMC a perpetual and worldwide license to certain intellectual property relating to the Company’s W-15 electric pickup truck platform and its related technology (the “Licensed Intellectual Property”) for consideration as described below:

•~~A 10 percent ownership interest in the common stock of LMC in exchange for the Company’s~~recognized when obligations under the ~~License Agreement. The LMC common stock received provided the Company~~terms of a contract with ~~anti-dilution rights for two years.~~

•~~NaN percent~~our customer are satisfied; generally this occurs when we transfer control of ~~the aggregate debt and equity commitments funded to LMC upon completion of the Capital Raise (the “Royalty Advance”). Any amount paid to the Company from the Capital Raise is non-refundable.~~

•~~A 1 percent royalty on the gross sales price of the first 200,000 vehicles sold, to the extent that the aggregate amount of such royalty fees exceeds the amount paid as the Royalty Advance.~~

•Upon completion of the Capital Raise, the Company intends to transfer approximately 6,000 existing vehicle orders to LMC. LMC will pay a 4 percent commission on the gross sales price of any transferred orders fulfilled by LMC.

~~The consideration includes a fixed and variable component. The fixed component consists of the~~ 10 percent ownership interest in LMC and any amounts received under the Royalty Advance. The variable component consists of the 4 percent commission and the 1 percent royalty. Variable consideration will be recognized when each vehicle for which a royalty or commission is owned is sold.

4. ~~REVENUE~~

~~Revenue Recognition~~

~~Net sales include products and shipping and handling charges, net of estimates for customer allowances.~~our vehicles. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring ~~products. All revenue is recognized when we satisfy our performance obligations under the contract. We recognize revenue by transferring the promised products to the customer, with~~goods or providing services. 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). The amount of consideration we receive and revenue ~~recognized at~~we recognize varies with changes in incentives and return rights we offer to our customers. When we give our dealers the ~~point in time~~right to return eligible vehicles, we estimate the customer obtains control of the products. We recognize revenue for shipping and handling charges at the time the products are delivered to or picked up by the customer. The majority of our contracts have a single performance obligation and are short term in nature.

Revenues related to repair and maintenance services are recognized over time as services are provided. Payment for vehicles, services, and merchandise are typically received at the point when control transfers to the customer or in accordance with payment terms customary to the business.

~~Accounts Receivable~~

~~Credit is extended based upon an evaluation of the customer’s financial condition. Accounts receivable are stated at their estimated net realizable value. The allowance for credit losses is~~expected returns based on an analysis of historical experience, current market conditions, and other measures. We receive cash equal to the invoice price for most vehicle sales and we do not have any material significant payment terms as payment is received at or shortly after the point of sale.

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 6, 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 ~~accounts, which considers history~~as an expense in Cost of ~~past write-offs, collections, and current and future credit conditions.~~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, Drones As A Service, 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 ~~contracts have a single performance obligation~~manufacturing facility to our customer (dealers and distributors). We recognize service revenue upon the transfer of control to the customer, which ~~are satisfied within~~is generally when at the time the service is completed.

For the year ended December 31, 2023, two entities represented 10% or more of our total revenues. For the year ended December 31, 2022, one ~~year from a given reporting date, we omit disclosures~~entity represented 10% or more of ~~the transaction price apportioned to remaining performance obligations on open orders.~~our total revenues.

~~Disaggregation of~~Deferred Revenue

~~Our revenues~~Deferred revenue related to our Assembly Services Agreement withTropos Technologies, Inc. consisted of the ~~following types~~following:


	Year Ended December 31,
	2023		2022
Deferred revenue, beginning of period	$	5,380,000	$	—
Additions	—		5,380,000
Net changes in liability	(485,669)		—
Revenue recognized	(180,000)		—
Deferred revenue, end of period	$	4,714,331	$	5,380,000
Less: current portion	4,714,331		3,375,000
Long-term deferred revenue, end of period	$	—	$	2,005,000

See Note 5, Contract Manufacturing Services and Investment in Tropos, for further discussion of ~~business~~deferred revenue.

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 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. R&D costs for the years ended December 31, 2023 and 2022 were $24.5 million and $23.2 million, respectively.

F-14

Advertising Costs

Advertising costs are recorded in Selling, general, and administrative in the consolidated statements of operations as ~~follows:~~they are incurred. During the years ended December 31, 2023 and 2022, advertising costs recognized were $1.2 million and $1.0 million, respectively.

Comprehensive Income (Loss)

Comprehensive income (loss) is comprised of adjustments to the fair value of our convertible notes due to changes in credit risk.

Stock-Based Compensation

We use the fair value method of accounting for our stock options, restricted stock awards (“RSA”) and performance share units (“PSUs”) granted to employees. The fair value of stock option awards with only service conditions is estimated on the grant or offering date using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires inputs such as the risk-free interest rate, expected term and expected volatility. These inputs are subjective and generally require significant judgment. The fair value of RSAs is measured on the grant date based on the closing fair market value of our common stock. The resulting cost is recognized over the period during which an employee is required to provide services in exchange for the awards, usually the vesting period. Stock-based compensation expense is recognized on a straight-line basis, net of actual forfeitures in the period.

The fair value of market-vested awards is based on a Monte-Carlo simulation that estimates the fair value based on the Company's stock price activity relative to a defined comparative group of companies, expected term of the award, risk-free interest rate, expected dividends, and the expected volatility of the stock of the Company and those in the comparative group. The grant date fair value per share of market-vested awards already reflects the probability of achieving the market condition, and is therefore used to record the expense on a straight-line basis over the performance period regardless of actual achievement.

For performance-based awards, stock-based compensation expense is recognizable over the expected performance achievement period of individual performance milestones when the achievement of each individual performance milestone becomes probable.

As we issue additional employee stock-based awards over time and as we incorporate additional market data related to our common stock, we may calculate significantly different volatilities and expected lives, which could materially impact the valuation of our stock-based awards and the stock-based compensation expense that we will recognize in future periods. Stock-based compensation expense is recorded in selling, general and administrative expense in the consolidated statements of operations.

Defined Contribution Plan

We have a 401(k) savings plan that is intended to qualify as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. Beginning in January 2021, we began to match 100% of each employee’s contributions up to a maximum of 6% of the employee’s eligible compensation, vested immediately. During the years ended December 31, 2023 and 2022, we recognized $1.3 million and $0.9 million, respectively, of expenses related to employer contributions for the 401(k) savings plan.

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-based awards, warrants and convertible senior notes 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.

F-15

Years Ended December 31,
2020 2019
Automotive $ 1,285,327 $ 240,280
Aviation 71,830 0
Other 35,362 136,282
Total revenues $ 1,392,519 $ 376,562
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:


	Year Ended December 31,
	2023	2022
Stock-based awards and equity-classified warrants	9,497,133	6,159,285
Convertible notes	38,624,952	—
Warrants1	8,500,000	—

1Represents shares issued upon exchange of the warrants on March 1, 2024. See Note 7, Debt, and Note 16, Subsequent Events, for more information regarding the warrants.

2. INVENTORY

Our inventory consisted of the following:


	December 31,
	2023		2022
Raw materials	$	32,682,324	$	42,500,878
Work in process	2,892,329		25,210,131
Finished goods(1)	18,309,829		301,645
	53,884,482		68,012,654
Less: inventory reserves	(8,476,290)		(59,162,512)
Inventory, net	$	45,408,192	$	8,850,142

~~Automotive~~(1) ~~– consists of sales of any of our truck platforms. We recognize revenue when control transfers upon shipment to the customer.~~Finished goods inventory includes new vehicles available for sale.

~~Aviation~~ ~~– consists~~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. During the years ended December 31, 2023 and 2022, we recorded net write-downs of $6.8 million and $19.5 million, respectively, in Cost of sales in the consolidated statements of ~~any~~operations. The year over year decrease to inventory reserves was primarily driven by our efforts to sell and dispose of ~~our drone systems. We recognize revenue when control transfers upon shipment~~C-Series inventory which had been fully reserved as of December 31, 2022 following the Company's decision to discontinue the ~~customer.~~program. The sale and disposal activity did not have a material impact on the Company's results of operations during the year ended December 31, 2023.

~~Other~~ ~~– consists~~During the year ended December 31, 2022, we recognized a gain of ~~grant-related research work and non-warranty after-sales vehicle services.~~$13.6 million, net of $0.5 million of selling costs, related to the sale of C-Series inventory. The gain on sale was recorded in Other (loss) income in the consolidated statements of operations. The selling costs of $0.5 million represent a commission paid to a related party who was a former executive of the Company.

5.3. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following:


	December 31,
	2023		2022
Prepaid purchases	$	7,908,087	$	34,611,649
Less: prepaid purchases reserve	(1,999,068)		(22,163,338)
Prepaid purchases, net	5,909,019		12,448,311
Prepaid insurance	1,283,146		1,198,769

Other	908,997		505,401
Prepaid expenses and other current assets	$	8,101,162	$	14,152,481

F-16

Prepaid purchases consist of deposits made to our suppliers for non-recurring engineering costs and production parts. As of December 31, 2023 and 2022, net prepaid purchases primarily consisted of deposits for direct materials associated with our W4 CC and W750 vehicles.

The year over year decrease to prepaid purchases reserves was primarily driven by write-offs related to the C-Series vehicle program, which did not have a material impact on the Company's results of operations during the year ended December 31, 2023.

4. PROPERTY, PLANT AND EQUIPMENT, NET

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


	December 31,
	2023		2022
Land and improvements	$	2,130,542	$	875,182
Buildings and improvements	12,677,544		8,167,736
Equipment and vehicles	23,081,818		8,183,089
Tooling	8,044,563		689,286
Construction in progress	1,104,010		9,027,020
	47,038,477		26,942,313
Less: accumulated depreciation	(9,161,522)		(5,441,218)
Property, plant and equipment, net	$	37,876,955	$	21,501,095

December 31,
2020 2019
Land and improvements $ 794,875 $ 700,000
Buildings and improvements 6,005,505 5,900,000
Equipment and vehicles 1,847,696 953,985
Tooling 2,079,471 0
Construction in progress 4,129,568 1,925,500
14,857,115 9,479,485
Less: accumulated depreciation (3,458,949) (2,649,304)
Property, plant and equipment, net $ 11,398,166 $ 6,830,181

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, ~~2020~~2023 and ~~December 31, 2019~~2022 was ~~$0.8~~$4.1 million and ~~$0.4~~$1.9 million, respectively.

5. CONTRACT MANUFACTURING SERVICES AND INVESTMENT IN TROPOS

We had a minority ownership investment in Tropos Technologies, Inc. (“Tropos”). The investment was obtained during the third quarter of 2022 in exchange for a cash payment of $5.0 million and a $5.0 million contribution of non-cash consideration representing a deposit from Tropos for future assembly services under an Assembly Services Agreement. The $5.0 million non-cash consideration was recorded as deferred revenue and is recognized as revenue over time as assembly service performance obligations are satisfied.

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

During the third quarter of 2023, we determined that our investment in Tropos was impaired based on the economic conditions and uncertainties that have significantly affected Tropos' performance and financial position. The impairment is considered other-than-temporary as the decline in fair value of the investment is not expected to recover in the foreseeable future.

The impairment charge recognized for our investment is $10.0 million, which represents the difference between the original cost of the investment and its fair value as of the impairment assessment date. The impairment loss was recognized in Other (loss) income in the consolidated statements of operations for the year ended December 31, 2023.

The impairment of our investment did not release the Company from its obligation to perform assembly services under the agreement. Therefore, the Company continues to perform assembly services and carry the balance of deferred revenue on its consolidated balance sheets as of December 31, 2023. As of December 31, 2023 and December 31, 2022, deferred revenue related to the Assembly Services Agreement was $4.7 million and $5.4 million, respectively.

F-17

6. ~~CONVERTIBLE NOTES~~ACCRUED LIABILITIES AND ~~LONG-TERM~~ OTHER CURRENT LIABILITIES

Accrued liabilities and other current liabilities consisted of the following:


	December 31,
	2023		2022
Securities litigation settlement	$	—	$	35,000,000

Compensation and related costs	2,083,808		4,967,187


Other	2,778,932		6,240,244
Accrued liabilities and other current liabilities	$	4,862,740	$	46,207,431

7. DEBT

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


	December 31,
	2023		2022
Fair value of convertible notes, beginning of year	$	—	$	24,705,000
Fair value of convertible notes issued during year	13,695,789		—
Change in fair value of convertible notes (1)	6,484,311		367,357

Fair value of convertible notes exchanged for common stock	—		(25,072,357)
Fair value of convertible notes, end of year	$	20,180,100	$	—

(1) The Company recognizes changes in fair value of convertible notes for common stock in Interest expense in the consolidated statements of operations.

Green Senior Convertible Notes Due 2026

December 31,
2020 2019
Convertible notes, at fair value $ 197,700,000 $ 39,020,000
Less: current portion 0 (19,620,000)
Convertible notes, net of current portion $ 197,700,000 $ 19,400,000
On December 12, 2023, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) under which the Company issued, pursuant to an indenture and supplemental indenture (the “Indenture”), $20.0 million principal amount of green senior convertible notes (the “2026 Notes”) due October 1, 2026. The 2026 Notes are a senior secured obligation of the Company and ranked senior to all unsecured debt of the Company. The 2026 Notes are guaranteed by all the Company’s current subsidiaries and are secured by substantially all the assets of the Company and its subsidiaries. The 2026 Notes were issued with an original issue discount of 12.5%. In the event of a default under the Indenture, the 2026 Notes would accrue default interest at a rate of 15.0% per annum (the “Default Interest”) until such default is cured and all outstanding Default Interest has been paid. The 2026 Notes do not bear interest other than the Default Interest. The 2026 notes are convertible into 38.6 million shares of common stock at a rate of $0.5178 per share, subject to change for anti-dilution adjustments and adjustments for certain corporate events.

The Company paid fees in connection with the issuance of the 2026 Notes of $0.6 million, resulting in net proceeds of $16.9 million. We have elected to account for the 2026 Notes using the fair value option under GAAP. All direct costs related to the issuance of our convertible notes were recognized in Interest expense in the consolidated statements of operations for the year ended December 31, 2023.

The 2026 Notes contain certain covenants, including limitations on liens, additional indebtedness, investments, dividends and other restricted payments, changes in the business, transactions with affiliates, and customary events of default. The Company is also required to at all times maintain minimum liquidity of the lesser of $10.0 million and the then aggregate outstanding principal amount under the 2026 Notes in a deposit account under the control of the collateral agent. In addition, the 2026 Notes requires that the Company have cash and cash equivalents of at least $25.0 million on December 31, 2023, $13.5 million on January 31, 2024, and of $20.0 million on February 29, 2024. In the event we consummate a sale and leaseback transaction with respect to the real property where our Union City, IN plant is located, the holder of the 2026 Notes may, at its option, require us to use up to half of the proceeds we receive in such a sale leaseback transaction to redeem outstanding principal under the 2026 Notes. For additional information regarding the sale of our Union City plant, refer to Note 16, Subsequent Events, to our consolidated financial statements.

F-18

As of December 31, 2023, the contractual principal balance of the 2026 Notes was $20.0 million and the fair value was $20.2 million. During the year ended December 31, 2023, we recorded a $6.5 million fair value adjustment in Interest expense in the statements of operations related to the 2026 Notes. No fair value adjustments related to the 2026 Notes attributable to changes in credit risk were recorded during the year ended December 31, 2023. Going forward, any future fair value adjustments attributable to changes in credit risk will be recorded in Other comprehensive loss.

The estimated fair value of the 2026 Notes upon issuance on December 12, 2023 was $13.7 million. The fair value was computed using a Binomial Lattice Model which incorporates significant inputs that are not observable in the market, and thus represents a Level 3 measurement. The unobservable inputs utilized for measuring the fair value of the 2026 Notes reflect our assumptions about the assumptions that market participants would use in valuing the Note as of the issuance date and subsequent reporting period.

We determined the fair value by using the following key inputs to the Binomial Lattice Model:


Issuance Date	December 12, 2023
Maturity Date	October 1, 2026
Principal Balance as of the Valuation Date	$	20,000,000
Risk-Free Rate (Annual)	5.3		%
Implied Yield	10.45		%
Volatility (Annual)	80.00		%

As of December 31, 2023, the Company is in compliance with the debt terms and associated covenant under the 2026 Notes. The holder may, at its option, require the Company to redeem up to 12.5% of the original principal amount of the 2026 Notes in cash on the first and fifteenth of each month beginning January 1, 2024. Subsequent to December 31, 2023, the Company has repaid $7.5 million of the initial principal balance upon request of the holder. On February 29, 2024, the Company entered into a First Amendment to Green Senior Secured Convertible Note Due 2026 (the “2026 Notes Amendment”) with the holder. In connection with the 2026 Notes Amendment, the Company redeemed $10.0 million principal amount of the 2026 Notes, thereby reducing the outstanding principal amount of the Note to $2.5 million. Therefore, given the Company has made partial redemption payments and expects the holder to require repayment of the 2026 Notes in full within 12 months, the Company classified the 2026 Notes as current in the consolidated balance sheets.

Warrants Exercisable Prior to December 2026

On December 12, 2023, as part of the Securities Purchase Agreement, the Company issued warrants (the “2026 Warrants”) to purchase 25,601,639 shares of common stock at an exercise price of $0.4492 per share. The 2026 Warrants may be exercised by the holder immediately upon issuance and prior to December 12, 2026. No fractional shares will be issued upon exercise of the 2026 Warrants. Upon a change of control or corporate event (as defined in the warrant agreement), the holder may request that the Company repurchase the 2026 Warrants for cash in an amount equal to the Black Scholes Value (as defined in the warrant agreement). A Black Scholes Value settlement is meant to compensate the holder of the warrant for lost time value related to a forced early exercise upon the contingent event. As the 2026 Warrants are recorded at fair value and measured pursuant to a Black Scholes option pricing model, the carrying value approximates the amount that the Company would have to pay in a Black Scholes Value settlement.

The fair value of the components of the Securities Purchase Agreement was allocated between the 2026 Notes and 2026 Warrants. As of December 12, 2023 (the initial recognition) and December 31, 2023, the fair value of the 2026 Warrants was $3.8 million and $5.6 million, respectively. During the year ended December 31, 2023, we recorded a $1.8 million fair value adjustment in Interest expense in the statements of operations related to the 2026 Notes. The fair value of the 2026 Warrants was measured using the Black Scholes model approach. Significant inputs to the model at December 12, 2023 and December 31, 2023 are as follows:

F-19


Valuation Assumptions	December 31, 2023			Initial Recognition on December 12, 2023
Stock Price	$	0.36		$	0.37
Strike Price	$	0.4492		$	0.4492
Volatility (annual)	98.0		%	98.0		%
Risk-Free Rate	5.3		%	5.3		%
Estimated time to expiration (years)	3			3
Dividend Yield	0.0		%	0.0		%

4.0% Senior Secured Convertible Notes Due 2024

On October 14, 2020 the Company issued $200.0 million par value convertible notes (the “2024 Notes”) due October 14, 2024. The 2024 Notes ~~are~~were a senior secured obligation of the Company, and ~~rank~~ranked senior to all unsecured debt of the Company. The 2024 Notes were guaranteed by all the Company’s current and future subsidiaries and were secured by substantially all the assets of the Company and its subsidiaries. Interest iswas payable quarterly beginning on January 15, 2021 at a rate of 4.0% per annum. The ~~interest rate on the~~ 2024 Notes ~~may be reduced to 2.75% if the Company meets certain conditions. The 2024 Notes are~~were convertible at a rate of $35.29 per share, subject to change for anti-dilution adjustments and adjustments for certain corporate events.

~~The~~

In the fourth quarter of 2021, the Company entered into securities exchange agreements with certain holders of its 2024 Notes, ~~will generally not be redeemable at the option~~to exchange $172.5 million in principal amount of the ~~Company prior to~~notes for 27.7 million shares of common stock. In the ~~third anniversary~~second quarter of ~~their issue date. There are no required redemptions on~~2022, the ~~2024 Notes. Accordingly, the Company has classified the full balance~~remaining $27.5 million in aggregate principal of the 2024 Notes ~~as long-term~~was exchanged for 7.8 million shares of common stock. The number of shares issued was calculated by dividing $29.4 million, which represents 107% of the principal amount of the notes, plus $0.3 million of interest accrued on the ~~Consolidated Balance Sheets as~~notes, by the average of the daily volume weighted average price (“VWAP”) for the 10 days immediately preceding April 21, 2022. During the year ended December 31, ~~2020.~~2022, the Company recognized a loss of $1.8 million, which included a $0.4 million fair value adjustment and a $1.4 million adjustment related to the amount previously recognized in Accumulated other comprehensive loss. The total loss was recorded in Interest expense in the consolidated statements of operations. During the year ended December 31, 2022, cash paid for contractual interest on the 2024 Notes was $0.3 million.

After the exchanges described above, the indenture and related security agreement under which the 2024 Notes were issued were terminated.

Floorplan Line of Credit

On August 10, 2023, we entered into a Floorplan and Security Agreement (the “Floorplan LOC”) with Mitsubishi HC Capital America, Inc. under which we obtained a revolving floorplan line of credit with a maximum borrowing limit of $5.0 million.

The intended use of the Floorplan LOC was to finance the acquisition of inventory used in production of our W4 CC and W750 vehicles. The terms of the Floorplan LOC included interest charged on the outstanding borrowings and other fees and covenants. Interest was to be charged at a variable rate based on a reference interest rate, such as the Secured Overnight Financing Rate (“SOFR”), plus 4.86%.

In connection with the Securities Purchase Agreement described above, we terminated the Floorplan and Security Agreement. During the year ended December 31, 2023, we did not draw on or incur any charges related to the Floorplan LOC.

8. LEASES

We have entered into various operating and finance lease agreements for offices, manufacturing and warehouse facilities. We determine if an arrangement is a lease, or contains a lease, 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 disclose 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

~~F-16~~F-20

borrowing rate based on the information available at lease commencement date in determining the present value of lease payments.

~~The 2024 Notes are guaranteed by all~~Our leases may include options to extend the ~~Company’s current and future subsidiaries and are secured by substantially all~~lease term for up to 5 years. Some of our leases also include options to terminate the ~~assets~~lease prior to the end of the ~~Company~~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.

During the second quarter of 2022, we entered into a lease agreement for additional office and ~~its subsidiaries. The 2024 Notes include~~warehouse space. We obtained a Letter of Credit (“LOC”) in the amount of $0.5 million to secure the lease, which bears interest at five percent per annum. Under the terms of the agreement, the landlord may use the whole or any part of the LOC for the payment of any amount as to which we are in default or to compensate the landlord for certain covenants, including a minimum sales backlog beginning the fiscal period ending on March 31, 2022, limitations on liens, additional indebtedness, investments, dividends and other restricted payments, and customary events of default.

specified losses or damage.

The Company ~~paid fees~~assesses the carrying value of its ROU assets for impairment whenever events or changes in ~~connection with~~circumstances indicate that the ~~2024 Notes~~carrying amount of ~~approximately $6.6 million, resulting~~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 ~~net proceeds to~~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, the Company estimates the future cash flows expected to result from the use and eventual disposition of ~~approximately $193.4 million. As we have elected to account for our convertible notes using~~ the ~~fair value option allowed under GAAP, all direct costs related to~~leased asset. These estimates consider factors such as anticipated future operating results, market conditions, and other relevant factors. If the ~~issuance~~sum of ~~our convertible notes were~~the expected future cash flows is less than the carrying amount of the ROU asset, an impairment loss is recognized ~~in Interest Expense in the Consolidated Statements of Operations~~ for the ~~year ended December 31, 2020.~~

~~The Company is required to hold~~difference between the ~~proceeds in escrow until it completes certain requirements related to the collateral. In January 2021, such requirements were met~~carrying amount and ~~the proceeds were released from escrow.~~

~~As of December 31, 2020, the contractual principal balance of the 2024 Notes was $200.0 million and the fair value was $197.7 million. The $2.3 million decrease in~~ the fair value of the ~~Convertible Notes~~ROU asset. The fair value is ~~recorded in Interest Expense~~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~~consolidated statements of ~~Operations. In electing~~operations. The Company determines the ~~fair value option,~~level at which the impairment loss is recognized based on whether it expects to retain or dispose of the ROU asset. If the Company ~~recognizes changes in fair value related~~expects to ~~changes in credit risk, if any, in Other Comprehensive Income and~~retain the ~~remaining change in fair value in Interest Expense. No portion~~ROU asset, the impairment loss is recognized as an adjustment to the carrying amount of the ~~change in fair value was related~~ROU asset, with a corresponding adjustment to ~~changes in credit risk.~~

~~High Trail Convertible Note II~~

~~On July 16, 2020,~~accumulated depreciation and amortization. If the Company ~~issued a $70.0 million par value convertible note (the“High Trail Convertible Note II” or “Note II”) due July 1, 2023. Interest was payable quarterly beginning October 1, 2020 at a rate~~expects to dispose of ~~4.5% per annum. The High Trail Convertible Note II was initially convertible at a rate of $19.00 per share, subject to change for anti-dilution and adjustments for certain corporate events.~~

~~The Company paid fees in connection with~~ the ~~issuance of Note II of approximately $1.1 million, reducing~~ROU asset, the ~~proceeds to the Company to approximately $68.9 million. All direct costs related to the issuance of our convertible notes were~~impairment loss is recognized in ~~Interest Expense~~Selling, general and administrative expense in the ~~Consolidated Statements~~statements of ~~Operations.~~operations.

During the year ended December 31, ~~2020,~~2023, the Company identified indicators of impairment due to slower than expected market adoption and conducted an impairment test on its ROU assets in accordance with applicable accounting standards. The fair value less costs to sublease was determined based on market prices for similar assets, while the value in use was calculated using discounted cash flow projections. As a result of these assessments, we recognized an impairment loss of $0.9 million related to the ~~Note II increased approximately $52.9 million,~~ROU asset for our Aero facility located in Mason, Ohio, which is recorded in ~~Interest Expense~~the Selling, general and administrative expense in the ~~Consolidated Statements~~statements of ~~Operations.~~operations.

~~On October 14, 2020,~~Lease expense for operating leases is recognized on a straight-line basis over the ~~Company exchanged the full $70.0 million outstanding principal balance of Note II at a premium for approximately 5.2 million shares. The settlement~~lease term as cost of ~~approximately $121.8 million was calculated as~~sales or operating expenses depending on the ~~number of shares issued in exchange for Note II multiplied by the closing price of Workhorse common stock on October 13, 2020, which was $23.63 per share.~~

~~High Trail Convertible Note~~

~~On December 9, 2019, the Company issued a $41.0 million par value convertible note (“High Trail Convertible Note” or “the Note”) due November 2022. The fair value~~nature of the ~~Note was $38.5 million upon issuance.~~lease right-of-use asset. Amortization of finance lease assets is recognized over the lease term as cost of sales or operating expenses depending on the nature of the leased asset. Interest ~~was payable quarterly beginning February 1, 2020, at a rate~~expense on finance lease liabilities is recognized over the lease term within Interest expense in the consolidated statements of ~~4.50% per annum. The Note was initially convertible at a rate of $3.05 per share, subject to change for anti-dilution adjustments or certain corporate events.~~operations.

The ~~Note was issued with approximately 15.5 warrants to purchase common stock~~components of ~~the Company at an initial exercise price~~lease expense are as follows within our consolidated statements of $3.05 per share. The Note and the warrants were determined to be freestanding instruments and were accounted for separately. The warrants were classified as equity instruments and the fair value was estimated to be approximately $0.4 million on December 9, 2019. The fair value of the warrants was recorded as an increase to Additional Paid-In Capital.operations:

The fair value of the High Trail Convertible Note as of December 31, 2020 and December 31, 2019 was 0 and $39.0 million, respectively, and the contractual principal balance as of December 31, 2020 and December 31, 2019 was 0 and $40.5 million, respectively. Fair value adjustments for the year ended December 31, 2020 were approximately $74.1 million, which were recorded in Interest Expense in the Consolidated Statements of Operations. Fair value adjustments for the year ended December 31, 2019 were $1.0 million, which is recorded in Interest Expense.


	Years Ended December 31,
	2023		2022
Short-term lease expense	$	281,802	$	589,969
Operating lease expense	2,338,266		1,782,332
Total lease expense	$	2,620,068	$	2,372,301

During the year ended December 31, 2020, the Company converted $40.5 million par value of the Note into approximately 14.4 million shares of common stock, resulting in a loss of approximately $35.9 million. During the year ended December 31,

~~F-17~~F-21

~~2019, the Company converted $0.5 million par value~~Lease right-of-use assets consisted of the ~~Note into approximately 0.2 million shares~~following:


	December 31,
	2023		2022
Operating leases	$	4,174,800	$	5,884,865
Finance leases	5,621,181		5,821,938
Total lease right-of-use assets	$	9,795,981	$	11,706,803

Lease liabilities consisted of ~~common stock, resulting in a gain of approximately $0.1 million. Gains and losses~~the following:


	December 31,
	2023		2022
Operating leases	$	6,292,954	$	6,977,896
Finance leases	2,548,184		3,147,198
Total lease liabilities	8,841,138		10,125,094
Less: current portion	(3,560,612)		(1,285,032)
Long-term portion	$	5,280,526	$	8,840,062

Other information related to ~~conversions of par value to common stock were recorded in Interest Expense in the Consolidated Statements of Operations.~~leases is as follows:

The warrants were only exercisable at the option of the Company following the full or partial redemption of the Convertible Note. The percentage of the warrants exercisable upon full or partial redemption of the Note is equal to a percentage of the original principal amount redeemed at such time. Therefore, as the principal balance of the Convertible Note was fully converted during the year, the number of warrants exercisable as of December 31, 2020 is 0.

~~PPP Term Note~~

December 31,
2020 2019
Long-term debt $ 1,411,000 $ 0
Less: current portion (1,411,000) 0
Long-term debt, net of current portion $ 0 $ 0


	As of December 31,
	2023		2022
Weighted-average remaining lease term
Operating leases	4.0 years		6.0 years

Financing leases	1.0 year		2.0 years
Weighted-average interest rate
Operating leases	10.0	%	10.0	%
Financing leases	10.0	%	10.0	%

~~On April 14, 2020,~~

Supplemental cash flow information related to leases where we are the Company entered into a Paycheck Protection Program Term Note ( “PPP Note”) with PNC Bank, N.A. under the Paycheck Protection Program of the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). The Company received total proceeds of $1.4 million from the PPP Note, which was due on April 13, 2022. In accordance with the requirements of the CARES Act, the Company used the proceeds primarily for payroll costs. Interest accrues on the PPP Note at the rate of 1.0% per annum. In October 2020, the Company applied for forgiveness of the amount due on the PPP Note. On January 15, 2021, the outstanding principal and interest accrued on the Note was fully forgiven and the full amount of the Notelessee is ~~classified~~ as ~~current at December 31, 2020 on the Consolidated Balance Sheets.~~follows:

The Company elected to account for the PPP Term Note as debt and will accrue interest over the term of the Note. During the year ended December 31, 2020, the Company did not make any repayments on any amount due on the Note.


	Years Ended December 31,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	1,349,021	$	770,642
Operating cash outflows from finance leases (interest payments)	280,430		369,976
Financing cash outflows from finance leases	879,444		857,516
Leased assets obtained in exchange for finance lease liabilities	—		6,022,694
Leased assets obtained in exchange for operating lease liabilities	—		5,631,558

7. ~~MANDATORILY REDEEMABLE SERIES B PREFERRED STOCK~~

~~On June 5, 2019,~~

F-22

As of December 31, 2023, the ~~Company closed agreements for the sale~~maturities of ~~1,250,000 units consisting of one share of Series B Preferred Stock (the “Preferred Stock”), with a stated value of $20.00 per share (the “Stated Value”)~~our operating and a common stock purchase warrant to purchase 7.41 shares of the common stock (the “Warrants”) for an aggregate purchase price of $25.0 million. The Preferred Stock was not convertible and did not have voting rights.finance lease liabilities (excluding short-term leases) are as follows:

The Preferred Stock ranked senior to the Company’s common stock with respect to dividend rights and rights upon liquidation, winding-up or dissolution. The Preferred Stock was entitled to annual dividends at a rate equal to 8.0% per annum on the Stated Value. The Warrants had an exercise price of $1.62 per share and expired seven years from the date of issuance. Accrued dividends were payable quarterly in shares of common stock of the Company based on a fixed share price of $1.62.


	Operating Leases		Finance Leases
2024	$	1,589,805	$	2,752,862
2025	1,458,783		—
2026	1,503,069		—
2027	1,316,387		—
2028	1,230,385		—
Thereafter	1,067,207		—
Total minimum lease payments	8,165,636		2,752,862
Less: Interest	1,872,682		204,678
Present value of lease obligations	6,292,954		2,548,184
Less: Current portion	1,012,428		2,548,184
Long-term portion of lease obligations	$	5,280,526	$	—

9. INCOME TAXES

During the years ended December 31, ~~2020~~2023 and ~~December 31, 2019,~~2022, the Company ~~issued 0.9 million and 0.7 million shares of common stock to the holders of the Preferred Stock, respectively.~~

As the Preferred Stock was mandatorily redeemable, it was classified as a liability on the Consolidated Balance Sheets. All dividends payable on the Preferred Stock were classified as Interest Expense.

The Preferred Stock and Warrants were considered freestanding financial instruments and were accounted for separately. The Warrants were considered equity instruments and not marked-to-market at each reporting period. On the date of issuance, the value of the Warrants was $6.7 million, which was determined using the Black-Scholes valuation model. The fair value of the Warrants was recorded as an increase to Additional Paid-In Capital and a discount of the Preferred Stock. The discount was amortized to Interest Expense using the effective interest method. Amortization of the discount was $1.1 million and $0.9 million for the years ended December 31, 2020 and December 31, 2019, respectively.

On September 28, 2020, the Company redeemed its Series B Preferred Stock in full for cash. Dividends on all shares of Series B Preferred Stock were paid in full as of the redemption date and will cease to accumulate. The Company recognized a loss on redemption of approximately $4.7 million related to the remaining unamortized discount, which was recorded in Interest Expense.

~~F-18~~

8. ~~INCOME TAXES~~

~~For the years ended December 31, 2020 and 2019, the Company had net income and loss, respectively, but~~has taxable losses primarily due to ~~timing differences in recognizing income for tax, 0~~operations and thus has no current federal tax expense ~~or benefit was~~ recorded. ~~The Company recorded~~We continue to record a ~~full~~ valuation allowance ~~on its~~against our deferred tax assets as of December 31, ~~2019. As~~2023.

The U.S. components of ~~December 31, 2020, the Company released~~loss before income taxes and a ~~portion~~reconciliation of the ~~valuation allowance,~~statutory federal income tax with the exception of certain tax credits and net operating losses that were determined to be unrealizable. The Company recorded deferred tax liabilities of approximately $21.8 million, with a corresponding deferred provision for federal and state income taxes.

~~The components of~~ the provision for income taxes ~~are as~~ follows:

Years Ended December 31,

2020

2019

Years Ended December 31,

2023

Current:

Federal

State and Local

Total Current

Deferred:

Federal

21,864,569

Federal

State and Local

(30,639)

Total Deferred

21,833,930

Total provision for income taxes

21,833,930

Total Deferred

Total benefit from income taxes

During 2023, activity for RSAs was as follows:


	Number of Unvested Shares	Weighted Average Grant Date Fair Value per Share




Unvested restricted stock as of December 31, 2022	3,525,331	$	4.9
Granted	3,994,707	1.5
Vested	(1,972,089)	4.2
Forfeited	(419,426)	2.8
Unvested restricted stock as of December 31, 2023	5,128,523	$	2.6

As of December 31, ~~2020,~~2023, unrecognized compensation expense was ~~$2.9~~$9.2 million for unvested restricted stock, which is expected to be recognized over the next 1.9 years.

F-26

~~11.~~

Performance Share Units

As of December 31, 2023, the number of unvested PSUs was 3.0 million. The vesting of PSUs is conditioned upon achievement of certain performance objectives over performance periods ending December 31, 2024 and 2025 as defined in each award agreement. Fifty percent of the PSUs vest based upon the Company’s total shareholder return (“TSR”) as compared to a group of peer companies, and fifty percent of the PSUs vest based upon our performance on certain measures including a cumulative adjusted EBITDA target (“EBITDA PSUs”). Depending on the actual achievement of the performance objectives, the grantee may earn between 0% and 200% of the target PSUs.

During 2023, activity for PSUs with a TSR metric was as follows:


	Number of Unvested Shares	Weighted Average Grant Date Fair Value per Share
Balance, December 31, 2022	738,751	$	11.79
Granted	966,342	1.88
Forfeited	(33,417)	6.28
Balance, December 31, 2023	1,671,676	$	6.17

Inputs and assumptions used to calculate the fair value at grant date through a Monte-Carlo simulation were as follows:


	2023			2022
Fair value per stock award	$	1.88		$	11.79
Grant date stock price	$	1.09		$	2.83
Assumptions:
Workhorse's stock price expected volatility (a)	109		%	117		%
Risk-free interest rate	3.77		%	0.69		%

(a) Expected volatility based on 2.7 years of daily closing share price changes.

As of December 31, 2023, unrecognized compensation expense was $4.0 million, which is expected to be recognized over the next 1.3 years.

During 2023, activity for EBITDA PSUs was as follows:


			Number of Unvested Shares
Balance, December 31, 2022			432,546
Granted			966,342
Forfeited			(33,416)
Balance, December 31, 2023			1,365,472

The fair value of performance share units is calculated based on the stock price on the date of grant. The stock-based compensation expense recognized each period is dependent upon our estimate of the number of shares that will ultimately vest based on the achievement of EBITDA-based performance conditions. Future stock-based compensation expense for unvested EBITDA PSUs will be based on the fair value of the awards as of the grant date, which has not yet occurred, as the cumulative adjusted EBITDA target condition is not yet defined.

F-27

12. ~~RECENT PRONOUNCEMENTS~~NEW ACCOUNTING STANDARDS

Adoption of New Accounting Standards ~~Recently Adopted~~

ASU 2016-13, Financial Instruments - Credit Losses. In June 2016, the ~~Financial Accounting Standards Board (“FASB”)~~FASB issued ~~Accounting Standards Update (“ASU”) No.~~ASU 2016-13, ~~Measurement of Credit Losses on Financial Instruments,~~ which requires entities to ~~use a new impairment model based on current~~measure all expected credit losses ~~rather than incurred losses. Estimated credit losses under~~for financial instruments held at the ~~ASU consider relevant information about past events,~~reporting date based on historical experience, current conditions, and reasonable ~~and~~ supportable ~~forecasts that affect the collectability of financial assets, resulting in recognition of lifetime expected credit losses at initial recognition of the related asset. The Company~~forecasts. We adopted ~~the ASU as of~~this standard effective January 1, ~~2020.~~2023. The adoption of this ~~guidance~~standard did not have a material impact on ~~the Company's financial condition and~~our consolidated balance sheets or statements of operations.

~~Accounting Standards Not Yet Adopted~~

~~In August 2020, the FASB issued~~ ASU 2020-06, Accounting for Convertible Instruments and Contracts in an ~~Entity’s~~Entity's Own Equity. ~~The~~In August 2020, the FASB issued ASU 2020-06, which simplifies the accounting for ~~certain~~ convertible instruments ~~amends~~by removing certain separation models in ASC 470-20, Debt—Debt with Conversion and Other Options, for convertible instruments. The ASU updates the guidance on ~~derivative scope exceptions~~certain embedded conversion features that are not required to be accounted for ~~contracts~~as derivatives under Topic 815, Derivatives and Hedging, or that do not result in ~~an entity's own equity and requires~~substantial premiums accounted for as paid-in capital, such that those features are no longer required to be separated from the ~~use of the if-converted method for calculating diluted earnings per share.~~host contract. The ~~ASU removes separation models for~~ convertible debt ~~with a cash conversion feature. Such convertible~~ instruments will be accounted for as a single liability measured at amortized cost. This will also result in the interest expense recognized for convertible debt instruments to be typically closer to the coupon interest rate when applying the guidance in Topic 835, Interest. Further, the ASU made amendments to the EPS guidance in Topic 260 for convertible debt instruments, the most significant impact of which is requiring the use of the if-converted method for diluted EPS calculation, and no longer allowing the net share settlement method. The ASU also made revisions to Topic 815-40, which provides guidance on how an entity must determine whether a contract qualifies for a scope exception from derivative accounting. The amendments to Topic 815-40 change the scope of contracts that are recognized as assets or liabilities. We adopted this standard effective January 1, 2022. The adoption of this standard did not have a material impact on our consolidated balance sheets or statements of operations.

Accounting Standards Issued But Not Yet Adopted

ASU 2023-07, Segment Reporting - Improvements to Reportable Segment Disclosures. In November 2023, the FASB issued ASU 2023-07 related to disclosures about a public entity’s reportable segments and provides more detailed information about a reportable segment’s expenses. The new standard is effective for ~~interim~~fiscal years beginning after December 15, 2023 and ~~annual~~interim periods beginning after December 15, ~~2021,~~2024, with ~~early~~retrospective application required. We are assessing the effect on our annual consolidated financial statement disclosures; however, adoption ~~permitted~~will not impact our consolidated balance sheets or statements of operations.

ASU 2023-09, Improvements to Income Tax Disclosures. In December 2023, the FASB issued ASU 2023-09 to enhance the transparency and decision usefulness of income tax disclosures. The new standard is effective for fiscal years beginning after December 15, ~~2020. Adoption of~~2024, with retrospective application permitted. We are assessing the ~~ASU can either be on a modified retrospective or full retrospective basis. The Company is currently evaluating the impacts of this ASU~~effect on our annual consolidated financial ~~statements.~~statement disclosures; however, adoption will not impact our consolidated balance sheets or statements of operations.

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.

~~12.~~13. STOCKHOLDERS' EQUITY

~~Warrants~~Securities Litigation Settlement

On September 1, 2023, we issued 25.4 million shares of common stock with an aggregate value of $20.0 million in connection with the settlement of the Securities Litigation as described below in Note 15, Commitments and Contingencies. The number of shares was based on the market price per share of our common stock on August 31, 2023. This transaction was recorded as a noncash operating activity.

As a result of the settlement, we no longer have any obligation related to the securities litigation and, as such, the $15.0 million insurance receivable previously recorded in Other Receivable and $35.0 million legal reserve previously recorded in Accrued and Other Current Liabilities were zero as of December 31, 2023.

ATM Sales Agreement

On March 10, 2022, we entered into an ATM Sales Agreement, under which we may offer and sell shares of our common stock having an aggregate sales price of up to $175.0 million.

During the years ended December 31, 2023 and 2022, we issued 89.3 million and 4.9 million shares, respectively, under the ATM Agreement for net proceeds of $62.2 million and $12.9 million, respectively. Commissions paid in connection with the

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issuances under the ATM Agreement are recorded as a reduction of the share proceeds. During the years ended December 31, 2023 and 2022, we incurred commissions of $1.3 million and $0.3 million, respectively. The remaining aggregate sales available under the ATM Agreement was $96.9 million as of December 31, 2023.

Equity Line of Credit

On December 12, 2023, the Company entered into an equity line of credit purchase agreement (the “ELOC Purchase Agreement”) with Lincoln Park Capital Fund, LLC (the “Purchaser”) which provides that, upon the terms and subject to the conditions and limitations set forth therein, the Company may sell to the Purchaser up to $50.0 million of shares of common stock over the 24-month term of the ELOC Purchase Agreement. Concurrently with entering into the ELOC Purchase Agreement, the Company also entered into a registration rights agreement (the “ELOC Registration Rights Agreement”) with the Purchaser, whereby the issuance of the shares pursuant to the ELOC Purchase Agreement were registered pursuant to the Company’s effective shelf registration statement on Form S-3, and the related base prospectus included in the registration statement, as supplemented by a prospectus supplement filed on December 27, 2023.

The Company may direct the Purchaser, at its sole discretion, and subject to certain conditions, to purchase up to 1.0 million shares of common stock on any business day (a “Regular Purchase”). The amount of a Regular Purchase may be increased under certain circumstances to 1.25 million shares if the closing price is not below $0.40 and up to 1.5 million if the closing price is not below $0.50 provided the Purchaser’s committed obligation under any single Regular Purchase shall not exceed $2.0 million. The purchase price for Regular Purchases (the “Purchase Price”) shall be equal to 97.5% of the lower of the lowest sale price of common stock on the Purchase Date for such Regular Purchase and the arithmetic average of the three lowest closing sale prices for the common stock during the ten consecutive business days ending on the business day immediately prior to the Purchase Date, with a floor of $0.10. In the event the Company issues the full amount allowed under a Regular Purchase on any given business day, we may also direct the Purchaser to purchase additional amounts as accelerated purchases. The purchase price for the accelerated and additional accelerated purchases shall be equal to the lesser of 97.0% of such day’s the VWAP of the common stock on the principal market and the closing sale price of the common stock on such day.

In connection with the ELOC Purchase Agreement and ELOC Registration Rights Agreement, the Company paid a non-cash commitment fee to the Purchaser in the amount of 3,775,105 shares of common stock of the Company (valued at $1.5 million). The Company reflected the commitment fee as an expense in Interest expense in the consolidated statements of operations based on the fair value on the issuance date.

Under applicable rules of the NASDAQ Capital Market, the Company cannot issue or sell more than 19.99% of the shares of common stock outstanding immediately prior to the execution of the ELOC Purchase Agreement to the Purchaser under the ELOC Purchase Agreement without stockholder approval.

During the year ended December 31, 2023, excluding the additional commitment shares issued to the Purchaser disclosed above, the Company did not sell any shares of common stock pursuant to the ELOC Purchase Agreement. Subsequent to December 31, 2023 through the date of this filing, the Company sold 12.0 million shares of common stock at prices ranging between $0.2210 and $0.3430 pursuant to the ELOC Purchase Agreement and received proceeds of $3.1 million.

The Company evaluated the contract that includes the right to require the Purchaser to purchase shares of common stock in the future (“purchased put right”) considering the guidance in ASC 815-40, “Derivatives and Hedging - Contracts on an Entity’s Own Equity” (“ASC 815-40”) and concluded that it is an equity-linked contract that does not qualify for equity classification, and therefore requires fair value accounting as a derivative asset. The Company has analyzed the terms of the freestanding purchased put right and has concluded that it has insignificant value as of December 31, 2023.

Preferred Stock

Workhorse has authorized 75.0 million shares of Series A Preferred Stock, par value $0.001 per share. Our certificate of incorporation provides that shares of preferred stock may be issued from time to time in one or more series. Our Board of Directors is authorized to fix the voting rights, if any, designations, powers, preferences, qualification, limitations and restrictions thereof, applicable to the shares of preferred stock. As of December 31, 2023 and December 31, 2022, there were no shares of Series A Preferred Stock issued and outstanding.

F-29

Common Stock

The Company has one class of common stock, par value$0.001 per share. Each share of our common stock is entitled to one vote on all matters submitted to stockholders.

On September 1, 2023, we obtained approval from our stockholders to amendment our articles of incorporation to increase the number of shares of common stock, par value $0.001 per share, authorized for issuance thereunder to 450.0 million.

Warrants

In connection with the issuance of debt, common stock and preferred stock, ~~the Company has~~we issued equity-classified warrants to purchase shares of ~~the Company's~~our common stock. ~~The following table summarizes warrant activity:~~As of December 31, 2023 and 2022, there were approximately 1.0 million warrants outstanding.

Number of Warrants Weighted Average Exercise Price per Warrant
Balance, December 31, 2018 17,818,844 $ 1.84
Granted, Series B Preferred Stock 9,262,500 1.62
Granted, Marathon Credit Agreement 3,379,466 2.26
Granted, Other 66,966 5.28
Exercised 0 0
Balance, December 31, 2019 30,527,776 1.82
Granted, Marathon Credit Agreement 1,176,203 28.26
Exercised (30,502,763) 1.78
Expired (45,540) 1.60
Balance, December 31, 2020 1,155,676 $ 28.74
Success Fees

~~2019 Stock Offerings~~

~~In February 2019,~~During the ~~Company sold approximately 1.6 million shares of common stock to investors (the “February 2019 Investors”) for net proceeds of $1.5 million. Through July 2019, if the Company~~years ended December 31, 2023 and 2022, we issued shares of its common stock for a lower price per share than the price paid by the February 2019 Investors (a “Down Round”), the Company was required to issue additional shares of common stock (for no additional consideration) resulting in the effective purchase price per share being equal to the purchase price per share paid in the Down Round. On May 1, 2019 the Down Round provision of the agreement was triggered344,997 and ~~an additional 116,496 shares of common stock were issued to the February 2019 Investors which was~~

~~F-24~~

accounted for as a $86,207 deemed dividend. The deemed dividend was recorded as a reduction to Retained Earnings and increase in Additional Paid-in-Capital and increased the net loss to common stockholders by the same amount.

~~Benjamin Samuels and Gerald Budde, directors of the Company, acquired 841,928 and 26,310~~244,035 shares of common stock, respectively, ~~as part~~for payment of ~~the February 2019 offering~~professional service fees, valued at ~~a price per share of $0.95, which was above the closing price the date prior to close. They did not receive the Down Round protection.~~

~~On June 22, 2017, the Company entered into an at the market issuance sales agreement with Cowen~~$0.4 million and Company, LLC, under which the Company may offer and sell shares of its common stock having an aggregate offering price of up to $25.0 million. During the three months ended March 31, 2019, the Company issued 1.6$0.6 million, ~~shares of common stock under the agreement for net proceeds of approximately $1.5 million. The agreement was canceled in the first quarter of 2019.~~

On May 1, 2019, the Company closed a registered public offering for the sale of approximately 4.0 million shares of common stock for a purchase price of $0.74 per share. The proceeds to the Company were approximately $2.9 million.respectively.

~~13.~~14. RELATED PARTIES

~~The Company obtains its~~We obtain our general liability, property and casualty, and directors and officers liability insurance through AssuredPartners NL, LLC (“Assured”). Gerald Budde, a ~~director~~former Director of the Company, is ~~Eastern Regions~~currently the Chief Financial Officer of ~~AssuredPartners,~~Accretive Insurance Solutions Inc.~~, the parent company~~ (“Accretive”). Assured and Accretive are both subsidiaries of AssuredPartners Capital, Inc. ~~and its subsidiary, AssuredPartners NL, LLC.~~ The placement of insurance was completed by an Assured agent ~~outside of the Eastern Region~~ and Mr. Budde did not participate in any decisions about insurance, nor was he paid any portion of the brokerage fee. Assured earned brokerage fees of ~~approximately $121,000~~ approximately $0.3 million and ~~$86,000~~$0.3 million for the years ended December 31, ~~2020~~2023 and ~~2019,~~2022, respectively.

15. COMMITMENTS AND CONTINGENCIES

~~14.~~ ~~DIVESTITURE OF SUREFLY~~

On November 27, 2019, the Company completed the sale of SureFly™ for $4.0 million. The gain on divestiture was $3.7 million, net of selling costs of $0.3 million. SureFly was the Company's hybrid electrically powered vertical takeoff and landing aircraft project. The Company had 0 revenues associated with SureFly in 2019. Operating expenses associated with the development of Surefly were $1.4 million in 2019.General Matters

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

~~15.~~ ~~OTHER TRANSACTION~~Legal Proceedings

On October ~~31, 2019,~~24, 2022, the Company ~~and ST Engineering Hackney, Inc. (“Hackney”)~~ entered into ~~an Asset Purchase Agreement~~a binding term sheet to ~~purchase certain assets and assume certain liabilities~~resolve the putative class action (the “Securities Class Action”) brought in the Central District of ~~Hackney. Upon execution~~California (Case No.2:21-cv-02072) on behalf of purchasers of the ~~agreement,~~Company’s securities from March 10, 2020 through May 10, 2021. On January 13, 2023, the parties executed a Stipulation of Settlement setting forth the terms of the settlement of the class action and resolution of all claims.

On July 28, 2023 (the “Judgment Date”), the Court entered an order (the “Order”) granting final approval of the Stipulation of Settlement, resolving the Securities Class Action. Pursuant to the Stipulation of Settlement, in exchange for a release of all claims and dismissal with prejudice of the Securities Class Action, the Company ~~deposited $1.0~~agreed to create a settlement fund with an escrow agent (the “Settlement Fund”), consisting of $15.0 million in cash and $20.0 million in shares of common stock of the Company (the “Settlement Shares”) from which class members will receive payment. The escrow agent may sell the Settlement Shares and deposit the proceeds from such sales into the Settlement Fund or may distribute the Settlement Shares to class members.

Pursuant to the Stipulation of Settlement, the number of Settlement Shares to be issued was based on the VWAP of the Company’s common stock for the 15 trading days immediately preceding the Judgment Date. The VWAP would be adjusted if, at market close on the trading day before the date the Company deposits the Settlement Shares, the market price per share of the Company’s common stock deviated more than 25% above or below the VWAP Price. Upon such deviation, the number of Settlement Shares would be adjusted, upward or downward, such that the aggregate value of the Settlement Shares equals $20.0 million. Consistent with the foregoing, the Company issued 25,380,711 shares of its common stock ~~having an initial value of $6.6 million~~ into ~~an escrow account. The number of shares held~~the Settlement Fund as Settlement Shares in ~~escrow~~September 2023, which is ~~subject to adjustment if the value of the shares is less than $5.28 million or greater than $7.92 million on certain dates.~~

The purchase price for the acquired assets was $7.0 million, $1.0 million of which was released from the escrow account in January 2020 upon satisfaction of certain conditions, and the remaining $6.0 million (the “Second Payment”) is payable in cash within 45 days if additional conditions are met. The Company is required to make additional payments to Hackney in the event the Second Payment is not made within 45 days of when the payment is due. In the event the Second Payment is not made within 105 days of when the payment is due, Hackney may require that the Escrow Agent release the shares held in escrow withconsidered a ~~value (based on the then-current market price of the shares) equal to $6.0 million in satisfaction of the Second Payment.~~

The transaction was accounted for as customer acquisition costs as the primary asset acquired is the right to bid on a customer contract. As each payment is made, the Company will determine if there is future benefit associated with the contract. If it is determined that there is future benefit, the payment will be capitalized as a customer acquisition cost and expensed over the period of benefit.non-cash transaction.

~~F-25~~F-30

For additional information regarding the Securities Class Action, see Note 17, “Commitments and Contingencies – Legal Proceedings – Securities Litigation” included in Item 8, “Financial Statements and Supplementary Data” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

16. SUBSEQUENT EVENTS

The Company has evaluated subsequent events for potential recognition and disclosures through the date the ~~Consolidated Financial Statements~~accompanying consolidated financial statements were filed.

Sale of Manufacturing Facility and Campus

On January 31, 2024, a subsidiary of Workhorse entered into a Purchase and Sale Agreement (the “Sale Agreement”) with William Repny LLC (the “Purchaser”) for the sale of its Union City, IN manufacturing facility and campus, excluding any equipment or fixtures used in manufacturing operations (the “Property”), for a purchase price, before fees and expenses, of approximately $34.5 million.

Pursuant to the Sale Agreement, the Company will lease back the Property from the Purchaser under a triple-net lease agreement (the “Lease”) for an initial term of 20 years. The Company will have the option to renew the Lease for three additional 10-year renewal terms, subject to the terms of the Lease.

Under the Lease, the Company will pay base annual rent of approximately $3.4 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, the Company will be responsible for all costs and expenses related to the Property, including, without limitation, maintenance, operation, repair and replacement of buildings and improvements, utility charges, insurance premiums and real estate taxes and assessments.

The closing is subject to Purchaser performing satisfactory due diligence on the Property, obtaining financing and other customary closing conditions. There is no assurance at this time that the Purchaser will purchase the Property. The Company plans to use the proceeds for general corporate purposes.

Aero Drone Design and Manufacturing Operations

As previously disclosed in our Quarterly Report on Form 10-Q for the period ended September 30, 2023 filed with the SEC on November 14, 2023, we announced our decision to evaluate a broad range of strategic alternatives for our drone vehicles which may include a sale, strategic partnership, another transaction, or the continued execution of our strategic plan for the drone vehicle production. On February ~~23, 2021,~~20, 2024, our Board of Directors approved a plan to cease the ~~USPS announced it awarded~~production operations of our drone design and manufacturing business and transition to only operating our Drones As A Service business. The decision to cease operation of our drone design and manufacturing product line was not considered a ~~contract~~strategic shift having major effects on operations and therefore does not meet the criteria to ~~Oshkosh Defense~~qualify as a discontinued operation.

First Amendment to ~~assemble 50,000~~Green Senior Secured Convertible Note Due 2026

Subsequent to ~~165,000 vehicles~~December 31, 2023, the Company has repaid $7.5 million of the initial principal balance upon request of the holder. On February 29, 2024, the Company entered into a First Amendment to Green Senior Secured Convertible Note Due 2026 (the “2026 Notes Amendment”) with the holder. In connection with the 2026 Notes Amendment, the Company redeemed $10.0 million principal amount of the 2026 Notes, thereby reducing the outstanding principal amount of the 2026 Notes to $2.5 million. The 2026 Notes Amendment also removed the February 15, 2024 and March 1, 2024 partial redemption dates, deleted the minimum liquidity covenant, and amended the 2026 Notes to permit the Company to prepay the 2026 Notes at its option, subject to certain conditions.

Exchange Agreement

In connection with the 2026 Notes Amendment, the Company entered into a letter agreement (the “Exchange Agreement”) to exchange the 2026 Warrants for a total of 8.5 million shares of common stock for a total value of $2.9 million, whereupon the Warrant was cancelled (the “Exchange”). The Company recorded a gain of $2.7 million in connection with the Exchange in the first quarter of 2024.

F-31

Additional Cost Reduction Measures

Another vital component of management’s intended plan over the next ~~ten years.~~twelve months to improve our liquidity and working capital requirements is reducing our operating costs to, among other things, reduce demands on the liquidity that is available to us. Accordingly, in the first quarter of 2024 we took the measures described below.

•We are in the process of completing a reduction in force (the “RIF”) pursuant to which we terminated approximately 20% of our total workforce, excluding direct labor. We do not expect to incur material costs in connection with the RIF.

•Each of our executive officers agreed to defer payment of approximately 20% of their cash compensation into the second quarter of 2024.

•As described above, we decided to fully transition our Aero business from a design and manufacturing drone business to Drones as a Service business. This transition has resulted in, among other things, our stopping production and development of both drone product lines and the termination of employees who performed the related work.

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

~~F-26~~F-32

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

~~Our~~We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized and reported within the specified time periods and accumulated and communicated to our management, ~~with~~including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. An evaluation of the ~~participation~~effectiveness of ~~our Principal Executive Officer~~the design and ~~Principal Financial Officer, has evaluated the effectiveness~~operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Annual Report. Based on such evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that, as of the end of the period covered by this Annual Report was made under the supervision and with the participation of our management, including our principal executive officer and principal financial officer.

Based upon this evaluation, our principal executive officer and principal financial officer have concluded that, as of December 31, 2023, our disclosure controls and procedures were ~~effective.~~

~~Our Chief Executive Officer and Chief Financial Officer have concluded that the Consolidated Financial Statements included~~not effective as of such date due to a material weakness in ~~this Annual Report on Form 10-K present fairly, in all material respects, the~~internal control over financial position of the Company at December 31, 2020 and 2019, and the consolidated results of operations and cash flows for each of the years presented herein in conformity with United States generally accepted accounting principles.reporting, as described below.

Management’s ~~Annual~~ Report on Internal Control Over Financial Reporting

~~Management of the Company~~Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as ~~required by Sarbanes-Oxley (“SOX”) Section 404(a)~~such term is defined in Securities Exchange Act Rules 13a-15(f) and 15d-15(f). ~~The Company’s internal~~Internal control over financial reporting is a process designed by, or under the supervision of, ~~the Company’s Principal~~our Chief Executive Officer and ~~Principal~~Chief Financial Officer and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s consolidated financial statements for external purposes in accordance with United States generally accepted accounting principles.

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with ~~US GAAP.~~generally accepted accounting principles and includes those policies and procedures that (1) pertain to the maintenance of records in reasonable detail to accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and our receipts and expenditures are being made only in accordance with authorizations of our management and directors and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets could have a material effect on the financial statements.

Under the supervision and with the participation of ~~our~~ management, including ~~our Principal~~Workhorse’s Chief Executive Officer and ~~Principal~~Chief Financial Officer, we conducted an evaluation of the effectiveness of internal control over financial reporting as of December 31, 2023, based on the criteria ~~established~~set forth in Internal Control -– Integrated Framework (2013) (the “Framework”) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). ~~Our management concluded that our~~

There are inherent limitations on the effectiveness of any system of internal controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective internal controls and procedures can only provide reasonable assurance of achieving their control objectives.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, ~~was effective as~~such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

During the audit process related to the year ended December 31, ~~2020.~~2023, Management identified a material weakness in the design of one of the Company's internal controls related to the review of the fair value calculation of the convertible note and warrant liability performed by a third-party valuation expert. The controls were not designed with a level of precision that would detect the use of an inappropriate input that could have a material impact on the valuation.

~~The independent registered public accounting firm~~

Based on the results of its evaluation and the material weakness described above, Management concluded that ~~audited the consolidated financial statements included in this Annual Report has issued an attestation report on~~ the Company’s internal control over financial reporting ~~which appears herein.~~

~~Limitations on~~was not effective to provide reasonable assurance regarding the ~~Effectiveness~~reliability of ~~Controls~~

~~Because of inherent limitations, internal control over~~ financial reporting ~~may not prevent or detect misstatements~~ and ~~projections~~the preparation of ~~any evaluation~~financial statements for external reporting purposes in accordance with GAAP as of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.December 31, 2023.

Changes in Internal Control over Financial Reporting

There were no changes in ~~our~~the Company’s internal control over financial reporting ~~that occurred during the quarter ended December 31, 2020,~~ that have materially affected, or are reasonably likely to materially affect, ~~our~~the Company’s internal control over financial reporting.

Remediation of the Material Weakness

We are in the process of designing and implementing remediation measures intended to address the material weakness discussed above. These remediation measures will be focused on our precision of review of the binomial lattice model performed by independent third-party valuation experts we use to value these types of complex financial instruments. The valuation procedures are to be reviewed and approved by responsible management of the Company. Under the supervision of the Audit Committee, responsible management will develop a comprehensive remediation plan, including a detailed plan and timetable for implementation, and will report regularly to the Audit Committee regarding the status of the implementation activities.

ITEM 9B. OTHER INFORMATION

~~None.~~

On March 11, 2024, each of our executive officers (including each of our Named Executive Officers) voluntarily agreed to defer receipt of 20% of their annual base salary for pay periods beginning on March 4, 2024 and ending three months thereafter. In addition, each of our directors agreed to defer receipt of monthly cash retainers for the second quarter until July 1, 2024. Our executive officers and directors agreed to the deferrals to reflect their commitment to the Company and to align their compensation with the broader actions we are taking to reduce costs. All executive officers and affected directors are expected to receive such deferred compensation following the deferral period.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

3236

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The ~~officers~~information required by this Item 10 of Form 10-K will be included in our 2024 Proxy Statement to be filed with the Securities and ~~directors of the Company are as follows:~~

~~Name~~

~~Age~~

~~Position~~

~~Raymond Chess~~

~~Director, Chairman~~

~~Harry DeMott~~

~~Director~~

~~H. Benjamin Samuels~~

~~Director~~

~~Gerald Budde~~

~~Director~~

~~Michael Clark~~

~~Director~~

~~Pamela Mader~~

~~Director~~

~~Jacqueline Dedo~~

~~Director~~

~~Duane Hughes~~

~~Chief Executive Officer, President and Director~~

~~Robert Willison~~

~~Chief Operating Officer~~

~~Steve Schrader~~

~~Chief Financial Officer~~

~~Stephen Fleming~~

~~General Counsel and Vice President~~

~~Anthony Furey~~

~~Vice President of Finance~~

~~Gregory Ackerson~~

~~Corporate Controller~~

Officers are elected annually by the Board of Directors (subject to the terms of any employment agreement) to hold such office until an officer’s successor has been duly appointed and qualified, unless an officer dies, resigns or is removed by the Board.

Our officers and directors have not been the subject of any order, judgment, or decree of any court of competent jurisdiction, or any regulatory agency permanently or temporarily enjoining, barring, suspending or otherwise limiting them from acting as an investment advisor, underwriter, broker or dealer in the securities industry, or as an affiliated person, director or employee of an investment company, bank, savings and loan association, or insurance company or from engaging in or continuing any conduct or practice in connection with any such activity orExchange Commission in connection with the ~~purchase or sale~~solicitation of ~~any securities.~~

~~Our officers~~proxies for our 2024 Annual Meeting of Stockholders and ~~directors have not been convicted in any criminal proceeding (excluding traffic violations)~~is incorporated herein by reference. The 2024 Proxy Statement will be filed with the Securities and ~~are not~~Exchange Commission within 120 days after the ~~subject of any criminal proceedings which are currently pending.~~

~~Background of Directors and Executive Officers~~

~~Raymond Chess, Director, Chairman~~

Raymond Chess has 40+ years in the automotive industry. Mr. Chess joined General Motors in 1980, and during his 37 years with General Motors, he held ever increasing roles and responsibilities in both manufacturing and product development. While in manufacturing, Mr. Chess held key positions in both plant floor operations and manufacturing engineering such as Chief Manufacturing Engineer and Executive Director of Stamping and Assembly. While in product development, Mr. Chess was a Vehicle Line Executive, where he led global cross functional responsibilities for GM’s commercial truck line from 2001 to 2009 and GM’s cross over segment from 2009 through 2012. Upon retirement from General Motors, he formed his own engineering consulting company. In 2014, Mr. Chess was elected onto the Board of Directors of Rush Enterprises. Mr. Chess also sits on the advisory board of Productive Research LLC. He started working with Workhorse in 2014 on their advisory board, was then elected to their Board of Directors and subsequently became the Chairman. We believe that Mr. Chess possesses specific attributes that qualify him to serve as Chairman and a member of our committees, including his lengthy executive experience in the automotive industry and his board experience.

~~Harry DeMott, Director~~

Mr. DeMott, has more than 25 years of experience in the investment community, having worked as an analyst and portfolio manager at leading brokerage firms and investment management firms. He has also served on the boards of several companies. He is a long-time operator and investor in the media, sports and entertainment industries. He is the co-founder of Raptor

~~Ventures I LP, where he has been a General Partner since February 2011. In addition, Mr. DeMott is a member~~end of the ~~Board of Directors of Proper (where he also serves as executive Chairman), Hi.Fi, SecurityPoint Media, Australis and Ticket Evolution.~~

He also serves as founder and managing partner for Hamerle Investments, a family investment company. Prior to co-founding Raptor Ventures, Mr. DeMott served on the Board of Directors of Pandora Media, Inc. from 2006 through 2011. Earlier, he served as senior analyst at Knighthead Capital Management, analyst at King Street Capital Management, portfolio manager at Bourgeon Capital Management and managing member and founder at Gothic Capital Management. During this 16-year period, Mr. DeMott focused on finding, fostering and investing in disruptive technology companies. He previously spent nine years at First Boston (now Credit Suisse), where he was a director in the equity research division specializing in radio, television, outdoor advertising and cell towers. He earned a Bachelor of Arts in economics from Princeton University in 1988 and a MBA in finance from New York University in 1991. We believe that Mr. DeMott possesses specific attributes that qualify him to serve as a member of the Board and a member of our committees, including his deep understanding of the financial markets and his experience in starting and operating various companies.

~~H. Benjamin Samuels, Director~~

Mr. Samuels served as CEO of Victory Packaging from May 2007 through 2015, during which time he led an executive team managing more than 1,700 employees. In 2015, Mr. Samuels was appointed as Co-President after Victory Packaging was acquired by KapStone Paper and Packaging Corporation. From 1995 through 2007, Mr. Samuels served in multiple roles, including as Vice Chairman and leader of Victory Packaging’s national accounts group, real estate, finance and legal departments, achieving a period of unprecedented growth in sales and revenues. Mr. Samuels is an active member in the community, where he served as the Chairman of the Houston Food Bank and as a director of the Samuels Family Foundation. Samuels serves on the boards of and holds leadership positions with Teach For America, Children at Risk, Brighter Bites, Move For Hunger, American Jewish Committee, Leo Baeck Education Center Foundation, and Jewish Federation of Greater Houston. Mr. Samuels received a Bachelor’s Degree in American studies and economics from Amherst College in Massachusetts as well as an MBA from the Harvard Graduate School of Business Administration. We believe that Mr. Samuels possesses specific attributes that qualify him to serve as a member of the Board and a member of our committees, including his deep understanding of managing and operating significant organizations as an executive and his experience in starting.

~~Gerald Budde, Director~~

Mr. Budde is currently the Eastern Regions Chief Financial Officer of AssuredPartners, Inc. Mr. Budde started his career in public accounting with EY after graduating with a Bachelor of Science degree in Accounting from the University of Dayton. After almost eleven years with EY as a licensed CPA, Mr. Budde spent over nine years in the machine tool industry with Cincinnati Milacron Inc., Cincinnati Machine, a successor company, and its parent company UNOVA Manufacturing Technologies, as its Vice President of Finance and Administration. Mr. Budde became the Chief Financial Officer at Neace Lukens, an insurance brokerage and consulting firm, in 2003 who was acquired by AssuredPartners in 2011. Prior to his current role, Mr. Budde was previously the Midwest Region Chief Financial Officer overseeing multiple AssuredPartners legal entities. Mr. Budde previously served on the Board of Trustees and the Finance Committee for Mount Notre Dame high school and is a member of the Finance Commission for St Margaret of York parish and school. Mr. Budde’s business, management, and accounting knowledge and experience led to the conclusion he should serve on the Board of Directors, given the Company’s business and structure. We believe that Mr. Budde possesses specific attributes that qualify him to serve as a member of the Board and as Chair of the Audit Committee, such as his executive leadership experience and his financial and accounting expertise in the public setting.

~~Michael Clark, Director~~

Mr. Clark is a Chartered Financial Analyst ("CFA") Charterholder with close to twenty years of investing and capital markets experience. He also serves as a director of Laws Whiskey House, a privately held, Denver-based award winning craft distillery. Mr. Clark has also served as a director of Halcón Resources from September 2016 until October 2019 and as a director of Paragon Offshore Ltd., as Chairman of the Corporate Governance and Compensation Committee and a member of its Audit Committee from July 2017 until its sale to Borr Drilling Limited in March 2018. Mr. Clark was a Retired Partner of SIR Capital Management, LLC from 2014 until his departure in 2016 and from 2008 to 2013 served as a Portfolio Manager and Partner. Prior to that, Mr. Clark valued equities as a Portfolio Manager at Satellite Asset Management, LLC from 2005 to 2007 and as an Equity Research Analyst at SAC Capital Management, LLC from 2003 to 2005 and at Merrill Lynch from 1997 to 2002. Mr. Clark began his career at Deloitte & Touche, LLP, progressing to Senior Auditor. He is a Certified Public Accountant licensed in New York State and also holds the Accredited in Business Valuation (ABV) credential awarded by the American Institute of Certified Public Accountants. The National Association of Corporate Directors ("NACD") recognized him as a NACD Governance Fellow in 2017. Mr. Clark graduated cum laude from the University of Pennsylvania with a Bachelor of Arts in

Economics and earned a Masters of Business Administration in Finance and Economics with Distinction (top 10%) from New York University’s Stern School of Business. Mr. Clark’s qualifications to serve on the board include his public company board service and his wealth of accounting, valuation and capital markets experience. We believe that Mr. Clark possesses specific attributes that qualify him to serve as a member of the Board and a member of our committees, including his broad experience in the capital markets, in addition to skills acquired with firms engaged in investment banking and financial services.

~~Pamela Mader, Director~~

Ms. Mader brings over two decades of automotive industry experience, with a proven track record in leading Fortune 100 manufacturing organizations as well as supporting the growth of emerging growth companies through various business advisory services. Since June 2018, Ms. Mader has served as VP Belcan Consulting Services for Belcan Engineering, Consulting, and Technical Services, LLC. From 2012 through 2018, Ms. Mader held various positions with Allegiant International, LLC. From 1994 through 2010, Ms. Mader held various positions with General Motors including Plant Manager of various General Motors assembly operations. Ms. Mader received a Bachelor of Science, Organizational Leadership from Purdue University and serves as a Board Member for Purdue University, College of Polytechnic. We believe that Ms. Mader possesses specific attributes that qualify her to serve as a member of the Board and a member of our committees, including her lengthy executive experience in the automotive industry.

~~Jacqueline Dedo, Director~~

Ms. Dedo has over 30 years of global automotive, off highway, industrial and aftermarket experience. She has held various leadership positions at Piston Group, Dana Holding Corp., Motorola, and Robert Bosch Corporation among others and has a proven background in managing full P&L responsibilities for major business units and entire companies responsible for up to $2 billion in revenue. In May 2015, Ms. Dedo co-founded Aware Mobility LLC, which is focused on the development, investing, partnering and application of both electrified propulsion and connectivity tools, platforms and applications. Prior to May 2015, Ms. Dedo served as President of Piston Group and held various positions with Dana Holding Corp, The Timken Company, Motorola, Covisint LLC, Robert Bosch Corporation and Cadillac Motor Car Company. Ms. Dedo received a Bachelor of Science, Electrical Engineering from Kettering University and holds a number of board positions including Cadillac Products, Kettering University and Michigan Science Center. We believe that Ms. Dedo possesses specific attributes that qualify her to serve as a member of the Board and a member of our committees, including her lengthy executive experience in the automotive industry.

~~Duane Hughes, Chief Executive Officer, President and Director~~

Mr. Hughes is a senior-level executive with more than 20 years’ experience including direct business relationships in the automotive, advertising, and technology segments. Mr. Hughes has served as our Chief Executive Officer and as a director since November 2019. Prior to Mr. Hughes' appointment as Chief Executive Officer, Mr. Hughes served as Chief Operating Officer and President of Workhorse from August 2016 through January 2019. Prior to joining Workhorse, Mr. Hughes served as Chief Operating Officer for Cumulus Interactive Technologies Group. As Chief Operating Officer, Mr. Hughes was responsible for managing the company’s day-to-day sales and operations. He was responsible for all operations of the business unit. Prior to Cumulus Interactive Technologies Group, Mr. Hughes spent nearly fifteen years in senior management positions with Gannett Co., Inc., including his duties as Vice President of Sales and Operations for Gannett Media Technologies International. We believe that Mr. Hughes possesses specific attributes that qualify him to serve as a member of the Board, including the perspective and experience he brings as our Chief Executive Officer, including his historic knowledge, operational expertise, and continuity to the Board.

~~Robert Willison, Chief Operating Officer~~

On February 19, 2019, the Company announced the appointment of Robert Willison as Chief Operating Officer effective February 18, 2019. Mr. Willison previously served as Director of Fleet Technology for Sysco Corporation. Prior to joining Sysco, Mr. Willison served as the Company’s Director of Research and Development from 2016 until 2018. Prior to joining the Company, Mr. Willison served as a Partner and Chief Technology Officer for Räv Technology LLC from 2014 until 2016. Prior to joining Räv Technology, Mr. Willison served as Director of International Operations and New Business Development for PDi Communication Systems.

~~Steve Schrader, Chief Financial Officer~~

Mr. Schrader has over sixteen years of experience in public and private companies in industries such as manufacturing, health care and utilities and is currently serving as our Chief Financial Officer. Prior to his appointment by the Company, from December 2015 to December 2019, Mr. Schrader was Chief Financial Officer of Fuyao Glass America Inc., a subsidiary of a

Chinese-owned public company specializing in the manufacture of automobile glass. From October 2006 to May 2015, Mr. Schrader served as the Chief Financial Officer of Oncology Hematology Care ("OHC"), the largest oncology practice in the Cincinnati metro area. Mr. Schrader started his career working for utilities that are now part of Duke Energy. His last position there was Vice President and Chief Financial Officer of Cinergy’s Regulated Business prior to Duke’s acquisition in 2006. Mr. Schrader holds a B.S. in Finance and Accounting from Ball State and an MBA from Butler University. He also received an Advanced Management Program Certificate from Harvard Business School.

~~Stephen Fleming, General Counsel and Vice President~~

Mr. Fleming serves as our corporate general counsel. Prior to joining Workhorse in November 2019, Mr. Fleming served as outside corporate/securities counsel to Workhorse since 2010. Mr. Fleming has served as the Managing Member of Fleming PLLC, a boutique law firm specializing in corporate/securities law, since 2008. Mr. Fleming graduated from Catholic University of America in 1995 with a Bachelor of Arts in Political Science. In 1999, Mr. Fleming received his Juris Doctorate and Master of Science in Finance from the University of Denver.

~~Anthony Furey, Vice President of Finance~~

Mr. Furey is a senior-level finance executive with more than 25 years of experience in corporate finance and capital markets and is currently serving as our Vice President of Finance. Prior to that, Mr. Furey was the Director of Business Development for Workhorse and Director of Finance for SureFly a former subsidiary of Workhorse Group. Prior to joining Workhorse, Mr. Furey owned and was president of Fastnet Advisors, LLC, a mergers and acquisition and corporate advisory practice. As President, Mr. Furey led over $300 million in financing and uplisting transactions, and was responsible for managing the company’s day-to-day growth and operations. Prior to Fastnet Advisors, LLC, Mr. Furey spent fifteen years on both the buy and sell side in institutional sales and trading, holding Series 7,65 & 63 licenses.

~~Gregory Ackerson, Corporate Controller~~

Mr. Ackerson has been with the Company since April 2018. Prior to joining the Company, Mr. Ackerson was an Assurance Senior Manager with BDO USA LLP from December 2015 through March 2018, and Senior Manager Technical Accounting for NewPage Corporation from April 2011 through March 2015. Mr. Ackerson has also served as an Inspection Specialist for PCAOB and various progressive audit roles with PwC. Mr. Ackerson received his Master of Science in Accounting and Bachelor of Business Administration and Finance from the University of Cincinnati.

~~Family Relationships~~

~~There are no family relationships among our directors and executive officers. There is no arrangement or understanding between or among our executive officers and directors pursuant~~fiscal year to which ~~any director or officer was or is to be selected as a director or officer.~~

~~Involvement in Certain Legal Proceedings~~

~~To our knowledge, during the last ten years, none of our directors and executive officers has:~~

•~~Had a bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time.~~

•~~Been convicted in a criminal proceeding or been subject to a pending criminal proceeding, excluding traffic violations and other minor offenses.~~

•Been subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities.

•Been found by a court of competent jurisdiction (in a civil action), the SEC, or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.

•Been the subject to, or a party to, any sanction or order, not subsequently reverse, suspended or vacated, of any self-regulatory organization, any registered entity, or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

~~CORPORATE GOVERNANCE~~

~~Governance Policies of the Board of Directors~~

The Board of Directors has adopted Governance Policies of the Board of Directors to assist the Board in the exercise of its duties and responsibilities and to serve the best interests of the Company and its stockholders. These policies provide a framework for the conduct of the Board’s business.

~~Committees~~

~~Establishment of Board Committees and Adoption of Charters~~

The Company has a Nominating and Corporate Governance Committee, a Compensation Committee and an Audit Committee (collectively, the “Committees”) and approved and adopted charters to govern each of the Committees.

In connection with the establishment of the Nominating and Corporate Governance Committee, Compensation Committee and Audit Committee, the Board of Directors of the Company appointed members to each such committee. Currently, all three committees are comprised of at least three (3) directors meeting the requirements set forth in each applicable charter. The membership of these three standing committees of the Board of Directors of the Company is as follows:

~~Nominating and Corporate Governance Committee~~

~~Compensation Committee~~

~~Audit Committee~~

~~Jacqueline Dedo (Chairwoman)~~

~~Michael Clark (Chairman)~~

~~Gerald Budde (Chairman)~~

~~Pamela Mader~~

~~Harry DeMott~~

~~Jacqueline Dedo~~

~~Harry DeMott~~

~~H. Benjamin Samuels~~

~~Raymond Chess~~

~~Pamela Mader~~

~~Michael Clark~~

~~Nominating and Corporate Governance Committee~~

Our board of directors has determined that each of the members of the Governance Committee is an “independent director” as defined by the rules of The NASDAQ Stock Market, Inc. The Governance Committee is generally responsible for recommending to our full board of directors’ policies, procedures, and practices designed to help ensure that our corporate governance policies, procedures, and practices continue to assist the board of directors and our management in effectively and efficiently promoting the best interests of our stockholders. The Governance Committee is also responsible for selecting and recommending for approval by our board of directors and our stockholders a slate of director nominees for election at each of our annual meetings of stockholders, and otherwise for determining the board committee members and chairmen, subject to board of directors ratification, as well as recommending to the board director nominees to fill vacancies or new positions on the board of directors or its committees that may occur or be created from time to time, all in accordance with our bylaws and applicable law. The Governance Committee’s principal functions include:

•~~developing and maintaining our corporate governance policy guidelines;~~

•~~developing and maintaining our codes of conduct and ethics;~~

•~~overseeing the interpretation and enforcement of our Code of Conduct and our Code of Ethics for Chief Executive Officer and Senior Financial and Accounting Officers;~~

•~~evaluating the performance of our board of directors, its committees, and committee chairmen and our directors; and~~

•selecting and recommending a slate of director nominees for election at each of our annual meetings of the stockholders and recommending to the board director nominees to fill vacancies or new positions on the board of directors or its committees that may occur from time to time.

During 2020, the Governance Committee met one time. The Governance Committee is governed by a written charter approved by our board of directors. A copy of the Governance Committee’s charter is posted on the Company’s website at www.workhorse.com in the “Investors” section of the website. In identifying potential independent board of directors’ candidates with significant senior-level professional experience, the Governance Committee solicits candidates from the board

of directors, senior management and others and may engage a search firm in the process. The Governance Committee reviews and narrows the list of candidates and interviews potential nominees. The final candidate is also introduced and interviewed by the board of directors and the lead director if one has been appointed. In general, in considering whether to recommend any particular candidate for inclusion in our board of directors’ slate of recommended director nominees, the Governance Committee will apply the criteria set forth in our corporate governance guidelines. These criteria include the candidate’s integrity, business acumen, commitment to understanding our business and industry, experience, conflicts of interest and the ability to act in the interests of our stockholders. Further, specific consideration is given to, among other things, diversity of background and experience that a candidate would bring to our board of directors. The Governance Committee does not assign specific weights to particular criteria and no particular criterion is a prerequisite for each prospective nominee. We believe that the backgrounds and qualifications of our directors, considered as a group, should provide a composite mix of experience, knowledge and abilities that will allow our board of directors to fulfill its responsibilities. Stockholders may recommend individuals to the Governance Committee for consideration as potential director candidates by submitting their names, together with appropriate biographical information and background materials to our Governance Committee. Assuming that appropriate biographical and background material has been provided on a timely basis, the Governance Committee will evaluate stockholder recommended candidates by following substantially the same process, and applying substantially the same criteria, as it follows for candidates submitted by others.

~~Audit Committee~~

We have a separately-designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Our board of directors has determined that the members are all “independent directors” as defined by the rules of The NASDAQ Stock Market, Inc. applicable to members of an audit committee and Rule 10A-3(b)(i) under the Exchange Act. In addition, Mr. Budde is an “audit committee financial expert” as defined in Item 407(d)(5) of Regulation S-K and demonstrates “financial sophistication” as defined by the rules of The NASDAQ Stock Market, Inc. The Audit Committee is appointed by our board of directors to assist our board of directors in monitoring (1) the integrity of our financial statements, (2) our compliance with legal and regulatory requirements, and (3) the independence and performance of our internal and external auditors. The Audit Committee’s principal functions include:

•reviewing our annual audited financial statements with management and our independent auditors, including major issues regarding accounting principles, auditing practices and financial reporting that could significantly affect our financial statements;

•reviewing our quarterly financial statements with management and our independent auditor prior to the filing of our Quarterly Reports on Form 10-Q, including the results of the independent auditors’ reviews of the quarterly financial statements;

•~~recommending to the board of directors the appointment of, and continued evaluation of the performance of, our independent auditor;~~

•~~approving the fees to be paid to our independent auditor for audit services and approving the retention of our independent auditor for non-audit services and all fees for such services;~~

•~~reviewing periodic reports from our independent auditor regarding our auditor’s independence, including discussion of such reports with the auditor;~~

•~~reviewing the adequacy of our overall control environment, including internal financial controls and disclosure controls and procedures; and~~

•reviewing with our management and legal counsel legal matters that may have a material impact on our financial statements or our compliance policies and any material reports or inquiries received from regulators or governmental agencies.

~~During 2020, the audit committee met four times. A copy of the Audit Committee’s charter is posted on the Company’s website at www.workhorse.com in the “Investors” section of the website.~~

~~Meetings may be held from time to time to consider matters for which approval of our Board of Directors is desirable or is required by law.~~

~~Compensation Committee~~

~~A full discussion of our compensation committee can be found under Item 11 – Executive Compensation.~~

~~Company Policies~~

The Company has established the following written policies that have been distributed and reviewed with all Company employees: Approval policy, Purchase Requisition policy, Conflict of Interest policy, “Do the Right Thing” (ethics) policy and a Travel and Expense policy.

~~Section 16(a) Beneficial Ownership Reporting Compliance~~

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers and persons who own more than 10% of the issued and outstanding shares of our common stock to file reports of initial ownership of common stock and other equity securities and subsequent changes in that ownership with the SEC. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, during the year ended December 31, 2020 all Section 16(a) filing requirements applicable to our officers, directors and greater than 10% beneficial owners were complied with.this report relates.

ITEM 11. EXECUTIVE COMPENSATION

~~COMPENSATION DISCUSSION AND ANALYSIS ("CD&A")~~

This CD&A is designed to provide our shareholders with an understanding of our compensation philosophy and objectives, as well as the analysis that we performed in setting executive compensation for 2020. It discusses the Compensation Committee’s (referred to as the Committee in this CD&A) determination of how and why, in addition to what, compensation actions were taken during 2020 for our Chief Executive Officer and our two next highest paid executive officers (the “Named Executive Officers” or “NEOs”).

~~Overview~~

Many of our compensation decisions for the last couple of years reflect our continued transition of our executive compensation program. Workhorse’s historical compensation philosophy was to provide base salaries with equity-based incentives, primarily in the form of stock options. However, in order to continue to attract high quality executives and employees, we recognized that we needed to be more competitive on cash compensation going forward by offering a more structured annual bonus program, and we also shifted to granting restricted stock awards mixed with options as part of our equity incentives to better align with market practices.

~~Highlights of 2020 Executive Compensation Actions~~:

~~Executive Salaries~~

~~After making a few adjustments in 2019, our executive level base salaries remained flat in 2020. Generally, our NEO salaries were comparable to the 30th percentile of the market.~~

~~Annual Incentives~~

Annual incentive target opportunities remain unchanged. As part of our effort to align our executive compensation program with market each NEO has a target bonus opportunity expressed as a percentage of base salary.

~~We maintained a formalized approach to funding annual incentives during 2020.~~ The bonus funding for 2020 was formulaically determined based on a mix of financial and individual performance targets. Although we made substantial progress on our operating model in 2020, both adjusted EBITDA and Gross Margin were below threshold. We had strong safety performance in 2020 and individual performance was assessed by the Compensation Committee to be at maximum performance levels, resulting in overall annual incentive funding below target opportunity level.

~~Restricted Stock Awards~~

During 2020, we granted restricted stock awards with time-based vesting over a 3 year period. Given our historical reliance on stock options, this form of equity provides greater retention incentives, creates more direct alignment with stockholders, and is more consistent with peer practices.

~~CEO Compensation~~

We placed emphasis on allocating a significant portion of our CEO’s compensation to at-risk and variable pay. Approximately 67% of our CEO’s target total compensation qualifies as at-risk or variable in nature. The graph below illustrates the allocation of our CEO’s pay under our latest programs and awards.

~~Our Named Executive Officers~~

Our Named Executive Officers, along with other select members of the senior management team participate in the compensation plans and programs described in this CD&A. While different in some aspects of their operation, the compensation programs for the broader employee population at Workhorse are driven by consistent principles which seek to compete effectively in our industry with the ability to reward for strong corporate and individual performance.

~~The list below reflects our Principal Executive Officer and our two other highest paid executive officers in 2020:~~

~~Name~~

~~Age~~

~~Position~~

~~Duane Hughes~~

~~Chief Executive Officer, President and Director~~

~~Robert Willison~~

~~Chief Operating Officer~~

~~Stephen Fleming~~

~~General Counsel and Vice President~~

~~Workhorse's Executive Compensation Objections & Practice~~s

In order to accomplish our goals and to ensure that the Company's executive compensation program is consistent with its direction and business strategy, the compensation program for our senior executive officers is based on the following objectives:

•~~to attract, motivate, retain and reward a knowledgeable and driven management team and to encourage them to attain and exceed performance expectations within a calculated risk framework; and~~

•~~to reward each executive based on individual and corporate performance and to incentivize such executives to drive the organization's current growth and sustainability objectives.~~

~~These objectives serve to assure our long-term success and are built on the following compensation principles:~~

•~~compensation is designed to align executives to the critical business issues facing the Company;~~

•~~compensation should be fair and reasonable to shareholders and be set with reference to the local market and similar positions in comparable companies;~~

•~~an appropriate portion of total compensation should be equity-based, aligning the interest of executives with shareholders; and~~

•~~compensation should be transparent to the Board of Directors, executives, and our shareholders.~~

All elements of compensation are compared to the total compensation packages of a peer group of companies, which includes both competitors and companies representing our industry broadly to reflect the markets in which we compete for business and people.

~~Compensation Best Practices~~

We have made significant effort to align our executive compensation programs and practices with stockholder interests, and to incorporate strong governance standards within our compensation program, such as:

†~~Annual Incentives Based on Performance~~ - In 2020, we designed and implemented an annual incentive award program that is based on Company financial and operational performance; we include an assessment of individual performance as determined by the Committee and added safety performance to the bonus plan, incorporating a measure that incorporates environmental, social, and corporate governance into our plan.

†~~Cap on Incentive Award Payouts~~ ~~- Incentive award payouts are capped in our incentive program.~~

†~~Balanced Mix of Variable & Performance Based Compensation~~ - We provide our executives with a balanced mix of variable and performance based compensation designed to motivate our executives to improve both our financial performance and stock price over the short and long-term.

†~~Actively Engage with our Shareholders~~ ~~- We actively engage with our largest shareholders and consider feedback and input on our programs and practices.~~

†~~Anti-Hedging & Anti-Pledging Policies -~~ ~~We prohibit our executives and directors from hedging and pledging Company securities.~~

†~~"Double Trigger" Change of Control Payments~~ ~~- Our change of control program provides for cash payments that are triggered only if a qualifying termination of employment occurs in connection with the change in control.~~

†~~Clawback Policy~~ - Our annual incentive awards and any future performance based awards are subject to a clawback policy which applies to all of our executive officers and provides for the forfeiture of these awards or the return of any related gain in the event of a restatement of our financial statements.

†~~Stock Ownership Guidelines~~ ~~- We encourage and require stock ownership by our executive team. Our CEO is required to own 6X his base salary and our other NEO's are required to own 3X their respective base salaries.~~

†~~No Excise Tax Gross-Ups~~ ~~- We do not provide gross-ups in any executive employment agreement or severance program.~~

†~~Engagement of Independent Compensation Consultant~~ ~~- Our Committee retains an independent compensation consultant who reports directly to the Committee and does not provide any other services to management or the Company.~~

~~What We Don't Do~~

X ~~No Guaranteed Annual Salary Increases or Bonuses.~~

X ~~No Special Tax Gross Ups.~~

X ~~No Repricing or Exchange of Underwater Stock Options.~~

X ~~No Plans that Encourage Excessive Risk-Taking.~~

X ~~No Hedging or Pledging of Workhorse Securities.~~

X ~~No Excessive Perks.~~

~~Executive Compensation Recoupment Policy~~

~~The Board can recoup all or part of any compensation paid to an executive officer in the event of a material restatement of the Company's financial results. The Board will consider:~~

•whether any executive officer received compensation based on the original consolidated financial statements because it appeared he or she achieved financial performance targets that in fact were not achieved based on the restatement; and

•the accountability of any executive officer whose acts or omissions were responsible, in whole or in part, for the events that led to the restatement and whether such actions or omissions constituted misconduct.

~~Role of the Compensation Committee in Setting Compensation & Overall Oversight of Our Programs~~

Our compensation committee consists of Michael Clark, Harry DeMott, H. Benjamin Samuels, and Pamela Mader. Our board of directors has determined that each of the members are an “independent director” as defined by the rules of The NASDAQ Stock Market, Inc. applicable to members of a compensation committee. The Compensation Committee is responsible for establishing the compensation of our senior management, including salaries, bonuses, termination arrangements, and other executive officer benefits as well as director compensation. The Compensation Committee also administers our equity incentive plans. During 2020, the Compensation Committee met three times. The Compensation Committee is governed by a written charter approved by the board of directors. A copy of the Compensation Committee’s charter is posted on the Company’s website at www.workhorse.com in the “Investors” section of the website. The Compensation Committee works with the Chairman of the Board and Chief Executive Officer and reviews and approves compensation decisions regarding senior management including compensation levels and equity incentive awards. The Compensation Committee also approves employment and compensation agreements with our key personnel and directors. The Compensation Committee has the power and authority to conduct or authorize studies, retain independent consultants, accountants or others, and obtain unrestricted access to management, our internal auditors, human resources and accounting employees and all information ~~relevant to its responsibilities.~~

~~The responsibilities of the Compensation Committee, as stated in its charter, include the following:~~

•~~review and approve the Company’s compensation guidelines and structure;~~

•~~review and approve, on an annual basis, the corporate goals and objectives with respect to compensation for the Chief Executive Officer;~~

•~~review and approve, on an annual basis, the evaluation process and compensation structure for the Company’s other officers, including salary, bonus, incentive and equity compensation; and~~

•~~periodically review and make recommendations to the Board of Directors regarding the compensation of non-management directors.~~

The Compensation Committee is responsible for developing the executive compensation philosophy and reviewing and recommending to the Board of Directors for approval all compensation policies and compensation programs for the executive team.

~~Role of Management in Setting Compensation~~

Our CEO is consulted in the Committee’s determination of compensation matters related to the executive officers reporting directly to the CEO. Each year, the CEO makes recommendations to the Committee regarding such components as salary adjustments, target annual incentive opportunities and the value of long-term incentive awards. In making his recommendations, the CEO considers such components as experience level, individual performance, overall contribution to Company performance and market data for similar positions. The Committee takes the CEO’s recommendations under advisement, but the Committee makes all final decisions regarding such individual compensation.

Our CEO’s compensation is reviewed and discussed by the Committee, which then makes recommendations regarding his compensation to the independent members of our board of directors. Our board of directors ultimately makes decisions regarding the CEO’s compensation.

Our CEO attends Committee meetings as necessary. He is excused from any meeting when the Committee deems it advisable to meet in executive session or when the Committee meets to discuss items that would impact the CEO’s compensation. The Committee may also consult other employees, including the remaining Named Executive Officers, when making compensation decisions, but the Committee is under No obligation to involve the Named Executive Officers in its decision-making process.

~~Role of the Compensation Consultant in Setting Compensation~~

The Compensation Committee has engaged the services of Compensation Advisory Partners, LLC (“CAP”) as its independent executive compensation consultant. Certain of our Board members have worked with CAP in the past and value the firm’s collective knowledge and capabilities, and its ability to help us develop compensation programs that incentivize our executives and align performance with company strategies and stockholders’ interests.

CAP’s current role is to advise the Committee on matters relating to executive compensation to help guide, develop, and implement our executive compensation programs. CAP reports directly to the Compensation Committee. The Committee regularly reviews the services provided by CAP and believe the firm to be independent in providing executive compensation consulting services to us. A review of CAP’s relationship did not raise any conflicts of interest, consistent with the guidelines provided under the Dodd-Frank Act and by the SEC and the NYSE. In making this determination, the Committee notes that during 2020:

•CAP did not provide any services to the Company or management, other than services requested by or with the approval of the Committee, and its services were limited to executive and director compensation consulting;

•~~The Committee or members of the Committee meet regularly in executive sessions with CAP, outside the presence of management;~~

•~~CAP maintains a conflicts policy, which was provided to the Committee with specific policies and procedures designed to ensure independence;~~

•~~Fees paid to CAP by Workhorse during 2020 were less than 1% of CAP's total revenue;~~

•~~None of the CAP consultants working on matters with us had any business or personal relationships with Committee members (other than in connection with working on matters with us);~~

•~~None of the CAP consultants working on matters with us (or any consultants at CAP) had any business or personal relationships with any of our executive officers; and~~

•~~None of the CAP consultants working on matters with us own shares of our common stock.~~

~~The Committee continues to monitor the independence of its compensation consultant on a periodic basis.~~

~~Compensation Peer Group~~

We have developed a compensation peer group, which is composed of specific peer companies within our industry. Our peer group was developed with the assistance of CAP and is used to analyze our executive and director compensation levels and overall program design. This compensation peer group is used to determine market levels of the main elements of executive compensation (base salary, annual incentives/bonus, long-term incentives, as well as total direct compensation).

The peer group is also used to gauge industry practices regarding the structure and mechanics of annual and long-term incentive plans, employment agreements, severance and change in control policies and employee benefits. The composition of the peer group is reviewed by the Committee on an annual basis to ensure that we have and maintain an appropriate group of comparator companies.

In September 2020, with the assistance of CAP, the Committee developed and approved the peer group for use as a source of executive compensation and practices data. Criteria for selecting peer companies for compensation benchmarking is based on a number of factors. The peer companies selected should reflect an optimum mix of the criteria listed below in their relative order of importance:

~~Competitive market~~:

†~~Competing Talent—companies with executive talent similar to that valued by us;~~

†~~Competitors—companies in the same or similar industry sector; and~~

†~~Competing Industry—companies in the same general industry sector having similar talent pools.~~

~~Size and demographics~~:

†~~Companies that are generally similar in revenue and/or market cap size and whose median revenue for the group approximates our revenue;~~

†~~Firms with a competitive posture and comparable area of operations; and~~

†~~Companies within our corporate headquarters region~~

~~The Committee, based on CAP’s analysis and our internal analysis, determined to use the following peer group of 17 companies to evaluate and compare our compensation practices in 2020:~~

Ticker Peer Company HQ Location ~Miles to WKHS Insiders Ownership Post IPO Yrs Fiscal Yr End ↓TTM Revenue $ % Change TTM Rev. Primary Industry Market CAP $ TSR 1-Year TSR 3-Year
SMP Standard Motor Products Long Island City, NY 561 10% 52.6 12/20 1,051.2 (7.2)% Auto Parts & Equipment 998 (7.2)% (1.1)%
DORM Dorman Products Colmar, PA 478 11% 29.4 12/20 984.3 (2.2)% Auto Parts & Equipment 2,912 13.6% 8.1%
BLBD Blue Bird Corp. Macon, GA 444 11% 5.5 09/20 941.3 (6.5)% Const. Machinery/Hvy Trucks 329 (36.1)% (16.1)%
THRM Gentherm Northville, MI 219 1% 27.2 12/20 835.1 (18.0)% Auto Parts & Equipment 1,336 (50.0)% 3.3%
SHLO Shiloh Industries Valley City, OH 230 5% 27.1 10/20 815.7 (25.6)% Auto Parts & Equipment 2 (97.7)% (79.1)%
CVGI Commercial Vehicle Grp New Albany, OH 84 4% 16.0 12/20 728.9 (22.0)% Const. Machinery/Hvy Trucks 213 (9.4)% (3.9)%
SHYF Shyft Group, The Novi, MI 236 4% 36.1 12/20 705.6 24.8% Const. Machinery/Hvy Trucks 671 38.6% 20.6%
MLR Miller Industries Ooltewah, TN 292 4% 24.6 12/20 703.2 (11.6)% Const. Machinery/Hvy Trucks 349 (6.0)% 5.6%
HZN Horizon Global Corp. Plymouth, MI 219 10% 5.1 12/20 603.9 (14.0)% Auto Parts & Equipment 148 50.5% (31.2)%
MPAA Motorcar Parts of America Torrance, CA >625 2% 26.4 03/21 522.0 6.5% Auto Parts & Equipment 296 (7.9)% (19.2)%
STRT Strattec Security Corp. Milwaukee, WI 324 5% 25.5 06/20 385.3 (20.9)% Auto Parts & Equipment 77 1.3% (20.0)%
VOXX VOXX Intl. Corp. Orlando, FL >625 21% 33.2 02/21 373.4 (15.0)% Consumer Electronics 184 63.6% (3.5)%
AMOT Allied Motion Tech. Amherst, NY 376 19% 51.6 12/20 363.6 6.8% Elect. Components & Equip. 402 17.3% 18.0%
ULBI Ultralife Corp. Newark, NY 461 35% 27.6 12/20 112.9 26.1% Elect. Components & Equip. 94 (31.9)% (4.4)%
SYPR Sypris Solutions Louisville, KY 106 33% 26.2 12/20 83.5 (6.3)% Auto Parts & Equipment 23 6.2% (8.3)%
PRCP Perceptron Plymouth, MI 219 2% 28.0 06/20 62.3 (19.0)% Elect. Components & Equip. 66 41.9% (4.8)%
TAYD Taylor Devices N. Tonawanda, NY 391 13% 40.6 05/21 28.4 (11.2)% Industrial Machinery 33 (7.3)% (8.2)%
75th Percentile
815.7 (2.2)% 402 17.3% 3.3%
Median Company Count = 17 603.9 (11.2)% 213 (50.0)% (4.4)%
25th Percentile
363.6 (18.0)% 77 (7.9)% (16.1)%
WKHS Workhorse Group Inc. Loveland, OH — 9% 10.6 12/20 0.2 (54.4) % Auto Parts & Equipment 2,658 622.3% 109.2%
TTM (Trailing Twelve Months) up to June 30, 2020 Information from Standard & Poor's Capital IQ
All dollar values are in millions (000s) Current Market Cap and TSR as of September 30, 2020

~~We will continue to monitor this group each year to determine the best mix of companies to use as comparators for compensation related purposes.~~

~~Overview of Executive Compensation~~

The Company recognizes that people are our primary asset and our principal source of competitive advantage. In order to recruit, motivate and retain the most qualified individuals as senior executive officers, the Company strives to maintain an executive compensation program that is competitive in the commercial transportation industry, which is a competitive, global labor market.

The Compensation Committee’s compensation objective is designed to attract and retain the best available talent while efficiently utilizing available resources. The Compensation Committee compensates executive management primarily through base salary and equity compensation designed to be competitive with comparable companies, and to align management’s compensation with the long-term interests of shareholders. In determining executive management’s compensation, the Compensation Committee also takes into consideration the financial condition of the Company and discussions with the executive.

In order to accomplish our goals and to ensure that the Company’s executive compensation program is consistent with its direction and business strategy, the compensation program for our senior executive officers is based on the following objectives:

•~~to attract, motivate, retain and reward a knowledgeable and driven management team and to encourage them to attain and exceed performance expectations within a calculated risk framework; and~~

•~~to reward each executive based on individual and corporate performance and to incentivize such executives to drive the organization’s current growth and sustainability objectives.~~

~~The following key principles guide the Company’s overall compensation philosophy:~~

•~~compensation is designed to align executives to the critical business issues facing the Company;~~

•~~compensation should be fair and reasonable to shareholders and be set with reference to the local market and similar positions in comparable companies;~~

•~~an appropriate portion of total compensation should be equity-based, aligning the interests of executives with shareholders; and~~

•~~compensation should be transparent to the Board of Directors, executives, and shareholders.~~

~~Compensation Elements and Rationale~~

There are three basic components to the Company’s executive compensation program: base salary, our annual incentive program, and long-term incentive equity compensation. The Compensation Committee actively evaluates our executive compensation program design against best market practices as the Company experiences further growth. A recent review of our NEO compensation levels relative to market found that overall total compensation is below the median of our peer group. This result was in part due to our 2020 annual incentive program which yielded payouts below target for the year. We believe our structure provides compensation opportunity that is competitive with market but also requires the executive team to perform and execute our goals to be earned.

~~Base Salary~~

Base salary is the foundation of the compensation program and is intended to compensate competitively relative to comparable companies within our industry and the marketplace where we compete for talent. Base salary is a fixed component of the compensation program and is used as the base to determine elements of incentive compensation and benefits.

~~As shown in the table below, Mr. Hughes base salary remained at $475,000 and our other NEO salaries were held flat in 2020.~~

Position 2020 Salary 2019 Salary % Change
Chief Executive Officer, President and Director $475,000 $475,000 0%
Chief Operating Officer $300,000 $300,000 0%
General Counsel and Vice President $300,000 $300,000 0%

~~Annual Incentive Program (Bonus)~~

During the 1st quarter of 2020, the Committee established the 2020 annual cash incentive bonus program, pursuant to which our Named Executive Officers were eligible to receive performance-based cash bonuses based on certain quantitative and qualitative performance metrics. For 2020, our Named Executive Officers’ target bonus opportunities were set based on market norms and each executive’s role within the Company. Our CEO bonus target is set at 100% of base salary, and 50% for our General Counsel and VP Finance. Our Named Executive Officers’ maximum bonus opportunities were 200% for our CEO and 75% for our General Counsel and VP Finance.

Position Target Bonus
(as % of base) Maximum Bonus
(as % of base)
Chief Executive Officer, President and Director 100% 200%
Chief Operating Officer 50% 75%
General Counsel and Vice President 50% 75%

The financial measures of adjusted EBITDA and Gross Margin accounted for a total of 30% of the target bonus opportunity, while individual performance objectives account for 40% of target bonus opportunity. We added a measure which set targets for trucks produced and delivered. It accounted for 25% of the target bonus opportunity. The final 5% of the bonus is based on our safety record by measuring our Total Recordable Incident Rate ("TRIR").


~~Performance Metric~~						~~Weight~~
~~Individual Objectives~~						~~40%~~
~~Trucks produced and delivered~~						~~25%~~
~~Gross margin (sales less BOM)~~						~~15%~~
~~EBITDA~~						~~15%~~
~~TRIR~~						5%

Payout opportunities were established according to a threshold, target and maximum performance for each performance metric. For each financial performance metric, threshold performance is equal to 50% of target performance and maximum performance is equal to 200% of target performance. In addition, with respect to each financial performance metric, if threshold level performance is achieved, then a threshold level payout is triggered, and if the maximum performance is achieved then a maximum level payout occurs. The chart below shows our CEO’s performance requirements and payout curves for each performance metric under the 2020 annual cash incentive bonus program:

After the level of performance is determined by the Compensation Committee, the payout percentage for each individual metric is added together to calculate the total payout percentage for each Named Executive Officer. The final payout percentage is then multiplied by the participant’s target bonus opportunity in order to calculate the total bonus payable to each Named Executive Officer. On February 24, 2021, based on the Company’s achievement relative to the adjusted EBITDA, gross margin, trucks produced and delivered, safety and each Named Executive Officer’s individual performance, our Compensation Committee approved payouts to be made to our Named Executive Officers under the 2020 annual cash incentive bonus program in the amounts set forth in the “Non-Equity Incentive Plan Compensation” column in the Summary Compensation Table.

~~2020 Payouts~~

Performance for our adjusted EBITDA, gross margin, and trucks produced and delivered fell below threshold levels. As a result our executives did not receive a bonus payout related to these measures which accounts for 55% of the target opportunity. Our safety component paid out at target, which is 5% of the total target bonus opportunity, based on our total recordable incident rate in 2020. For the individual performance component of our program, the Compensation Committee determined that our executives performed at a very high level navigating through capital raises while developing our Horsefly-UPS relationship, getting EPA and CARB certifications, as well as successfully engaging in shareholder outreach among other accomplishments. The Committee also considered how well the stock performed in 2020 during our CEO’s tenure and determined that the individual performance component should pay out at above target.

~~Overall 2020 payouts to our NEO's were below target and ranged from 45%-81% of target.~~


~~Position~~						2020 Payout as a % of Target
~~Chief Executive Officer~~						~~81%~~
~~Chief Operating Officer~~						~~45%~~
~~General Counsel and Vice President~~						~~68%~~

~~Long-Term Incentive (Equity)~~

The Company’s long-term incentive program provides for the granting of stock options and restricted stock to executive officers to both motivate executive performance and retention, as well as to align executive officer performance to shareholder value creation. In awarding long-term incentives, the Company compares the long-term incentive program to that of comparable companies within our industry and evaluates such factors as the value of awards granted to each executive position within the market, the number of shares available under our Stock Incentive Plan, and the number of awarded shares outstanding relative to our total common shares outstanding. The Board of Directors fixes the exercise price of stock options at the time of the grant based on the market price of our stock on the NASDAQ.

Each long-term incentive grant is based on the level of the position held and overall market competitiveness. The Compensation Committee takes into consideration previous grants when it considers new grants of stock options and restricted stock.

Each of the NEOs has a target LTI value expressed as a percentage of base salary. These targets are reviewed on an annual basis and serve as a guide to the Committee in establishing grant values each year. Our 2020 LTI award targets are shown in the table below.


~~Position~~						Target LTI Award Value (% of base salary)
~~Chief Executive Officer, President and Director~~						~~100%~~
~~Chief Operating Officer~~						~~75%~~
~~General Counsel and Vice President~~						~~50%~~

~~2020 NEO Awards~~

In 2020, we awarded restricted stock to our CEO and other NEOs. Our Chief Executive Officer, President and Director, Mr. Hughes, received a grant of 179,245 restricted shares with a grant date fair value of $475,000. Mr. Fleming, our General Counsel and Vice President, received a grant of 84,906 restricted shares with a grant date fair value of $225,000. Mr. Furey, our Vice President of Finance, received a grant of 42,453 restricted shares with a grant date fair value of $112,500. All of these restricted share awards to our executives vest ratably over a three year period. We believe that awarding restricted stock to balance our history of granting stock options was important in 2020 for retention and to directly tie our executives interests to those of our shareholders through share ownership.

~~Non-Cash Compensation~~

~~The Company provides standard health benefits to its executives, including medical, dental and disability insurance.~~

~~The Company’s non-cash compensation is intended to provide a similar level of benefits as those provided by comparable companies within our industry.~~

~~Pension Benefits~~

~~None.~~

~~Non-Qualified Deferred Compensation~~

~~None.~~

~~Retirement, Resignation or Termination Plans~~

Each of the Company’s executive employment agreements with Messrs. Hughes, Fleming, and Furey contemplates the case of termination due to various provisions whereby the named executive officers will receive severance payments, as described below.

~~Compensation and Risk~~

We do not believe that our compensation policies and practices are reasonably likely to have a material adverse effect on us. We have taken steps to ensure our executive compensation program does not incentivize risk outside the Company’s risk appetite. Some of the key ways that we currently manage compensation risk are as follows:

•~~appointed a Compensation Committee which is composed entirely of independent directors to oversee the executive compensation program;~~

•the use of a mix of deferred equity compensation in the form of stock options in 2019 and restricted stock awards in 2020 to encourage a focus on long-term corporate performance versus short-term results and retention of key exectutive talent; and

•~~disclosure of executive compensation to stakeholders;~~

~~Consideration of Most Recent Shareholder Advisory Vote on Executive Compensation~~

As required by ~~Section 14A~~this Item 11 of the Exchange Act, at our 2018 Annual Meeting of Stockholders our stockholders voted, in an advisory manner, on a proposal to approve our named executive officer compensation. This was our most recent stockholder advisory vote to approve named executive officer compensation. The proposal was approved by our stockholders, receiving approximately 91% of the vote of the stockholders present in person or represented by proxy and voting at the meeting.

~~Compensation Committee Interlocks and Insider Participation~~

No person who served as a member of our Compensation Committee during Fiscal 2020 was a current or former officer or employee of our Company or engaged in certain transactions with our Company required to be disclosed by regulations of the SEC. Additionally, during Fiscal 2020 there were No Compensation Committee “interlocks,” which generally means that No executive officer of our Company served: (a) as a member of the compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity which had an executive officer serving as a member of our Company’s Compensation Committee; (b) as a director of another entity which had an executive officer serving as a member of our Company’s Compensation Committee; or (c) as a member of the compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity which had an executive officer serving as a director of our Company.

~~Compensation Committee Report~~

The Compensation Committee has reviewed and discussed the foregoing compensation discussion and analysis with Company management. Based on that review and those discussions, the Compensation Committee recommended to the Board of Directors that the compensation discussion and analysisForm 10-K will be included in ~~this Annual Report. This report~~our 2024 Proxy Statement and is ~~provided~~incorporated herein by ~~the following independent directors, who comprise the Compensation Committee: Michael Clark, Harry DeMott, H. Benjamin Samuels and Pamela Mader.~~reference.

The following summary compensation table sets out details of compensation paid to (a) our principal executive officer; (b) each of our two most highly compensated executive officers who served as executive officers during the fiscal year ended December 31, 2020; and (c) up to two additional individuals for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as our executive officer at the end of the year ended December 31, 2020:

~~Summary Compensation Table~~

Name Year Salary
($) Bonus
($) Stock Awards
($) (1) Option Awards
($) (2) Non-equity Incentive
Plan Compensation All Other Compensation
($) Total
($)
Duane Hughes (3) 2020 $ 475,000 $ — $ 475,000 $ — $ 384,750 $ — $ 1,334,750
Chief Executive Officer, President and Director 2019 $ 391,058 $ 50,000 $ 600,000 $ 666,015 $ 132,500 $ — $ 1,839,573
Robert Willison (4) 2020 $ 300,000 $ — $ 225,000 $ — 101,250 — $ 626,250
Chief Operating Officer 2019 $ 217,308 $ — $ 300,000 $ 170,600 42,000 — $ 729,908
Stephen Fleming (5) 2020 $ 300,000 $ — $ 225,000 $ — 101,250 — $ 626,250
General Counsel and Vice President 2019 $ 32,307 $ — $ 1,300,000 $ — 45,000 295,000 $ 1,672,307

~~(1) Represents restricted stock awards granted to Mr. Hughes, Mr. Willison, and Mr. Fleming.~~

(2) Represents the aggregate grant date fair value of the award computed in accordance with FASB ASC Topic 718 to each of our Named Executive Officers. For 2019, these amounts included stock option awards granted to Mr. Hughes in February and to Mr. Willison in May.

(3) Mr. Hughes was appointed Chief Executive Officer and President on February 4, 2019. For his role as a Director, he was paid a retainer of $30,000, which is included in the 2019 Salary column above. Upon the execution of Mr. Hughes' employment agreement, he was entitled to receive a bonus of $25,000 and an additional $25,000 upon the successful closing of a financing in excess of $10.0 million. This $50,000 is reflected in the 2019 Bonus column above.

~~(4) Mr. Willison was appointed as our Chief Operating Officer on February 19, 2019.~~

(5) Mr. Fleming was appointed our General Counsel and Vice President on November 6, 2019. Mr. Fleming was paid $295,000 in 2019 for outside legal consultation and guidance, which is reflected in the 2019 All Other Compensation column above.

~~Employment Agreements~~

In November 2019, the Company entered into new employment agreements with our executive officers. These new agreements define the position held by each executive officer as well as base salary level and eligibility to participate in the Company's short and long term incentive programs.

Pursuant to the terms of the executive retention agreements in certain circumstances, the Company agreed to provide specified severance and bonus amounts and to accelerate the vesting on their equity awards upon termination upon a change of control, as the term is defined in the agreements. In the event of a termination upon a change of control or an involuntary termination, our CEO is entitled to receive an amount equal to 24 months of his base salary plus two times the target annual bonus then in effect. Our Chief Operating Officer and General Counsel are entitled to receive 16 months of base salary plus 1.25 times their respective target bonus amounts. Executives are also entitled to receive payment equal to the target bonus then in effect for the executive officer for the year in which such termination occurs, such bonus payment to be pro-rated to reflect the full number of months the executive remained in the Company’s employ. In addition, the vesting on any equity award held by the executive officer will be accelerated in full upon a termination and change of control or an involuntary termination. In the event the executive is terminated for cause, then the vesting of all equity awards shall cease and such equity awards will be terminated. In the event the executive leaves for any reason that is not considered a good reason, then the vesting of equity award shall cease. At the election of the executive officer, the Company will also continue to provide health related employee insurance coverage for nine-twelve months, at the Company’s expense upon termination upon a change of control or an involuntary termination.

If the Executive’s employment with the Company terminates by reason of an Involuntary Termination, then the Executive shall be entitled to receive an amount equal to nine-twelve months of base salary. Our CEO is entitled to receive 12 months of his base salary while our General Counsel and COO are entitled to receive 9 months of their then current base salaries. Executives are also entitled to receive the amount equal to the target Cash Bonus then in effect for the Executive for the year in which such termination occurs prorated to reflect the number of full or partial months the Executive was employed with the Company during such calendar year. Acceleration of vesting on outstanding equity awards in the event of an Involuntary Termination occurs only at the discretion of the Board.

~~Grants of Plan-Based Awards~~

~~The following table provides information regarding grants of share based awards to the Named Executive Officers in 2020:~~

Name Principal Position Grant Date All Other Stock Awards:
Number of Shares of
Stock or Units # Grant Data Fair Value of
Stock and Options
Awards $ (1)
Duane Hughes Chief Executive Officer, President and Director 5/21/2020 179,245 $ 475,000
Robert Willison Chief Operating Officer 5/21/2020 84,906 $ 225,000
Stephen Fleming General Counsel and Vice President 5/21/2020 84,906 $ 225,000

~~(1) Represents the aggregate grant date fair value of the award computed in accordance with FASB ASC Topic 718.~~

~~Outstanding Equity Awards~~

~~The following table sets forth information with respect to the outstanding equity awards of our Named Executive Officers as of December 31, 2020:~~

Outstanding Equity Awards at Year-End
Option Awards Stock Awards
Name Principal Position Number of Securities
underlying
unexercised
options (#)
Exercisable Number of securities
underlying
unexercised
options (#)
Unexercisable Options exercise
price ($) Option expiration date Number of shares
or units of stock
that have not
vested (#) Market value of
shares or units of
stock that have not
vested ($)
(1)
Duane Hughes Chief Executive Officer, President and Director — — $ — — 308,731 $ 6,106,699
950,000 — $ 0.97 2/4/2024 — $ —
26,000 24,000 $ 0.97 2/4/2024 — $ —
325,000 25,000 $ 5.28 5/19/2027 — $ —
Robert Willison Chief Operating Officer — — $ — — 150,435 $ 2,975,604
175,000 225,000 $ 0.93 5/2/2024 — $ —
Stephen Fleming General Counsel and Vice President — — $ — — 349,003 $ 6,903,279
— 65,625 $ 1.19 8/8/2023 — $ —

~~(1) The market value of unvested restricted stock is computed based on the $19.78 closing price per share of our common stock on December 31, 2020.~~

~~No Pension Benefits~~

The Company does not maintain any plan that provides for payments or other benefits to its executive officers at, following or in connection with retirement and including, without limitation, any tax-qualified defined benefit plans or supplemental executive retirement plans.

~~No Deferred Compensation~~

~~The Company does not maintain any defined contribution or other plan that provides for the deferral of compensation on a basis that is not tax-qualified.~~

~~Director Compensation~~

Under the Non-Employee Director Compensation Program, our non-employee directors are generally eligible to receive compensation for services they provide to us consisting of retainers and equity compensation as described below. During 2020, each non-employee director was eligible to receive the following for their service on the Board pursuant to the Non-Employee Director Compensation Program:

•~~An annual Board retainer of $50,000~~

•~~An additional retainer of $10,000 for the Chairman of the Board~~

In addition to cash compensation, our non-employee directors are eligible to receive annual equity-based compensation consisting of restricted stock awards with an aggregate grant date value equal to $60,000 or, in the case of the Chairman of the Board, $70,000. Generally, the forfeiture restrictions applicable to the restricted stock awards lapse on the six month anniversary of the date of grant of such awards. The restricted stock awards granted to our non-employee directors are subject to the terms and conditions of the Stock Plan and the award agreements pursuant to which such awards are granted. Each non-

~~employee director is also reimbursed for travel and miscellaneous expenses to attend meetings and activities of the Board or its committees.~~

Name Fees Earned or Paid in
Cash $ (1) Stock
Awards $
(2) (3) Total $
Raymond Chess $ 65,000 $ 70,000 $ 135,000
H. Benjamin Samuels 54,167 60,000 114,167
Gerald Budde 54,167 60,000 114,167
Harry DeMott 54,167 60,000 114,167
Michael Clark 54,167 60,000 114,167
Pamela Mader 33,333 35,000 68,333
Jacqueline Dedo 33,333 35,000 68,333

(1) Amounts reported in this column reflect annual cash retainer amounts received by our non-employee directors for service on our Board. In 2020, Mr. Chess, Mr. Samuels, Mr. Budde, Mr. DeMott, and Mr. Clark received monthly retainer payments of $4,167. In addition, Mr. Chess received an additional monthly retainer of $833 for his service as Chairman of the Board (annual value of $10,000). Ms. Mader and Ms. Dedo were appointed as directors of the Company on May 1, 2020. As such, Ms. Mader and Ms. Dedo received monthly retainer payments of $4,167 for eight months of the year.

(2) In May 2020, Mr. Samuels, Mr. Budde, Mr. DeMott, and Mr. Clark received restricted stock awards for 22,642 shares of common stock with a grant date fair value equal to $60,000 for their service on our Board. Mr. Chess received a restricted stock award for 26,415 shares of common stock with a grant date fair value equal to $70,000 for his service as Chairman of the Board. Ms. Mader and Ms. Dedo received restricted stock awards for 11,939 shares of common stock with a grant date fair value equal to $35,000 for their service on our Board.

(3) The amounts reflected in the “Stock awards” column represent the grant date fair value of restricted stock awards granted to our non-employee directors pursuant to the Stock Plan, as computed in accordance with FASB ASC Topic 718.

~~Directors’ and Officers’ Insurance~~

The Company has purchased directors and officer’s liability insurance (“D&O Insurance”) for the benefit of its directors and officers, and the directors and officers of its subsidiaries, against liability incurred by them in the performance of their duties as directors and officers of the Company, or its subsidiaries, as the case may be. The primary policy also provides coverage to the corporate entity for security claims.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The ~~following table sets forth certain~~ information asrequired by this Item 12 of February 15, 2021 with respect to the beneficial ownership of the outstanding common stock by (i) any holder of more than five (5%) percent; (ii) each of the Company’s executive officers and directors; and (iii) the Company’s directors and executive officers as a group. Except as otherwise indicated, each of the stockholders listed below has sole voting and investment power over the shares beneficially owned.

Name of Beneficial Owner (1) Common Stock Beneficially
Owned Percentage of
Common Stock (2)
BlackRock, Inc. 7,097,121 5.7 %
Benjamin Samuels † 1,460,086 1.2 %
Duane Hughes † 1,296,085 1.0 %
Stephen Fleming † 364,221 *
Robert Willison † 228,405 *
Gerald Budde † 214,047 *
Anthony Furey † 187,127 *
Steve Schrader † 160,361 *
Raymond Chess † 141,390 *
Michael Clark † 120,355 *
Gregory Ackerson † 103,585 *
Harry DeMott † 27,905 *
Jacqueline Dedo † 11,939 *
Pamela Mader † 3,939 *
All officers and directors as a group (13 people) 4,319,445 3.5 %

* Less than one percent.

~~† Executive officer and/or director.~~

~~(1)Except as otherwise indicated, the address of each beneficial owner is c/o Workhorse Group Inc, 100 Commerce Drive, Loveland, Ohio 45140.~~

~~(2)~~Applicable percentage ownership is based on 123,506,483 shares of common stock outstanding as of February 15, 2021. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Stock options to purchase shares of common stock that are currently exercisable or exercisable within 60 days of February 15, 2021 are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

~~(3)Represents 7,097,121 shares of common stock held directly by BlackRock, Inc.~~

~~(4)Represents (i) 578,753 shares of common stock held by Samuel 2012 Children’s Trust UAD 10/28/12, (ii) 527,035 shares of common stock held directly by Mr. Samuels, which~~Form 10-K will be fully vested in one year; and (iii) 354,298 shares of common stock held by the Marci Rosenberg 2012 Family Trust, a trust managed by Mr. Samuels’ wife. Mr. Samuels is a trustee of the Children’s Trust.

~~(5)~~Represents (i) a common stock option to acquire 950,000 shares of common stock at $0.97 per share; (ii) a common stock option to acquire 50,000 shares of common stock at $5.28 per share; and (iii) 320,085 shares of common stock held directly by Mr. Hughes, which will be fully vested in three years.

~~(6)~~Represents (i) a stock option to acquire 65,625 shares of common stock at $1.19 per share; and (ii) 354,846 shares of common stock held directly by Mr. Fleming, which will be fully vested in three years.

~~(7)~~Represents (i) a stock option to acquire 250,000 shares of common stock at $0.932 per share; and 178,405 shares of common stock held directly by Mr. Willison, which will be fully vested in three years.

~~(8)~~Represents (i) 119,692 shares of common stock owned by the Gerald B. Budde Living Trust, which Mr. Budde is the trustee; and (ii) 94,355 shares of common stock held directly by Mr. Budde, which will be fully vested in one year.

~~(9)~~Represents (ii) 148,928 shares of common stock held directly by Mr. Furey, which will be fully vested in three years; and (ii) 38,199 shares of common stock held by Fastnet Advisors, LLC. Mr. Furey is the owner and manager of Fastnet Advisors, LLC.

~~(10)Represents 160,361 shares of common stock held directly by Mr. Schrader, which will be fully vested in three years.~~

~~(11)Represents (i) a stock option to acquire 10,000 shares of common stock at $7.21 per share; and (ii) 131,390 shares of common stock held directly by Mr. Chess, which will be fully vested in one year.~~

~~(12)Represents (i) a stock option to acquire 50,000 shares of common stock at $1.10 per share; and (ii) 94,355 shares of common stock held directly by Mr. Clark, which will be fully vested in one year.~~

~~(13)~~Represents (i) a stock option to acquire 10,000 shares of common stock at $1.19 per share; and (ii) 97,335 shares of common stock held directly by Mr. Ackerson, which will be fully vested in three years.

~~(14)Represents (i) a stock option to acquire 8,000 shares of common stock at $8.20 per share; and (ii) 23,905 shares of common stock held directly by Mr. DeMott, which will be fully vested in one year.~~

~~(15)~~ ~~Represents 11,939 shares of common stock held directly by Ms. Dedo.~~

~~(16)~~ ~~Represents 3,939 shares of common stock held directly by Ms. Mader.~~

~~Changes in Control~~

~~We have no knowledge of any arrangements, including any pledge by any person of our securities, the operation of which may, at a subsequent date, result in a change~~included in our ~~control.~~2024 Proxy Statement and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

~~Transactions with Related Persons~~

The ~~Company obtains its property~~information required by this Item 13 of Form 10-K will be included in our 2024 Proxy Statement and ~~casualty insurance through AssuredPartners NL, LLC (“Assured”). Gerald Budde, a director of the Company,~~ is Eastern Regions Chief Financial Officer of AssuredPartners, Inc., the parent company of AssuredPartners Capital, Inc. and its subsidiary, AssuredPartners NL, LLC. The placement of insurance was completedincorporated herein by an agent outside of the Eastern Region and Mr. Budde did not participate in any decisions about insurance, nor was he paid any portion of the brokerage fee. Assured earned brokerage fees of approximately $121,000 and $86,000 for the years ended December 31, 2020 and 2019, respectively.

Other than noted above, at no other time during the last two fiscal years has any executive officer, director or any member of these individuals’ immediate families, any corporation or organization with whom any of these individuals is an affiliate or any trust or estate in which any of these individuals serves as a trustee or in a similar capacity or has a substantial beneficial interest been indebted to the Company or was involved in any transaction in which the amount exceeded $120,000 and such person had a direct or indirect material interest.

~~Procedures for Approval of Related Party Transactions~~

Our Board of Directors is charged with reviewing and approving all potential related party transactions. All such related party transactions must then be reported under applicable SEC rules. We have not adopted other procedures for review, or standards for approval, of such transactions, but instead review them on a case-by-case basis.

~~Director Independence~~

The Board of Directors has determined that Raymond Chess, Gerald Budde, H. Benjamin Samuels, Michael Clark, Harry DeMott, Pamela Mader and Jacqueline Dedo each qualify as independent directors under the listing standards of the Nasdaq.reference.

ITEM 14. PRINCIPAL ~~ACCOUNTING~~ACCOUNTANT FEES AND SERVICES

~~Fees for professional services provided~~The information required by ~~our independent auditors, Grant Thornton LLP, in each~~this Item 14 of ~~the last two years, in each of the following categories including expenses are:~~

2020 2019
Audit fees $ 329,820 $ 285,170
Audit-related fees 25,350 22,357
Tax fees — —
All other fees — —
Total fees $ 355,170 $ 307,527

~~Audit Fees~~

~~Audit fees include the audit of the Annual Report on~~ Form 10-K ~~including the audit of internal control over financial reporting~~will be included in our 2024 Proxy Statement and ~~reviews of the Quarterly Reports on Form 10-Q.~~

~~Audit related fees include work associated with registration statements.~~

~~The policy of the audit committee~~ is ~~to approve the appointment of the principal auditing firm and any permissible audit-related services. Fees charged~~incorporated herein by ~~Grant Thornton LLP were approved by the Board with engagement letters signed by Gerald Budde, Audit Committee Chairman.~~

The Audit Committee is responsible for the pre-approval of audit and permitted non-audit services to be performed by the Company’s independent auditor. The Audit Committee will, on an annual basis, consider and, if appropriate, approve the provision of audit and non-audit services by the auditor. Thereafter, the Audit Committee will, as necessary, consider and, if appropriate, approve the provision of additional audit and non-audit services by the auditor which are not encompassed by the Audit Committee’s annual pre-approval and are not prohibited by law. The Audit Committee has delegated to the Chair of the Audit Committee the authority to pre-approve, on a case-by-case basis, non-audit services to be performed by the auditor. The Audit Committee has approved all audit and permitted non-audit services performed by the auditor for the year ended December 31, 2020.reference.

5537

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

1.Financial statements (see Index to Consolidated Financial Statements in Part II, Item 8 of this report)

2.All financial statement schedules have been omitted since the required information was not applicable or was not present in amounts sufficient to require submission of the schedules, or because the information required is included in the consolidated financial statements or the accompanying notes.

3.The exhibits listed in the following Index to Exhibits are filed or incorporated by reference as part of this report.

Exhibit No.

Description

Form Incorporated From

Report Date

3.1

Certificate of Designation for Series A Preferred Stock

8-K

1/4/2010

3.2

Certificate of Change

8-K

5/25/2010

3.3

Certificate of Correction

8-K

5/25/2010

3.4

Articles of Merger

8-K

5/25/2010

3.5

Certificate of Correction (Articles of Merger)

8-K

5/25/2010

3.6

Certificate of Amendment to the Certificate of Incorporation

8-K

9/10/2010

3.7

Certificate of Incorporation

SB-2

2/4/2008

3.8

Articles of Merger between AMP Holding Inc. and Workhorse Group Inc.

8-K

4/16/2015

3.9

Certificate of Change filed December 9, 2015

8-K

12/10/2015

3.10

Certificate of Amendment to the Certificate of Incorporation dated August 8, 2017

10-Q

8/9/2017

3.11

Certificate of Amendment to the Certificate of Incorporation dated May 3, 2019

10-Q

5/7/2019

3.12

Certificate of Designation of Series B Preferred Stock

8-K

6/6/2019

~~4.12~~3.13

First Amended and Restated Bylaws of Workhorse Group Inc.

8-K

4/4/2022

3.14

Certificate of Amendment to the Company’s Articles of Incorporation

8-K

9/6/2023

3.15

Second Amended and Restated Bylaws

8-K

7/12/2023

4.1

Description of Securities Registered under Section 12 of the Securities Exchange Act of 1934

†10-K

3/1/2021

4.2

Indenture, dated December 27, 2023, by and between Workhorse Group Inc. and U.S. Bank, National Association

8-K

12/28/2023

4.3

Supplemental Indenture, dated December 27, 2023, by and between Workhorse Group Inc. and U.S. Bank, National Association

8-K

12/28/2023

10.1

~~Asset Purchase Agreement by and between Workhorse Custom Chassis, LLC, as Seller, and AMP Trucks Inc., as Buyer dated as of March 4, 2013~~

~~8-K~~

~~3/4/2013~~

~~10.2~~

~~Amendment No. 1 to the Asset Purchase Agreement by and between Workhorse Custom Chassis, LLC, as Seller, and AMP Trucks Inc., as Buyer dated as of March 13, 2013~~

~~8-K~~

~~3/13/2013~~

~~10.3~~

Director Agreement by and between Workhorse Group Inc. and Raymond Chess dated October 24, 2013

8-K

10/30/2013

~~10.4~~10.2

Director Agreement by and between Workhorse Group Inc. and Gerald Budde dated December 17, 2015

8-K

12/21/2015

~~10.5~~10.3

Director Agreement by and between Workhorse Group Inc. and Benjamin Samuels dated December 17, 2015

8-K

12/21/2015

~~10.6~~10.4

Director Agreement by and between Workhorse Group Inc. and Harry DeMott dated September 15, 2016

8-K

9/9/2016

~~10.7~~10.5

~~Services Partner Agreement between Workhorse Group Inc. and Ryder Truck Rental, Inc. dated April 27, 2017~~

~~8-K~~

~~5/3/2017~~

~~10.8~~

Form of Indemnification Agreement

†10-K

~~10.9~~

~~Form of Employee Invention Assignment, Confidentiality, Non-Compete and Non-Solicit Agreement~~

~~8-K~~

~~5/19/2017~~3/1/2021

~~10.10~~10.6

Director Agreement by and between Workhorse Group Inc. and Michael L. Clark dated September 28, 2018

8-K

10/1/2018

~~10.11~~+ 10.7

~~Sales Agreement between Workhorse Group Inc. and Duke Energy One, Inc. dated November 28, 2018~~

~~8-K~~

~~12/3/2018~~

~~10.12~~

~~Services Agreement between Stephen S. Burns and Workhorse Group Inc. dated February 4, 2019~~

~~8-K~~

~~2/5/2019~~

~~10.13~~

~~Director Agreement between Duane Hughes and Workhorse Group Inc. dated February 4, 2019~~

~~8-K~~

~~2/5/2019~~

~~10.14~~

~~Asset Purchase Agreement dated as of October 1, 2019 by and among Workhorse Group Inc., Surefly Inc. and Moog Inc~~

~~8-K~~

~~10/1/2019~~

~~10.15~~

~~Amendment No. 1 to the Asset Purchase Agreement dated as of October 4, 2019 by and among Workhorse Group Inc., Surefly Inc. and Moog Inc.~~

~~8-K~~

~~10/1/2019~~

~~10.16~~

~~Amendment No. 1 to the Asset Purchase Agreement dated as of October 31, 2019 by and among Workhorse Group Inc., Surefly Inc. and Moog Inc.~~

~~8-K~~

~~10/1/2019~~

~~10.17~~

~~Amended and Restated Employment Agreement between Workhorse Group Inc. and Duane Hughes dated November 6, 2019~~

~~8-K~~

~~11/6/2019~~

~~10.18~~

~~Amended and Restated Employment Agreement between Workhorse Group Inc. and Robert Willison dated November 6, 2019~~

~~8-K~~

~~11/6/2019~~

~~10.19~~

Employment Agreement between Workhorse Group Inc. and Anthony Furey, dated November 6, 2019

8-K

11/6/2019

~~10.20~~+ 10.8

~~Employment Agreement between Workhorse Group Inc. and Stephen Fleming dated November 6, 2019~~

~~8-K~~

~~11/6/2019~~

~~10.21~~

Employment Agreement between Workhorse Group Inc. and Gregory Ackerson dated November 6, 2019

8-K

11/6/2019

~~10.22~~+ 10.9

Employment Agreement between Workhorse Group Inc. and ~~Steve~~ ~~Schrader~~John Graber dated ~~December 19, 2019~~April 20, 2021

8-K

4/21/2021

+ 10.10

~~11/6/2019~~Employment Agreement between Workhorse Group Inc. and Ryan Gaul dated April 22, 2021

8-K

4/26/2021

~~10.23~~+ 10.11

~~Operating~~Employment Agreement ~~of Certus Unmanned Aerial Systems LLC effective as of November 27, 2019~~between Workhorse Group Inc. and Richard Dauch dated July 26, 2021

8-K

~~11/27/2019~~7/26/2021

~~10.24~~+ 10.12

Employment Agreement between Workhorse Group Inc. and James D. Harrington, dated August 16, 2021

10-K

3/1/2022

+ 10.13

Employment Agreement between Workhorse Group Inc. and Joshua Anderson, dated September 21, 2021

10-K

3/1/2022

+ 10.14

Employment Agreement between Robert Ginnan and Workhorse Group Inc. dated January 4, 2022

8-K

1/4/2022

10.15

Intellectual Property License Agreement between Workhorse Group Inc. and Lordstown Motors Corp. dated November 7, 2019

10-K

3/13/2020

~~10.25~~10.16

Asset Purchase Agreement by Asset Purchase Agreement by and between ST Engineering Hackney, Inc. and Workhorse Group Inc. dated as of October 31, 2019 between ST Engineering Hackney, Inc. and Workhorse Group Inc. dated as of October 31, 2019

10-K

3/13/2020

~~10.26~~10.17

Agreement between Workhorse Group Inc. and Lordstown Motors Corp dated August 1, 2020

8-K

8/4/2020

~~10.27~~10.18

Vehicle Supply and Purchase Agreement, dated February 28, 2022, between the Company and GreenPower Motor Company, Inc.

8-K

2/28/2022

10.19

At-the-Market-Sales Agreement, dated March 10, 2022, between the Company and BTIG, LLC.

8-K

3/10/2022

10.20

Form of Purchase Agreement - October 2020

8-K

10/13/2020

~~10.28~~10.21

Form of Exchange Agreement - October 2020

8-K

10/13/2020

~~10.29~~10.22

Form of Indenture

8-K

10/16/2020

~~10.30~~10.23

Form of ~~Global 4.00% Senior Secured Convertible Note~~Securities Exchange Agreement

8-K

10/~~16/2020~~6/2021

~~10.31~~10.24

Form of ~~Security~~Securities Exchange Agreement

8-K

~~10/16/2020~~11/2/2021

~~10.32~~10.25

Form of ~~Registration Rights~~Exchange Agreement - 2022

8-K

~~10/16/2020~~4/5/2022

~~10.33~~+ 10.26

2017 Incentive Stock Plan

10-Q

8/9/2022

+ 10.27

2019 Incentive Stock Plan

10-K

3/13/2020

+ 10.28

Form of Non-Statutory Option Award Agreement between Workhorse Group Inc. and Richard Dauch

10-Q

11/9/2021

+ 10.29

Form of Executive Restricted Stock Award Agreement under 2019 Incentive Stock Plan

10-K

3/1/2022

+ 10.30

Form of Performance Share Unit Award Agreement under 2019 Incentive Stock Plan

10-K

3/1/2022

+ 10.31

Form of Executive Restricted Stock Award Agreement under 2017 Incentive Stock Plan and 2023 Long-Term Incentive Plan

10-K

3/1/2022

+ 10.32

Form of Performance Share Unit Award Agreement under 2017 Incentive Stock Plan and 2023 Long-Term Incentive Plan

10-K

3/1/2022

+ 10.33

Form of Director Restricted Stock Award Agreement under 2017 Incentive Stock Plan

10-K

3/1/2022

+ 10.34

Short-Term Incentive Plan

10-K

3/1/2022

+ 10.35

Workhorse Group Inc. 2023 Long-Term Incentive Plan, as amended and restated, effective as of May 2, 2023 (incorporated by reference to Appendix A to the registrant’s definitive additional materials as filed with the Securities and Exchange Commission on April 24, 2023).

10-Q

5/15/2023

10.36

Floorplan and Security Agreement, dated as of August 10, 2023, by and between Workhorse Technologies Inc. and Mitsubishi HC Capital America, Inc.

10-Q

8/14/2023

10.37

Form of Securities Purchase Agreement, dated December 12, 2023, by and between Workhorse Group Inc. and the purchaser thereto

8-K

12/12/2023

10.38

Form of Note, dated December 12, 2023, by and between Workhorse Group Inc. and the holder thereto

8-K

12/12/2023

10.39

Form of Warrant dated December 12, 2023, by and between Workhorse Group Inc. and the holder thereto

8-K

12/12/2023

10.40

Purchase Agreement, dated December 12, 2023, by and between Workhorse Group Inc. and the purchaser thereto

8-K

12/12/2023

10.41

Form of Registration Rights Agreement, dated December 12, 2023, by and between Workhorse Group Inc. and the purchaser thereto

8-K

12/12/2023

10.42

Form of Security Agreement, dated December 27, 2023, by and between Workhorse Group Inc. and the investor party thereto

8-K

12/28/2023

10.43

Form of Guaranty, Dated December 27, 2023, by and among the investor and the guarantors party thereto

8-K

12/28/2023

+ 10.44

First Amendment to Employment Agreement, dated November 13, 2023, by and between Workhorse Group Inc. and Rick Dauch

8-K

11/14/2023

10.45

Form of Executive Restricted Stock Unit Award Agreement under 2023 Long-Term Incentive Plan

†

10.46

Form of Director Restricted Stock Unit Award Agreement under 2023 Long-Term Incentive Plan

†

21.1

List of Subsidiaries

†

23.1

Consent of Grant Thornton LLP

†

31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

†

31.2

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

†

32.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

†

32.2

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

†

~~99.1~~97.1

~~Nominating and Corporate Governance Committee Charter adopted by the Board of Directors of Workhorse Group Inc. on December 17, 2015~~Clawback Policy, effective October 2, 2023

~~10-Q~~†

~~8/9/2017~~

~~99.2~~

~~Compensation Committee Charter adopted by the Board of Directors of Workhorse Group Inc. on December 17, 2015~~

~~10-Q~~

~~8/9/2017~~

~~99.3~~

~~Audit Committee Charter adopted by the Board of Directors of Workhorse Group Inc. on December 17, 2015~~

~~10-Q~~

~~8/9/2017~~

101.INS

Inline XBRL INSTANCE DOCUMENT

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Labels Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Inline XBRL Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

† Exhibits that are filed with this report.

* Portions of this exhibit have been redacted pursuant to+ Indicates a ~~request for confidential treatment submitted to the Securities and Exchange Commission.~~management contract or compensatory arrangement.

ITEM 16. FORM 10-K SUMMARY

None.

5840

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


		WORKHORSE GROUP INC.

Dated:	March ~~1, 2021~~12, 2024	By:	/s/ ~~Duane A. Hughes~~Richard Dauch
		Name:	~~Duane A. Hughes~~Richard Dauch
		Title:	Chief Executive Officer, President and Director (Principal Executive ~~Officer)~~

~~Dated:~~	~~March 1, 2021~~	~~By:~~	~~/s/ Steve Schrader~~
		~~Name:~~	~~Steve Schrader~~
		~~Title:~~	Chief Financial Officer (Principal Financial Officer)
~~Dated:~~	~~March 1, 2021~~	~~By:~~	~~/s/ Gregory T. Ackerson~~
		~~Name:~~	~~Gregory T. Ackerson~~
		~~Title:~~	Corporate Controller (Principal Accounting Officer)

In accordance with the Exchange Act, this report has been signed below by the following persons on March ~~1, 2021,~~12, 2024, on behalf of the registrant and in the capacities indicated.


Signature						Title

/s/ ~~Duane A. Hughes~~Richard Dauch						Chief Executive Officer, President and Director (Principal Executive Officer)
~~Duane A. Hughes~~Richard Dauch

/s/ ~~Steve Schrader~~Robert M. Ginnan						Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
~~Steve Schrader~~Robert M. Ginnan

/s/ Raymond Chess						Director
Raymond Chess

~~/s/ Gerald B. Budde~~						~~Director~~
~~Gerald B. Budde~~

~~/s/ H. Benjamin Samuels~~						~~Director~~
~~H. Benjamin Samuels~~

~~/s/ Harry DeMott~~						~~Director~~
~~Harry DeMott~~

~~/s/ Michael L. Clark~~						~~Director~~
~~Michael L. Clark~~

~~/s/ Pamela Mader~~						~~Director~~
~~Pamela Mader~~

/s/ Jacqueline Dedo						Director
Jacqueline Dedo

/s/ William G. Quigley III						Director
William G. Quigley III

/s/ Austin Scott Miller						Director
Austin Scott Miller

/s/ Pamela S. Mader						Director
Pamela S. Mader

/s/ Jean Botti						Director
Jean Botti

/s/ Brandon Torres Declet						Director
Brandon Torres Declet

5941


Nevada						26-1394771
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


~~100 Commerce~~3600 Park 42 Drive, Suite 160E
~~Loveland,~~Sharonville, Ohio ~~45140~~45241						~~(513) 360-4704~~(1-888) 646-5205
(Address of principal executive offices)						(Registrant’s telephone ~~number)~~number, including area code)


PART I

Item 1.	Business	1

Item 1A.	Risk Factors	97

Item 1B.	Unresolved Staff Comments	19

Item 1C.	Cybersecurity	19

Item 2.	Properties	1920

Item 3.	Legal Proceedings	1920

Item 4.	Mine Safety Disclosures	20

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	21

Item 6.	~~Selected Financial Data~~Reserved	2421

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2522

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	3134

Item 8.	Financial Statements and Supplementary Data	F-1

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	3235

Item 9A.	Controls and Procedures	3235

Item 9B.	Other Information	3236

Item 9C.	Information Regarding Foreign Jurisdictions that Prevent Inspection	36

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	3337

Item 11.	Executive Compensation	3937

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	5337

Item 13.	Certain Relationships and Related Transactions, and Director Independence	5437

Item 14.	Principal Accounting Fees and Services	5537

PART IV

Item 15.	Exhibits	5638

Item 16.	Form 10-K Summary	5840

Signatures		5941


Plan	Number of Securities to be Issued upon Exercise of Outstanding Options and Rights	Weighted Average Exercise Price of Outstanding Options		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in first column)

Equity Compensation Plans approved by security holders - 2016 Stock Incentive Plan	102,500	$	6.30	—

Equity Compensation Plans approved by security holders - 2017 Stock Incentive Plan	1,475,625	$	2.01	2,247,500

Equity Compensation Plans approved by security holders - 2019 Stock Incentive Plan	773,115	$	1.42	4,332,011
	2,351,240			6,579,511


	For the Years Ended December 31,
	2023		2022
Sales, net of returns and allowances	$	13,094,752	$	5,023,072
Cost of sales	38,350,545		37,672,308

Gross loss	(25,255,793)		(32,649,236)
Operating expenses
Selling, general and administrative	55,574,740		73,220,088
Research and development	24,467,933		23,213,540
Total operating expenses	80,042,673		96,433,628
Loss from operations	(105,298,466)		(129,082,864)
Interest expense, net	(8,731,247)		(1,837,882)
Other (loss) income	(10,000,000)		13,646,528
Loss before for income taxes	(124,029,713)		(117,274,218)
Benefit from income taxes	(110,524)		—
Net loss	$	(123,919,189)	$	(117,274,218)


☒			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Report of Independent Registered Public Accounting Firm (PCAOB ID Number 248)			F-2
Consolidated Financial Statements:
Consolidated Balance Sheets			F-4
Consolidated Statements of Operations			F-5
Consolidated Statements of ~~Operations~~Comprehensive Loss			F-6
Consolidated Statements of Stockholders’ Equit y ~~(Deficit)~~			F-7
Consolidated Statements of Cash Flows			F-8
Notes to Consolidated Financial Statements			F-109


	December 31
	2020		2019
Cash and cash equivalents	$	46,817,825	$	23,868,416
Restricted cash held in escrow	194,411,242		1,000,000
Total cash, cash equivalents and restricted cash held in escrow	$	241,229,067	$	24,868,416


	2020		2019
Unrecognized tax benefits - January 1	$	1,163,282	$	1,163,282
Gross increases - tax positions in prior period	0		0
Gross decreases - tax positions in prior period	0		0
Gross increases - tax positions in current period	0		0
Settlement	0		0
Lapse of statute of limitations	0		0
Unrecognized tax benefits - December 31	$	1,163,282	$	1,163,282


	December 31, 2020								December 31, 2019
	Fair Value		Level 1		Level 2		Level 3		Fair Value		Level 1		Level 2		Level 3
Assets
Investment in LMC	$	330,556,744	$	330,556,744	$	0	$	0	$	12,194,800	$	0	$	0	$	12,194,800
Total assets at fair value	$	330,556,744	$	330,556,744	$	0	$	0	$	12,194,800	$	0	$	0	$	12,194,800

Liabilities
Convertible notes	$	197,700,000	$	0	$	0	$	197,700,000	$	39,020,000	$	0	$	0	$	39,020,000
Warrant liability	0		0		0		0		16,335,000		0		0		16,335,000
Total liabilities at fair value	$	197,700,000	$	0	$	0	$	197,700,000	$	55,355,000	$	0	$	0	$	55,355,000


	December 31, 2023								December 31, 2022
	Fair Value		Level 1		Level 2		Level 3		Fair Value		Level 1		Level 2		Level 3
Warrant liability	$	5,605,325	$	—	$	—	$	5,605,325	$	—	$	—	$	—	$	—
Convertible notes	$	20,180,100	$	—	$	—	$	20,180,100	$	—	$	—	$	—	$	—


	Number of Options	Weighted Average Exercise Price per Option		Weighted Average Grant Date Fair Value per Option	Weighted Average Remaining Contractual Life (Years)
Balance, December 31, 2018	3,867,621	$	4.1
Granted	2,450,000	1.0		0.5
Exercised	(736,552)	0.7
Forfeited	(907,500)	4.5
Expired	(948,569)	5.0
Balance, December 31, 2019	3,725,000	2.3
Granted	877,575	1.9		0.6
Exercised	(2,112,392)	2.4
Forfeited	(118,943)	5.8
Expired	(20,000)	2.4
Balance, December 31, 2020	2,351,240	$	2.0		5.5

Number of options exercisable at December 31, 2020	1,972,740	$	2.1		5.8


	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)





Outstanding, beginning of period	423,626	$	7.6	6.7

Exercised	(50,200)	$	1.1	—

Expired	(80,997)	$	1.7	—
Outstanding, end of period	292,429	$	10.3	8.0
Exercisable, end of period	197,618	$	10.3	8.0


	Number of Warrants	Weighted Average Exercise Price per Warrant
Balance, December 31, 2018	17,818,844	$	1.84
Granted, Series B Preferred Stock	9,262,500	1.62
Granted, Marathon Credit Agreement	3,379,466	2.26
Granted, Other	66,966	5.28
Exercised	0	0
Balance, December 31, 2019	30,527,776	1.82
Granted, Marathon Credit Agreement	1,176,203	28.26
Exercised	(30,502,763)	1.78
Expired	(45,540)	1.60
Balance, December 31, 2020	1,155,676	$	28.74


Ticker	Peer Company	HQ Location	~Miles to WKHS	Insiders Ownership	Post IPO Yrs	Fiscal Yr End	↓TTM Revenue $	% Change TTM Rev.		Primary Industry	Market CAP $	TSR 1-Year	TSR 3-Year
SMP	Standard Motor Products	Long Island City, NY	561	10%	52.6	12/20	1,051.2	(7.2)%		Auto Parts & Equipment	998	(7.2)%	(1.1)%
DORM	Dorman Products	Colmar, PA	478	11%	29.4	12/20	984.3	(2.2)%		Auto Parts & Equipment	2,912	13.6%	8.1%
BLBD	Blue Bird Corp.	Macon, GA	444	11%	5.5	09/20	941.3	(6.5)%		Const. Machinery/Hvy Trucks	329	(36.1)%	(16.1)%
THRM	Gentherm	Northville, MI	219	1%	27.2	12/20	835.1	(18.0)%		Auto Parts & Equipment	1,336	(50.0)%	3.3%
SHLO	Shiloh Industries	Valley City, OH	230	5%	27.1	10/20	815.7	(25.6)%		Auto Parts & Equipment	2	(97.7)%	(79.1)%
CVGI	Commercial Vehicle Grp	New Albany, OH	84	4%	16.0	12/20	728.9	(22.0)%		Const. Machinery/Hvy Trucks	213	(9.4)%	(3.9)%
SHYF	Shyft Group, The	Novi, MI	236	4%	36.1	12/20	705.6	24.8%		Const. Machinery/Hvy Trucks	671	38.6%	20.6%
MLR	Miller Industries	Ooltewah, TN	292	4%	24.6	12/20	703.2	(11.6)%		Const. Machinery/Hvy Trucks	349	(6.0)%	5.6%
HZN	Horizon Global Corp.	Plymouth, MI	219	10%	5.1	12/20	603.9	(14.0)%		Auto Parts & Equipment	148	50.5%	(31.2)%
MPAA	Motorcar Parts of America	Torrance, CA	>625	2%	26.4	03/21	522.0	6.5%		Auto Parts & Equipment	296	(7.9)%	(19.2)%
STRT	Strattec Security Corp.	Milwaukee, WI	324	5%	25.5	06/20	385.3	(20.9)%		Auto Parts & Equipment	77	1.3%	(20.0)%
VOXX	VOXX Intl. Corp.	Orlando, FL	>625	21%	33.2	02/21	373.4	(15.0)%		Consumer Electronics	184	63.6%	(3.5)%
AMOT	Allied Motion Tech.	Amherst, NY	376	19%	51.6	12/20	363.6	6.8%		Elect. Components & Equip.	402	17.3%	18.0%
ULBI	Ultralife Corp.	Newark, NY	461	35%	27.6	12/20	112.9	26.1%		Elect. Components & Equip.	94	(31.9)%	(4.4)%
SYPR	Sypris Solutions	Louisville, KY	106	33%	26.2	12/20	83.5	(6.3)%		Auto Parts & Equipment	23	6.2%	(8.3)%
PRCP	Perceptron	Plymouth, MI	219	2%	28.0	06/20	62.3	(19.0)%		Elect. Components & Equip.	66	41.9%	(4.8)%
TAYD	Taylor Devices	N. Tonawanda, NY	391	13%	40.6	05/21	28.4	(11.2)%		Industrial Machinery	33	(7.3)%	(8.2)%
75th Percentile							815.7	(2.2)%			402	17.3%	3.3%
Median		Company Count = 17					603.9	(11.2)%			213	(50.0)%	(4.4)%
25th Percentile							363.6	(18.0)%			77	(7.9)%	(16.1)%

WKHS	Workhorse Group Inc.	Loveland, OH	—	9%	10.6	12/20	0.2	(54.4)	%	Auto Parts & Equipment	2,658	622.3%	109.2%
TTM (Trailing Twelve Months) up to June 30, 2020								Information from Standard & Poor's Capital IQ
All dollar values are in millions (000s)								Current Market Cap and TSR as of September 30, 2020


Position	2020 Salary	2019 Salary	% Change
Chief Executive Officer, President and Director	$475,000	$475,000	0%
Chief Operating Officer	$300,000	$300,000	0%
General Counsel and Vice President	$300,000	$300,000	0%


Position	Target Bonus (as % of base)	Maximum Bonus (as % of base)
Chief Executive Officer, President and Director	100%	200%
Chief Operating Officer	50%	75%
General Counsel and Vice President	50%	75%


Name	Year	Salary ($)		Bonus ($)		Stock Awards ($) (1)		Option Awards ($) (2)		Non-equity Incentive Plan Compensation		All Other Compensation ($)		Total ($)
Duane Hughes (3)	2020	$	475,000	$	—	$	475,000	$	—	$	384,750	$	—	$	1,334,750
Chief Executive Officer, President and Director	2019	$	391,058	$	50,000	$	600,000	$	666,015	$	132,500	$	—	$	1,839,573
Robert Willison (4)	2020	$	300,000	$	—	$	225,000	$	—	101,250		—		$	626,250
Chief Operating Officer	2019	$	217,308	$	—	$	300,000	$	170,600	42,000		—		$	729,908
Stephen Fleming (5)	2020	$	300,000	$	—	$	225,000	$	—	101,250		—		$	626,250
General Counsel and Vice President	2019	$	32,307	$	—	$	1,300,000	$	—	45,000		295,000		$	1,672,307


Outstanding Equity Awards at Year-End
		Option Awards					Stock Awards
Name	Principal Position	Number of Securities underlying unexercised options (#) Exercisable	Number of securities underlying unexercised options (#) Unexercisable	Options exercise price ($)		Option expiration date	Number of shares or units of stock that have not vested (#)	Market value of shares or units of stock that have not vested ($) (1)
Duane Hughes	Chief Executive Officer, President and Director	—	—	$	—	—	308,731	$	6,106,699
		950,000	—	$	0.97	2/4/2024	—	$	—
		26,000	24,000	$	0.97	2/4/2024	—	$	—
		325,000	25,000	$	5.28	5/19/2027	—	$	—
Robert Willison	Chief Operating Officer	—	—	$	—	—	150,435	$	2,975,604
		175,000	225,000	$	0.93	5/2/2024	—	$	—
Stephen Fleming	General Counsel and Vice President	—	—	$	—	—	349,003	$	6,903,279
		—	65,625	$	1.19	8/8/2023	—	$	—


Name	Fees Earned or Paid in Cash $ (1)		Stock Awards $ (2) (3)		Total $
Raymond Chess	$	65,000	$	70,000	$	135,000
H. Benjamin Samuels	54,167		60,000		114,167
Gerald Budde	54,167		60,000		114,167
Harry DeMott	54,167		60,000		114,167
Michael Clark	54,167		60,000		114,167
Pamela Mader	33,333		35,000		68,333
Jacqueline Dedo	33,333		35,000		68,333


Name of Beneficial Owner (1)	Common Stock Beneficially Owned	Percentage of Common Stock (2)
BlackRock, Inc.	7,097,121	5.7	%
Benjamin Samuels †	1,460,086	1.2	%
Duane Hughes †	1,296,085	1.0	%
Stephen Fleming †	364,221	*
Robert Willison †	228,405	*
Gerald Budde †	214,047	*
Anthony Furey †	187,127	*
Steve Schrader †	160,361	*
Raymond Chess †	141,390	*
Michael Clark †	120,355	*
Gregory Ackerson †	103,585	*
Harry DeMott †	27,905	*
Jacqueline Dedo †	11,939	*
Pamela Mader †	3,939	*
All officers and directors as a group (13 people)	4,319,445	3.5	%


	2020		2019
Audit fees	$	329,820	$	285,170
Audit-related fees	25,350		22,357
Tax fees	—		—
All other fees	—		—
Total fees	$	355,170	$	307,527