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Workhorse Group raises $25M to fund R&D, completion of electric van

Workhorse Group secured $25M in funding to help finalize development of its NGEN electric delivery vehicle. (Photo: Workhorse Group)

Workhorse Group (NASDAQ: WKHS) has announced a $25 million round of capital infusion from institutional investors as it works to finalize research and development (R&D) of its NGEN electric van and scale production. The first $15 million of the Series B preferred stock offering closed on May 31, 2019, the company said in an 8-K filing with the Securities and Exchange Commission. The remaining $10 million closed today.

“This funding provides Workhorse with sufficient capital to fully deliver on our existing backlog and will enable us to make significant strides in our strategic vision of being a leader in the electric last-mile delivery space,” Duane Hughes, CEO, said. “We now have all necessary pieces in place to bridge Workhorse into full-scale NGEN production and are looking forward to commencing the manufacturing process, in earnest, during the fourth quarter of this year.”

In a press release, Workhorse said the funds would be used as general working capital and R&D associated with the NGEN followed by production of an existing contracted backlog.

Under the terms of the agreements, the investors acquired shares of Series B preferred stock and warrants to purchase common stock. The Series B preferred stock is not convertible, but the holders are entitled to annual dividends payable in shares of common stock, the company said.

Last month, General Motors (NYSE: GM)  announced it was in the final stages of negotiating a sale of its shuttered Lordstown, Ohio, manufacturing plant to Workhorse. In a statement, GM said a newly formed entity led by Workhorse founder Steve Burns would acquire the facility with Workhorse itself holding a minority interest in the new entity.

“This potential agreement creates a positive outcome for all parties involved and will help solidify the leadership of Workhorse’s role in the [electric vehicle] community,” said Hughes.

Articles at the time wondered whether Workhorse, a company looking to reinvent itself, had the financial resources to acquire the plant. Today’s funding announcement doesn’t address a possible plant purchase.

Workhorse has also been working to finalize its NGEN electric van. The NGEN offers a 5,600-pound curb weight, about half that of competitive step vans, the company said, while offering a 6,500-pound carrying capacity. Featuring a low floor height for operations that require continual exits from the vehicle, it will be available in four cargo sizes – 450, 650, 1,000 and 1,200 cubic feet – and a 100-mile range.

The company is looking to sell its SureFly personal helicopter business. On the company’s first quarter earnings call, Paul Gaitan, CFO, said it was the “best course of action” for Workhorse to seek a sale of SureFly so it can focus on the building of its electric vehicle platforms.

SureFly is an electric vertical takeoff and landing (eVTOL) aircraft. Workhorse has received FAA approval to test the copter but is still trying to secure approval to sell it. Then-CEO Steve Burns told FreightWaves earlier this year the company is “six months into a two-year journey” to get the product approved and sold.

Burns noted that there is plenty of interest in the two-person SureFly, from paramedic applications to the military, which is looking for a fully autonomous operation where it can fly the SureFly into an area, drop supplies and fly it out without putting service members in harm’s way. The copter could also remove a seat to be used for cargo delivery.

Burns, co-founder of Workhorse, stepped down as CEO in February. He serves as a consultant to the company, focused on the development and future monetization of SureFly.

In its first quarter financial report, Workhorse reported sales of $364,000, down from $560,000 in the first quarter of 2018. Expenses also decreased in several areas, including in R&D, which saw a 42 percent decline to $1.4 million from $2.3 million. The decline was attributed to lower prototype expenses related to the U.S. Postal Service (USPS) Next Generation Delivery Vehicle (NGDV) and SureFly.

As of March 30, 2019, the company had cash, cash equivalents and short-term investments of $2.8 million compared to $1.5 million as of December 31, 2018.

USPS has not made a final decision yet on which company’s vehicle it will choose, but in a conference call, Hughes said the company remains “confident in the strength and quality of our prototype vehicles in the test progress.”

Brian Straight

Brian Straight leads FreightWaves' Modern Shipper brand as Managing Editor. A journalism graduate of the University of Rhode Island, he has covered everything from a presidential election, to professional sports and Little League baseball, and for more than 10 years has covered trucking and logistics. Before joining FreightWaves, he was previously responsible for the editorial quality and production of Fleet Owner magazine and Brian lives in Connecticut with his wife and two kids and spends his time coaching his son’s baseball team, golfing with his daughter, and pursuing his never-ending quest to become a professional bowler. You can reach him at [email protected]